Ann Arbor resident Fred Golden says he was “hardly affected” by the storm and outage that knocked out power to much of southeast Michigan for several days last week. That’s because he had purchased a backup generator, which he said was necessary because he and his wife use continuous positive airway pressure CPAP machines.
Still, he was troubled by the partial loss of power at Ann Arbor’s water treatment plant, where some of the pumps were unable to pump water from Barton Pond, causing the city to institute water use restrictions.
Golden feels a municipal utility might be the best way to increase reliability as well as adopt more renewable energy, which he said is his number one priority. He’s a supporter of Ann Arbor for Public Power (A2P2), the group looking to replace DTE Energy with a city-owned utility.
Public power backers say a municipal utility would improve performance because it would be accountable to the public rather than shareholders. However, Golden acknowledged that it might not be a silver bullet.
“It’s a way for people to get what they want,” Golden said. “Hopefully, that’s good.”
The latest round of power outages came at a critical moment for A2P2 as Ann Arbor could release the results of a feasibility study as soon as the end of the month. The report will evaluate public ownership and other options for the city and it’s likely to spark an intense debate over the best path forward.
The recent power failures may have helped public power advocates make their case.
“DTE has been our greatest advocate,” Greg Woodring, president of A2P2, said at a recent meeting. Indeed, Ann Arbor has been hit especially hard by recent outages, with 30,000 in Washtenaw County losing power during the July storm.
An ice storm in February resulted in 25,000 outages in the city, some lasting more than a week. And recent outages have impacted businesses – prompting the closure of a local restaurant and causing the State Theater to miss out on an estimated $30,000 in sales during the Barbie/Oppenheimer premiere weekend.
Advocates admit they will have an uphill battle winning support for their proposal, with DTE able to spend heavily to influence public opinion and the political process. But they say a win in Ann Arbor could set a precedent for new public utilities in the state as well as push the utility to provide better service and lower rates to other cities to discourage municipalization efforts elsewhere.
“We don’t have to live like this,” Yousef Rabhi, a Washtenaw County commissioner and member of the A2P2 advisory board, told those gathered at a town hall in Ann Arbor’s Burns Park on Sunday.
“Oftentimes when there’s these big storms, it’s just Michigan that loses power,” Rabhi said. “And when you zoom in on Michigan, it’s just southeast Michigan that loses power.”
A recent report backs up this assertion, finding that DTE Energy and Consumers Energy were among the worst utilities in the nation for the duration of power outages.
“The solution here is full municipalization,” said Rabhi.
Selling public power
Reliability has become perhaps the biggest selling point for municipalization advocates in Ann Arbor, who have been quick to organize town halls after this year’s two major outages.
Woodring frequently points to Lansing as a prime example of public power’s benefits. On the day after February’s ice storm, the publicly owned Lansing Board of Water & Light reported 15 customers without power, while Ann Arbor had 17,700.
Lansing received slightly less ice accumulation in that event, although the city was still covered by a significant .44 inches, while Ann Arbor was hit with .65 inches. In metro Detroit, Wyandotte’s publicly-owned utility was able to restore power to all its residents within 24 hours of the storm.
Woodring also presents municipalization as the best way to transition to 100% renewable power and meet the city’s aggressive A2Zero climate plan goal of achieving carbon neutrality by 2030. DTE has a goal of achieving net zero carbon emissions by 2050.
And advocates say municipalization could lower prices for energy customers because they wouldn’t need to provide DTE with a guaranteed 9% return on equity. According to 2016 US Energy Information Administration data, private utilities charged their customers 12% more than public ones. Currently, DTE has the highest kilowatt-per-hour rate of any large utility in the Great Lakes region.
All these factors could be helping to win over Ann Arborites, but outages appear to be the main driver of interest, with A2P2’s membership doubling to over 200 after the July blackout.
“There are a lot of reasons to take control of our power grid,” Woodring told Planet Detroit. “But the reliability issue is just becoming more and more ridiculous.”
A tough fight ahead
No current Ann Arbor city council members have publicly expressed support for public power, and much could depend on the feasibility study. Energy consulting groups NewGen and 5 Lakes Energy will be carrying out different aspects of the study, looking at the possibility of creating a municipal utility, a sustainable energy utility (SEU), which would supplement DTE’s service but not replace it, or community choice aggregation (CCA), where the city could purchase renewable energy from an alternative supplier.
A2P2 expects the feasibility study to set off an intense messaging battle. Former Council Member Elizabeth Nelson previously warned that the study could produce a skewed result.
“(A) municipal power utility is always going to come out on the losing side because there’s a fixed price to it, and an SEU is entirely flexible,” she said. In other words, the city could decide how much it wants to invest in an SEU, while purchasing and maintaining the existing grid carries a fixed, and substantial, cost.
Woodring cautions that an SEU may only provide limited improvements to reliability, while CCA wouldn’t necessarily do anything to improve service, adding that the A2Zero plan says it’s currently illegal in Michigan.
If the city council decides to move forward with municipalization, a legal battle with DTE will likely follow, which could last several years. Then a city-wide ballot initiative would be sent to voters to approve the revenue bonds needed to purchase DTE’s assets. This would require 60% approval to pass.
Council members may be wary of taking on DTE, especially if they have plans to run for statewide office. State lawmakers have received $2 million in campaign donations from Consumers Energy and DTE Energy over the past five years, contributions that were accepted by nearly 70% of all sitting legislators. Rabhi says that this level of spending has had a “chilling effect” on politicians.
“You don’t want to piss off the utilities because they can quickly end your political career,” he said. For example, dark money groups backed by DTE and Consumers spent more than $1 million to defeat Republican Gary Glenn in a primary race for a Bay City area state senate seat in 2018. Glenn, a tea party conservative, had criticized “monopoly utilities” and wanted to make it easier for homeowners and businesses to invest in solar.
Municipalization isn’t the only option advocates and others are pushing for to improve reliability. Both state regulators and DTE executives have mentioned performance-based regulation (PBR) as a path toward better reliability. This would limit how much profit a utility could collect if they don’t meet targets for reliability and other factors.
Amy Bandyk, executive director for the Citizens Utility Board of Michigan, advocates for PBR, but she said DTE “is going to fight tooth-and-nail against anything that they think will reduce shareholder return,” whether that’s PBR or municipalization.
“Neither is more workable than the other,” Bandyk said. “Both should be pursued at the same time.”
In a statement to Planet Detroit, DTE spokesperson Peter Ternes defended the company’s grid improvement efforts. He said DTE spent $5 billion on grid infrastructure in the last five years, including $175 million in Washtenaw County.
Ternes also said that the cost of municipalization could be “very significant,” noting the city would need to purchase the distribution system at “today’s market value.”
“This does not include the cost of buying or generating electricity for customers or the ongoing costs of running the system once purchased. The community also must factor in costs for ongoing grid modernization investments, grid security, and reliability,” he said.
However, Rabhi said that Ann Arbor ratepayers are already paying DTE for service, and DTE is taking a portion for executive pay and as profit, which totaled $1.2 billion in 2022. Instead, he argues the city could use municipal bonds with relatively low-interest rates to purchase DTE’s infrastructure and use all their electric rate payments for grid improvements.
“It’s expensive, but we have the resources here to do it,” he said. “And we’re already spending that money.”
Beyond Ann Arbor
Some experts and public officials believe the fight for public power in Ann Arbor could have broader ramifications for metro Detroit and Michigan. John Coyle, an attorney and municipalization expert, said in a webinar hosted by A2P2 that “a newly formed municipal utility in the state provides incredible competitive discipline to the pricing of its investor-owned competitors.”
In other words, providing DTE Energy with competition could help lower rates in other parts of DTE’s service area to discourage new public utilities from forming.
Mikal Goodman, a Pontiac city council member, and A2P2 advisory board member, believes that if Ann Arbor for Public Power succeeds, it could create an important precedent for his community and perhaps the state.
“Having a city as influential as Ann Arbor making this fight, it kind of pushes the envelope,” he said, adding that Pontiac would have difficulty municipalizing for financial reasons. “[Ann Arbor] is the most feasible community to make that jump.”
Goodman says a win in Ann Arbor could also set up a ballot initiative for a state-owned utility. Pontiac City Council passed a resolution in February to begin researching a statewide utility in the wake of the ice storm. This followed Rabhi’s House Joint Resolution Y in 2022, which would have presented voters with a constitutional amendment to create a statewide utility.
“The conversation around public power, utility accountability, and DTE is far from done,” Goodman said. “This is probably the quietest it will be.”