Lower electric rates may not save you money

Suppose your electric bill drops by $38 a year and your city property tax rises by $100. That is not a savings. You would pay $62 more overall.

Those are real results from my calculator for a $250,000 home using 900 kWh a month. The scenario assumes the utility's $261,675 in 2025 transfers to the city end, the savings go into lower electric rates, and the city adds the lost revenue to the tax levy. Try the calculator.

The burden moves

Most of this debate is about transfers from the electric fund to the city. The city uses that money to pay its bills instead of taxing you for the same dollars. Supporters of the amendment are right about one important thing. There is no published formula for those transfers, and they swing a lot from year to year.

Electric fund transfers were $624,330 in 2024 and dropped to $261,675 in 2025. Total support in 2024 was about $1.08 million once you add the EDA contribution and the estimated franchise fee. That equals about 29 percent of this year's city tax levy. For a city this size, that is a major funding source.City of LuverneCity of LuverneMissouri River Energy Services / City of LuverneMinnesota Department of Revenue

The transfers themselves are not the problem. They pay for city services that would otherwise require higher taxes, fees, or cuts. The problem is that those transfers result in more expensive electricity. But cutting the transfers does not lower your electric bill with no consequences. The city cannot close a gap that size with budget cuts alone. Most of it would likely be added to the city levy each year.

That is where residents come out behind. Residential customers pay at most about 42 percent of electric revenue. Residential property makes up about 64 percent of the city's tax capacity. See the source tables.

If the amendment passes and the commission eliminates the transfers and puts every dollar into an across-the-board rate cut, at least 57 percent of the rate cut goes to non-residential accounts: mostly businesses, along with schools, churches, and government buildings. When the council raises the levy to cover the gap, residents pay about 64 percent of that increase.

Call the shift $1,000,000. Residents would collectively save at most about $420,000 on electric bills and pay about $640,000 more in property taxes. Residents are out at least $210,000. Everyone else, taken together, comes out ahead by the same amount. Schools, churches, and government buildings get the rate cut and pay none of the levy. The imbalance does not stop there.

A guaranteed seat for big customers

The amendment reserves one of five commission seats for an owner, officer, or senior manager of a nonresidential, nongovernmental customer among the utility's 25 largest accounts. The council appoints that member for three years. The member does not have to live in Luverne.§ 2(c)–(d)

I reviewed 59 other Minnesota municipal electric utilities, about half of those in the state. None of them reserves a seat for any class of customer. The closest is Hutchinson, which allows, but does not require, one appointee to be a non-resident business owner. A guaranteed commercial seat is not a standard arrangement, probably for good reason. See the cities reviewed.

Imagine if this were the city council. Reserving an unelected council seat for someone who might not even live in your city, whose purpose would be to represent the interests of the largest companies in town, would be unthinkable. A commission that controls such a substantial source of revenue for the city should be no different.

The commission gets leverage over city revenue

Section 3(i) requires the commission and the council to approve a transparent payment formula together. The amendment sets no starting amount, no deadline, and no fallback if they disagree.§ 3(i)

Picture the first negotiation. The council proposes a formula. Commissioners ask what the city plans to spend the money on. What if a commissioner does not agree with the spending proposed? The commission cannot set the city budget, but it can refuse to approve the formula and hold up a large and necessary source of funds for the budget. That refusal is leverage over the budget, and the reserved commercial seat holds one of the five votes. Do you want one of the biggest companies in town exerting that much control over your budget? That is what you would be voting for if you vote yes.

The elected commissioners add to the tension. Commission candidates will be pressured to promise low electric rates. Council candidates will be pressured to promise low taxes. Elect both and put them in a room to set the transfer. The council member wants a bigger transfer to hold the levy down. The commissioner wants a smaller one to hold rates down. Both just won elections, and neither has much reason to give ground.

The amendment does not say what happens next. There is no deadline, no tiebreaker, no outside body that can step in, and no way for either side to settle on a number. Other Minnesota cities avoid this. New Ulm's charter sets the payment outright. Alexandria's sets a default that applies unless both sides agree to change it. Blue Earth, whose utility board is elected, still has its payment written into the charter. In Moorhead, the council has the final say. This amendment does none of these.City of New UlmCity of AlexandriaCity of Blue EarthCity of Moorhead

There are simpler fixes

This amendment is overkill for the problem it aims to solve. If the transfers are too big or too unpredictable, the city can set a fixed rate or formula for them. Or an advisory committee could be assigned to increase deliberation and transparency. If the problem is trust in the council or the mayor, voters can replace them. Voters cannot replace the reserved commercial seat on a new commission. Other narrow fixes are listed here.

Questions the amendment leaves open

A charter amendment is hard to undo, so it should answer the hard questions before the vote. This one leaves too many unanswered questions and unresolved legal issues.

• The payment formula. No starting amount, no deadline, and no default if the two bodies never agree.§ 3(i)
• Whether transfers or rates fall at all. Nothing in the text requires either.
• Who employs the staff. Supporters have said staff remain city employees. The text says the commission “shall be deemed to be the employer.” The city's attorneys call the question ambiguous.§ 3(c)City of Luverne Legistar
• Shared staff and equipment. Water, sewer, and other city work share people and equipment with the electric utility today. Apart from a contract for payroll and accounting, the amendment sets no method for splitting those costs.§ 3(h)
• The reserved seat. There is no recusal rule for decisions that affect the member's own account. The city's attorneys also warned that a non-resident seat may conflict with the state law that vacates a local office when its holder lives outside the city.
• Removal. The city's attorneys concluded the council cannot remove the elected commissioners, whatever the amendment's removal clause says.
• Reserves. Rebuilding reserves is one of the supporters' main reasons, but the amendment sets no reserve target.

None of these are small details. Yet you are being asked to permanently change your city charter to lock in this plan. Once it passes, only another charter amendment can undo it.

If a commission really is the answer, Luverne can do better than this. Thirty-nine of the 59 cities I reviewed already run their utility through a commission. None of them mixes seats elected by voters with permanently appointed seats, and none reserves a seat for the largest commercial customers. Whether or not Luverne wants a commission, this amendment is not the one to adopt. Don't go with this half-thought-through plan.

If the goal is increased transparency and accountability, that should start with a clear explanation of why the largest companies in town get to control 20 percent of the votes on the commission. Who came up with that idea? Did residents like you get the opportunity to weigh in on that part of the plan?

Voting no on this charter amendment is not a vote for the status quo. It just rejects this plan and its holes. You can vote no and still tell your council that it needs to come up with a plan to resolve the issues this plan aimed to solve. I think you and your council can come up with better solutions than this charter amendment. And I bet your solutions won't involve giving the biggest companies in town an unprecedented amount of power over your city budget.