Should We Divorce DTE?

The storm with up to seventy-five miles-per-hour mph winds that swept across Michigan last August, knocking down trees and power lines, caused more than 375,000 southeast Michigan DTE Energy customers to lose power for days, including many in Ann Arbor. But not city Sustainability and Innovations Director Missy Stults: She and her family have a solar array with storage batteries at their west-side home.

“We were out [of power] for about fifteen minutes, but that was because we had drained the battery the day before doing laundry,” she emails. “As soon as the sun came up we were back in operation. And, had we known a storm was moving through, we could have set the battery to hold power so that we wouldn’t have lost for even those fifteen minutes.” Stults says they kept power during the outage by unplugging unused devices and moderating doing laundry.

A week after the storm, city council approved a half-million-dollar study exploring the feasibility of a city-owned power utility in a 10-1 vote. And in November, 71 percent of voters passed the city’s $150 million, twenty-year Community Climate Action Millage. Together these measures are intended to help the city improve services and achieve its extremely ambitious A2Zero goal of net carbon neutrality by 2030.

“Achieving community-wide carbon net neutrality is incredibly important,” says mayor Christopher Taylor, “both as a matter of improving services and comfort and cost for people in the city, but also, of course, because working to affect carbon neutrality is a moral necessity. And we need to explore all of our options with respect to greening our grid in order to accomplish that goal.”

The city’s options will likely come down to three: keeping DTE while encouraging more green power; creating a “supplemental energy utility” (SEU) linking private solar arrays and batteries in local “microgrids,” or divorcing DTE and forming its own municipal power company.

The feasibility study won’t be complete until later this year, though Taylor and Stults have thoughts on both options, as do councilmember Erica Briggs, county commissioner Yousef Rabhi, and Ann Arbor for Public Power spokesperson Zackariah Farah. Unsurprisingly, DTE also has strong opinions. Molly Luempert-Coy, Pete Ternes, and Knox Cameron say their company is an ally, not an enemy, in achieving Ann Arbor’s goals.  

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Mayor Taylor didn’t lose power in August either, because he, too, has a solar array and storage batteries. “Ann Arbor has a great program called Ann Arbor Solarize,” he explains. “I was excited to participate in that program, and my experience was, like the experience of so many, incredibly successful.”

Taylor did it because “like most everyone in Ann Arbor, I’m dissatisfied with DTE’s energy production, its cost, and its reliability.” An SEU, he explains, would let neighbors share the benefits of systems like his while leaving the private utility in place: It “does not require the purchase of DTE’s existing infrastructure. It overlays DTE’s existing infrastructure.”

For that reason, it “can get off the ground, I believe, quite quickly,” Taylor says. “I don’t believe there’re substantial legal or regulatory hurdles. It is of course incremental. There will not be solar panels on every single home the moment the ordinance has passed. So part of the feasibility study is to determine how this will work.”

Stults agrees that an SEU would be relatively easy to implement because “solar and storage is already viable [and] on the market.” If the city chooses that path, she says, it “would pay all of the upfront costs, and people who got solar would just pay back like they do on their energy bill today.” 

City councilmember and energy commission member Briggs says that while residents can add solar panels and batteries on their own now, “being able to operate our own utility provides different options, both legally in terms of what we’re able to do with that energy and in terms of how energy flows back into the grid. It’s moving away from thinking about this as sort of individual improvements that we would make on our own homes to the ability to do this at a larger scale and neighborhood scale and build up resiliency.”

Briggs believes that an SEU could be set up in two or three years. But she concedes that “it’s gonna be challenging for us to meet all of our own needs with the energy that we can produce in the city.” 

“This is true,” agrees Stults in an email. “But we do have a lot of potential in Ann Arbor and we want to maximize that potential. The SEU allows us to do that and to do it in a way that improves resilience, reliability, and affordability.” 

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Farah says an SEU “makes good sense in the short term,” but his group sees it as just  “laying the groundwork for what we think is the long-term solution: replace DTE entirely.

“To beat climate change, we need badly to reduce the emissions produced when we generate our power,” says Farah. “Unfortunately we have a private, for-profit utility company, DTE, that makes all the decisions about how our electricity is generated.” 

Michigan’s constitution, he points out,  “says that any municipality can replace a private utility with a public one through a citywide vote.” If Ann Arbor did that, he says, the city could condemn DTE’s entire local grid and then negotiate the cost of buying it. He acknowledges “there’s a good chance that it’ll go into the courts because DTE [is] not gonna agree!” 

Then, if it’s implemented. the city would upgrade the infrastructure: Farah notes that in 2020, the utility asked the Michigan Public Service Commission (MPSC) for permission to more than double its annual spending on “pole and pole-top maintenance.” “I’m sure that many of our cables need to be replaced,” Farah says. “Probably many of our poles need to be replaced.” 

 No one knows how much that would cost, but energy commission chair John Mirsky suggests it could be as much as $300 million just for the existing assets, without the upgrades Farah thinks are needed, or the ongoing cost of running a utility. For those reasons, Mirsky says, “If you took a look at the A2Zero plan, you’ll notice that a [municipal] utility isn’t even really mentioned.” 

Farah believes that a municipal utility would nonetheless be cheaper than DTE, because it wouldn’t “have a massive profit margin.” The MPSC regulates how private utilities generate and distribute electricity and the rates customers pay for it. But Farah notes that it “does not directly set DTE’s profit margin.”

In filings with the Securities and Exchange Commission, Farah says, the company reported a 14.1 percent margin in 2021. Investing website macrotrends.net says it was less, with quarterly profits hovering between 7 and 10 percent of revenue for most of the last decade, rising to 12 percent in 2020, and briefly dipping below 5 percent last year.

“It’s gonna cost a lot of money to acquire the assets,” Farah acknowledges. “But it’s not like we’re just buying some worthless piece of metal or something … We’re buying something that will be a real cash cow for the entire city even if we lower rates.” 

He says a city-owned utility could even send money to the city. “The city of Holland, which has a public power utility, receives an annual dividend from its utility that’s equal to 6.25 percent of the average retail electric sales revenue. In 2020, that dividend for the city of Holland was $7.6 million!” 

According to secondwavemedia.com, Holland has also cut its rates by about 15 percent since 2017. But that cheap power is far from green: Holland operated its own coal-fired power plant until 2017—when it opened one that burns natural gas.

State Senator Jeff Irwin says that as far as supplementing or replacing goes, he doesn’t “feel it’s time yet to firmly come down on one side or another because I want to see some analysis and I want to see some numbers.” 

Former state representative and current Washtenaw County commissioner Yousef Rabhi is all for replacing DTE. He points out that many Michigan municipalities already have their own power companies, including Chelsea.

Taylor acknowledges that but notes that Michigan’s existing municipal power companies have operated “since the Harding administration. If we had had such a public utility created in 1920 in Ann Arbor, we would be enjoying the benefits today.

“But that is not the question before us,” he continues. “We need to determine the feasibility of forcing DTE to sell us their hundreds of millions of dollars’ worth of existing infrastructure in its existing condition. And then once we purchase that infrastructure, how it is that we effectively power that source, that distribution infrastructure, with clean renewable energy? 

“That is the question before us, and that is the question that a series of feasibility studies will help us evaluate.”

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The first thing DTE Washtenaw County regional manager Molly Luempert-Coy wants folks to know is the company has already done a whole lot of work on reliability in Ann Arbor.

“We invested about $175 million to upgrade substations, overhead equipment [and] underground equipment over the last one to two years,” Luempert-Coy says. “We’ve looked at approximately thirty-three of our eighty-eight circuits in the Ann Arbor area. We’ve expanded our State St. substation as well. That’s about a $15 million, five-year project. We’ve replaced about 45,000 feet of overhead conductors, installed new underground conduits and cables.”

All that and much more aims to improve reliability plus provide additional capacity for electric vehicle charging and increasing electrification in the city.  “DTE is committed to helping Ann Arbor achieve its goal to reach 100 percent renewable energy by 2030,” she says. 

“Between DTE’s wind and solar projects and local participation in MIGreenPower, we’re already 30 percent of the way there,” emails DTE communications manager Pete Ternes. “Today we have over 12,000 [Washtenaw County] residents who participate,” adds DTE’s MIGreenPower director, Knox Cameron.

 Cameron says the U-M, Washtenaw Community College, and the Ann Arbor Public Schools, plus lots of businesses like Zingerman’s, also participate in MIGreenPower, paying a subscription fee to support new wind and solar energy projects and getting credits for the value of the energy they produce. Cameron says it’s a way “customers who want more renewables can invest in more renewable energy production of the utility-scale variety.” Currently most of it is wind energy, but with costs coming down, “as we move forward the prevailing technology will be solar.”

In a plan submitted to the MPSC in November, DTE reported that in 2005 it produced 77 percent of its energy from coal plants and just 1 percent from renewables. This year it will be at 45 percent coal and 14 percent renewables, and by 2036 it plans to end using coal altogether and get to net zero carbon.

That’s a huge step forward from its previous plan, which wouldn’t have reached net zero till 2050. Luempert-Coy says they’ll do it by accelerating the retirement of three coal plants and converting one to natural gas by 2028.

Luempert-Coy says Ann Arbor should work with DTE because “there’s a lot of greater flexibility of working with the current provider.” And she points out that there’s a lot of work involved in running a utility.

“You’d have to look at staffing,” she says. “You’d have to look at cost associated with operations, and then annual investment made, right? Doing load forecasting—it’s a pretty extensive, sophisticated process, right? And maintaining ongoing grid modernization investments, grid security, reliability—all of those elements that go into managing an energy system.” 

“This is a fear-mongering tactic,” responds Farah. “In the beginning, yeah, there would be startup costs that would be publicly covered by the issuing bonds. But then once the public power utility is up and running we would just pay for their salaries from the revenue from the public power utility.”

“I’m happy that DTE is finally trying to catch up on all the delayed maintenance,” Irwin says sarcastically. “I’m glad that they’re investing in these substations and in this distribution network that it is their obligation to maintain.

“If they’re successful in improving their price and their sustainability efforts and their reliability, that certainly blunts the effort of those of us who are trying to improve the prices and the environmental performance and the reliability of our system by moving to municipalization. But, they’ve got a long ways to go.”

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Council’s current study, by 5 Lakes Energy, is meant to determine if any sort of city-owned public power utility is feasible. Stults reports that 5 Lakes is working with peer communities aiming towards carbon neutrality, but “not a lot of communities attempt to start their own utilities.”

If the 5 Lakes study finds that a supplemental or municipal utility is feasible here, there will be two more studies: a rate analysis and a comparison of the options for increasing the city’s renewable energy. Taylor says the additional studies will cost “seven figures.” Stults says the timeline is “many months to a few years.”

“My goal is to achieve community-wide carbon neutral by the year 2030,” the mayor concludes. “I am method-agnostic. I want to get it done. It’s not a question of ideology. It’s a question of accomplishing the goal.”

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Calls & Letters, April 2023: Divorcing DTE

To the Observer:

Thank you for your article about the city’s future electricity options (“Should We Divorce DTE?,” March). We appreciate the coverage. However, we’d like to point out one error in the story. You wrote that, based on DTE’s plans submitted to the MPSC in November, “by 2036 it [DTE] plans to end using coal altogether and get to net zero carbon.” The coal part is correct, but DTE, according to its November 2022 Integrated Resource Plan (IRP) filing, has set a 2050 target for net zero, not 2036.

Please note in the IRP that the natural gas portion of DTE’s generation mix will increase from 18% this year to 29% in 2036. DTE has not set any date for phasing out gas generation, and continues to invest in new gas-fired power plants. Natural gas, once considered a “bridge fuel,” is—according to the best current science—no better than coal in terms of emissions, once upstream methane emissions (from leaks and flaring) and CO₂ emissions (from fracking) are taken into account.

Also note that DTE’s 2050 net zero goal depends on two technologies, carbon capture and sequestration and small modular nuclear, neither of which has advanced out of the pilot stage. They may never be scalable. DTE is also counting on hydrogen combustion for electricity generation, which is feasible (though expensive and requiring clean power to create, by hydrolysis). However, the world’s limited stocks of clean hydrogen will be needed for the future decarbonization of steel, concrete, and fertilizer production, for which there is no alternative, rather than for electricity, which wind and solar can affordably make today. In short, we consider DTE’s 2050 goal more technological wishful thinking than realistic plan.

Sincerely,

Chris Lewis
A2P2 media liaison

DTE spokesperson Cindy Hecht also emailed a correction: Knox Cameron, director of DTE’s MIGreenPower program, listed Zingerman’s as one of the participants in the alternative-power program—but, Hecht writes, the company is “not actually enrolled at this point.”