Public outreach planned as city ponders natural gas fee

ROCHESTER — Whether to implement a new natural gas franchise fee, and how, will be the subject of three months of community engagement at the start of 2026.

Kayla Betzold, the city’s sustainability coordinator, said the goal is to inform residents how a franchise fee could be implemented and how the funds would be used to meet existing city environmental stewardship goals.

“We are putting together some plain language … that clearly explains the terms, the different options and the different levels we are looking at,” she told the Rochester City Council on Monday.

Council member Nick Miller said the information will likely be key in getting informed opinions from residents before the council decides whether to enact a new fee.

“I know this is a topic that many people in the community will have an initial opinion on, and perhaps a different or more-informed opinion after the engagement process,” he said.

The potential divide in opinions was highlighted during the council’s discussion, with three out of the seven members expressing opposition of the proposed fee, which would be added to natural gas bills.

“I think of this as more of a tax than some type of fee,” council member Norman Wahl said.

He pointed out the fee is designed for Minnesota Energy Resources to include the cost on its bills, but unlike the city’s existing cable franchise fee, most residents don’t have a choice whether to connect to natural gas.

Past City Council’s have discussed a similar fee, but never enacted one.

Betzold said the city’s agreement with Minnesota Energy Resources already acknowledges the potential for establishing a franchise fee based on the natural gas provider’s use of public right-of-way. Additionally, she said the utility reports approximately 20% of the Minnesota cities it serves charge a franchise fee.

Council member Shaun Palmer said he initially supported the proposed fee, seeing it as an alternate revenue stream to offset budget pressures to increase local property taxes, but Monday’s proposal earmarks the funds for environmentally focused programs.

“For me, it was a budget issue that would take it off our budget,” he said. “I don’t see that as an alternative here.”

Randy Petersen / Post Bulletin

Tyler Neimeyer, director of Public Works, said the goal would be to use half the revenue for community programs, such as home weatherization projects and rebates, while the other half would fund city projects, which could include adding electric vehicles to the fleet.

While the city projects could offset some expenses covered by property taxes, the focus is to provide a reliable revenue stream to fund projects that fit the sustainability goals adopted by the council earlier this year.

“Today, a lot of sustainable energy efforts really rely on grants, which is inherently unstable,” Neimeyer said. “This would be a much more stable source.”

“The benefit I see to a more stable funding source like this one is that it may help shrink some of the timelines involving the council’s priorities around environmental stewardship,” he added.

Council member Patrick Keane said he appreciates the effort to better address the desire for responsible environmental stewardship but worries it could conflict with goals tied to helping residents achieve affordable living.

“I am concerned about those tradeoffs as we go forward,” he said, adding he wants to see what comes from the planned public engagement on the topic.

With nearly 45,000 residential meters among the 47,500 natural-gas meters in the city, Betzold said the financial impact to residents would largely be defined by the fee structure.

She said the fee structure and potential rate haven’t been determined, pointing to six undefined options that could be implemented. She said the potential annual revenue could range from $600,000 to nearly $1 million.

She said part of the planned engagement will be to determine what rate structure would best fit the community, as well as how the funds could be used throughout the city.

“We want to go out and we want to ask people what types of programs they are most interested in,” she said. “What do they value?”

Some council members questioned whether the planned three-month effort will cast a broad enough net to gauge a broad opinion among residents.

“My fear is a lot of people don’t pay attention until it hits them in the wallet,” council member Andy Friederichs said.

Neimeyer and Betzold said the proposed strategy includes a variety of outreach, including efforts to meet people where they are already gathered, rather than requiring them to attend a meeting or open house.

“We are going out of our way to make sure we don’t leave anything on the table, as far as engagement goes,” Neimeyer said.