Large Methane User Fee Proposal

Background, Details, and Requested Action

Overview

Community for Sustainable Energy (CforSE) and the Fort Collins Sustainability Group (FCSG) are partnering to advocate for the City of Fort Collins to adopt a methane fee structure that doesn’t impact residents and helps businesses reduce methane consumption and energy costs.  Methane is also known as “natural gas.”

Background

At the direction of City Council, City staff intends to bring forward a proposal later this year to increase the natural gas franchise fee from the current rate of 1.07% to 3.00%.  This fee is collected by Xcel Energy and returned to the City.  3.00% is the maximum rate allowed under the City’s agreement with Xcel.  City Council will vote on whether or not to approve this fee increase; it does not need to be approved by the voters.

The increased franchise fee would bring in an estimated additional $1.3 million in revenue per year.  The City says that these additional funds would be used to support the City’s climate initiatives, although the franchise fee goes into the City’s General Fund and does not need to be dedicated to any particular purpose.

City staff estimates the average annual increase for residential customers would be about $14 and the average annual increase for commercial customers would be $80.  Low-income customers would likely be offered a rebate so that they would not need to pay the full franchise fee increase.

CforSE and FCSG Objections to a Franchise Fee Increase

The voters approved a 0.5% sales and use tax increase to support climate initiatives and other city programs last November.  A sales and use tax is regressive, as low- and middle-income people must devote a greater percentage of their income to purchasing consumer goods than higher- income people.

A natural gas franchise fee is also regressive: low- and middle-income people must pay a greater percentage of their income for utilities than higher-income people.  And residential customers cannot deduct utility costs (including fees) from their profits as operating expenses like businesses can.

Council waited until after the sales tax increase passed to consider raising the franchise fee. We wonder whether voters would have approved the tax if the fee were raised first?

Offering rebates to low-income natural gas users for the increased franchise fee would help low-income people, but it would not help middle-income people.

The city is under a legal limitation not to increase the natural gas franchise fee by more than 3.00%, limiting the total additional amount that could be raised to $1.3 million.

Almost anything in the City budget can be construed as having a climate impact, so funds from increasing the franchise fee could be diverted to other City priorities.

Large Methane User Fee Proposal

Impose a fee larger than 3% on the City’s largest methane users.  For instance, the City could impose an additional “Large Methane User Fee” of 5% on commercial and industrial customers within city limits who use more than, say, 10,000 therms of methane per year.

Unlike the City’s proposed franchise fee increase, this type of fee is legally required to be used to the benefit of those businesses impacted. The funds could not be diverted to other City projects.

Funds raised by the Large Methane User Fee could be used to help commercial and industrial customers electrify their heating systems and processes.  As the electric supply becomes “greener,” this would help the City meet its climate goals.

A Large Methane User Fee would also encourage large users to reduce their methane use through more conventional means: adding insulation, making their buildings tighter, setting temperatures back at night during the winter, etc.

Owners of commercial buildings with a gross area of 5,000 square feet or more must already report their methane use to the City under the Building Energy and Water Scoring (BEWS) program.  Industrial and some commercial customers can apply for an exemption to avoid being subjected to BEWS.  The City could easily require all commercial and industrial customers to report their energy and water use so that the Large Methane User Fee could be applied equitably.

Requested Action

Please write a short, personalized email to Mayor Jeni Arndt and City Council:

To: ________________________@fcgov.com, jarndt@fcgov.com

Cc: cforse.fred@gmail.com

Tell them that you:

  • Do NOT want to the City to increase your natural gas franchise fee,
  • And want the City to instead adopt a “Large Methane User Fee” to help businesses fund their reduction of methane use.
  • Let them know that you get CforSE updates, and that their action will influence your vote in the next City election.

 Say whatever else you like. Feel free to use the above talking points. Please CC us and ask for a reply.

Thank you!

 

 

 

 

 

 

 

 

 

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Author: Kevin Cross

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