Why “Ann Arbor for Public Power” Should Scare You to Death

by P.D. Lesko

Ann Arbor for Public Power appears to be a group of ecologically-minded people sick to death of DTE’s “dirty,” high-priced services and outage-a-palloozas in Ann Arbor. They want Ann Arbor to replace DTE with a “clean,” public energy utility. However, the thought of the City of Ann Arbor elected officials and city staff controlling a public energy utility should scare you to death.

Ann Arbor for Public Power’s PR says a public utility would deliver “clean” electricity more cheaply than DTE. Don’t get me wrong, public utilities around the country do just that. But how much users would actually save is not spelled out. Data examined by the American Public Power Association showed public utility rates are on average about 13 percent lower than those of investor-owned utilities. In Winter Park, FL customers save, on average, 5 percent on their electric bills through a municipal electric system. Supporters argue that well-managed, public utilities are inherently better for ratepayers because they remove profit-driven investors from the equation. But Ann Arbor’s elected officials and city staff manage our city services as revenue centers, including the city-owned water and sewer utility. The Ann Arbor for Public Power folks present no evidence that a publicly-owned energy utility would be managed any differently.

As the saying goes, the best predictor of future behavior is past behavior.

Just Like DTE, City Utility (and Services) Run as Profit Centers

Ann Arbor’s existing public water utility saw administrative costs double between 2018 and 2022. Worse still, since 2000 the City’s water supply and wastewater systems have been used by elected officials and city staff in exactly the same way profit-driven executives and investors run DTE. There is no evidence to support, or reason to believe, a publicly-owned electric utility run by Ann Arbor city staff would be managed well, or run any differently.

City budget documents show how the City’s publicly-owned and operated water and sewer utility has been run as a slush fund/profit center rather than a revenue neutral utility that offers cheaper, more reliable water and sewer service. According to the City’s 2022 budget, the publicly-owned and controlled water system was projected to take in $31.4 million and the sewer system projected to take in $34.5 million. The 2022 water system expenses are projected to be $24 million and the sewer system expenses are projected to be $29 million, resulting in a $12.9 million “profit” from the city-owned and operated utility. Thanks to unrelenting rate hikes and profit-driven management, according to the 2022 budget the city-owned water and sewer systems are sitting on a $259 million total fund balance (surplus), around $5,000 per household.

Ann Arbor’s water, stormwater and sewer rates have been hiked by almost 70 percent over the past ten years. Rates for water and sewer services controlled by the City utility have been raised far and above the cost of inflation. To make matters worse, the water and sewer infrastructure has, for the past 50 years, been neglected and allowed to crumble. While the Ann Arbor for Public Power team argue that DTE outages in Ann Arbor have repeatedly inconvenienced tens of thousands, public records show that over the past decade in Ann Arbor water main breaks have hit the same water mains on the same streets time and again, inconveniencing tens of thousands. In February 2022, the City posted on Facebook that residential street snowplowing was behind, because there had been a water main break and five workers had been pulled from plowing to deal with the broken main.

Over the past half a dozen years, tens of thousands of gallons of sewage have been dumped into the Huron River either from Wastewater Treatment plant spills, or “accidents” related to poor maintenance of sewage pipes.

In 2021, the State of Michigan stepped in and demanded that Ann Arbor replace lead water pipes leading from water mains to resident homes. City officials estimated spending just $1 million per year on the $14 million project. City officials have estimated it will be two decades before Ann Arbor resident drinking water pipes are free of any and all lead connectors. In light of the Flint water crisis, you have to wonder why it took an order from State officials to get Ann Arbor’s elected and appointed officials, not to mention city staff, to come up with a plan to remove the lead connectors in the city-owned water system.

According to the Ann Arbor for Public Power website, “The poles and wires [of the local electric grid] belong to Ann Arbor. We maintain them to avoid outages just like Lansing does.”

This is like promising to maintain Model T technology. In Michigan, about one-third of DTEs power cables are underground, and DTE estimates it would cost $20 to $30 billion to bury all of the power lines in Michigan. In 2021, DTE invested $7 billion in power grid improvements, including tree trimming, replacing poles, installing censors to pinpoint outages and burying cables. In fact, no other public electric utility in Michigan uses completely renewable sources, such as solar panels and wind. So comparing Ann Arbor’s proposed “clean” energy utility (by 2030) to any other in the State is misleading.

Roads: How Do City Staff and City Council Take Care of the Present Infrastructure?

When he ran for office in 2018, Chris Taylor promised voters that 80 percent of city streets would be in “good” or “better” condition by 2026. Conveniently, after Taylor was re-elected, in 2021, city officials announced that goal was “unattainable.” Taylor blamed the “freeze-thaw cycle.” Really? In fact, when he was elected to Council in 2009, Taylor bemoaned the sorry state of the roads. In 2022, 13 years after Taylor was first elected, 39 percent of local Ann Arbor streets are rated at a three or worse on a ten-point scale. For major streets, it’s 22 percent. Detroit is the only city in Michigan with roads/streets rated by the State as being in worse shape than Ann Arbor’s. According to the Federal Highway Administration, Detroit’s roads are the the fifth worst in the entire United States.

Parks for Profit, Maintenance by Residents

According to the City’s website, “Ann Arbor parks system is comprised of 159 parks covering more than 2,100 acres. Parks maintenance staff is responsible for the care and upkeep of the parks, which includes mowing.” Ann Arbor’s most recent budget shows that much of that mowing is outsourced at the eye-popping rate of $500 per acre. Ann Arbor implemented GIVE365 to use resident volunteers to maintain city parks because of cuts to Parks Dept. staffing. In 2019, public records show around 9,000 residents participated in GIVE 365 programs. Those volunteers put in 200 to 600 hours per month doing the work of city staff: they did planting, and tended flower beds. They kept up trails and paths and picked up garbage. They repaired park structures, planted and watered trees. That is the equivalent of the work of four full-time city employees.

Will 365GIVE volunteers be given hard hats and sent up in cherry pickers to maintain the City’s electrical infrastructure? Will GIVE365 volunteers provide the customer service needed to help sort out billing questions, missed repair appointments, smart meter disputes? Ann Arbor will, according to Ann Arbor for Public Power, “create good, local jobs at many levels.” The wastewater treatment plant employs 35 FTEs. It’s fair to assume that the public electric utility would employ at least that many workers, if not more. Creating “good, local jobs at many levels” is a platitude without a plan. Transitioning to a locally-owned electric utility could add many millions of dollars to Ann Arbor’s already stretched-thin general fund, or require yet another millage.

Ann Arbor City budget books show that between 2016 and 2022, the amount of general fund money spent on our parks has risen from $5.7 million $7.8 million. Meanwhile, revenue generated by the Park and Recreation Services has risen from $3.2 million to $5 million, primarily through increases in fees, such as the cost to rent park facilities, participate in programs, and purchase pool passes. Like the water and sewer utility owned by city taxpayers, our publicly-owned parks are treated as a profit center.

More Public Accountability? Maybe. Maybe Not.

Ann Arbor for Public Power’s cartoon infographic says that “unlike DTE, the municipal utility will be directly accountable to the public.”

DTE is directly accountable to the public. In 2019 DTE requested a 9 percent increase in billing rates. The Michigan Public Service Commission approved a 4.7 percent rate increase for DTE customers. On making this decision amid the pandemic, MPSC Chairman Sally Talberg said in a press release, “There are pressing needs to upgrade aging infrastructure to ensure safe, reliable electric service.” Ann Arbor’s water and sewer utility did exactly the same thing: in 2019 water rates increased 6 percent, sewer rates increased 7 percent and stormwater rates increased 13 percent. Mayor Taylor argued that the steep hikes were necessary “to keep the water system adequate.”

In April 2022, a new package of bills was introduced by state Reps. Abraham Aiyash, D-Hamtramck, and Yousef Rabhi, D-Ann Arbor, to increase financial relief for customers during power outages and force more accountability from utilities. House Bill 6043 sets a formula for utilities to issue bill credits to residents for losses incurred during power outages that increases with the time of the outage. HB 6045 would give customers a $100 credit if they experienced four service interruptions lasting an hour or more within the previous 12 months. If the customer experiences more than four outages, they’d receive a $200 credit on their bill. 

The bills come on the heels of a March 2022 order by the Michigan Public Service Commission, the state’s utility oversight body, to increase the previously required credit of $25 per day to $35 per day. 

Until and unless some very detailed financial and operational specifics are forthcoming, Ann Arbor for Public Power offers little compelling evidence that a public-owned utility would save residents money, or be managed in the best interests of the public by city staff. Ann Arbor residents could find themselves, instead, on the hook for billions of dollars in needed improvements to the local electric power infrastructure in order to keep promises of reliability. After all, this is exactly why the water, sewer and stormwater rates have been raised so much.