The Power Is Down (Again) in Tree Town:
Examining Electric Utility Municipalization in Ann Arbor
Nathaniel Magrath
Over the last several years, Ann Arbor residents have organized a push to municipalize the city’s power grid.[1] While similar efforts to municipalize electric utilities have also gained momentum across the country, motivations for these efforts vary.[2] Efforts to municipalize in Ann Arbor were initially fueled by community members’ desire to achieve 100% renewable energy, but the unreliability of power delivery in the City has recently become an additional driving force in the push to municipalize.[3]
In response, the City has commissioned studies on the feasibility of several processes, including municipalization, that might effectuate its goal of 100% renewable energy by 2030.[4] This blog post aims to briefly describe municipalization processes generally, examine Ann Arbor’s municipalization effort within that context, and suggest that more analysis is needed to evaluate the best way to achieve the City’s goal and provide low-cost, clean, reliable power for Ann Arbor residents.
- What Does it Mean to Municipalize?
At a very general level, to municipalize a utility (including power, water, sewer, etc.) is to bring it under government control.[5] Proponents of municipal energy utilities are driven by a variety of policy goals ranging from reduced rates and better reliability to improved racial equity and decreased reliance on fossil fuels.[6]
Michigan is no stranger to municipal electric systems; presently, there are approximately forty-two such systems in the state, including one in Chelsea, Ann Arbor’s neighbor, and the state’s capital city, Lansing.[7]
The legal path to municipalization in the State is well paved, at least on paper. The ability to municipalize a utility is enshrined in Michigan’s constitution.[8] Additionally, The Home Rule Cities Act (MCL § 117.4f) authorizes a municipality to purchase or condemn assets to form a public utility (provided 3/5 of the electors vote to authorize such action).[9] The state statutes that govern the Michigan Public Service Commission (MPUC) also contain specific provisions for Municipal Electric Utilities (MEUs).[10] Notably, while MPUC regulates rates and service standards for Investor-Owned Utilities (IOUs),[11] it does not regulate MEUs within the state in the same way.[12]
The general steps towards a municipal takeover of the incumbent IOU are well documented, and these processes generally follow a similar pattern across states.[13] Efforts in other states indicate that legal hurdles in municipalization processes in Michigan are likely to come from the incumbent IOU, which has a profit motive to remain in place, rather than the commission itself.
- Municipalization in Ann Arbor
Energy delivery in Ann Arbor is currently managed by DTE, an IOU delivering power to a sizable portion of southeast Michigan.[14] In addition to growing frustration among residents with power outages,[15] some argue that continued reliance on DTE is incompatible with Ann Arbor’s 100% renewable power goal.[16] In September 2022, the Ann Arbor City Council funded a feasibility study to explore the formation of a municipal electricity system as well as other options to reach the City’s renewable energy goals.[17]
Grassroots movements have also supported this push. Ann Arbor for Public Power, a volunteer collective in the city, advocates for municipalization of Ann Arbor’s power grid to more quickly and completely achieve renewable energy goals, improve system reliability, and keep capital within the local economy.[18] These goals generally align with public sentiment as captured in a 2023 survey commissioned by the City. That survey found that the most repeated concerns of residents are “resilience, reliability, and cost,”[19] and nearly 60% of respondents stated that they would like to see Ann Arbor reach its 100% renewable energy goal by 2030.[20]
The feasibility study’s findings were released in the fall of 2023. The reported findings explained that an MEU—while potentially opening the door to long-term cost savings—would likely not result in the city’s achieving their 2030 100% renewable goal. The report indicates that because of the uncertainty surrounding potential litigation and other financial risks, an MEU would be “highly unlikely to launch before 2030.”[21] Additionally, the feasibility study “did not directly assess the reliability of the electric distribution system, which has been the source of the growing outage problems in DTE’s service territory.”[22] The City further notes that the next study planned will still not evaluate the costs to upgrade the grid and address end-user reliability issues.[23]
The report also discussed the feasibility of a Sustainable Energy Utility (SEU), “a municipal utility supplemental to the existing electric load-serving entity (DTE)”, but further discussion of this option is beyond the scope of this blog.[24]
- What’s Next?
If Ann Arbor votes to municipalize the power grid, its chief legal advantage will be that Michigan provides both constitutional and statutory support to cities and towns wishing to municipalize. However, it is unlikely that DTE will leave Ann Arbor without a fight given its profit motive to remain in place. The study commissioned by the City noted that “[m]unicipalization is a complex legal process that has historically been vigorously opposed by the incumbent utility” and that a similar fight is expected in Ann Arbor.[25]
The litigation risks remain difficult to pinpoint in part because no municipality in the state has successfully completed the municipalization process in over a century.[26] Concern about the lack of precedent within the state might be remedied by looking to other communities across the country that have gone through this process. But while some such communities have been successful in their efforts, others have faced insuperable roadblocks.[27]
At this point in the process, there remains an alarming lack of information regarding how municipalization would resolve residents’ top concerns with power delivery as it stands now: resilience, reliability, and decarbonization.[28] While most Ann Arborites support the push towards 100% renewable energy, they also remain deeply frustrated with repeated power outages under the incumbent IOU, DTE.[29] Thus, the City must balance their focus on advancing their renewable energy goals with the demands of their constituents: solutions that improve the resilience and reliability of the grid.
Michigan’s constitutional and statutory support for municipalization of utilities puts Ann Arbor in a good legal position to form a municipal utility. However, should it pursue this route, it is important that it keep in mind that what citizens appear to most desire is a clean, reliable power grid—the City would do well to ensure that goal remains in focus as it explores future studies and continues with this process.
[1] Ann Arbor for Public Power, https://annarborpublicpower.org/ (last visited Mar. 17, 2024).
[2] See Akielly Hu, Meet the communities trying to take over their local electric utility, Grist (Jan. 25, 2024),
https://grist.org/politics/meet-the-communities-trying-to-take-over-their-local-electric-utility/ (outlining municipalization efforts across the country, including the effort in Ann Arbor).
[3] See Nirali Patel and Chen Lyu, Community members protest for municipal energy ahead of City Council vote at city hall, Mich. Daily (Jan. 21, 2022), https://www.michigandaily.com/news/protestors-protest-for-municipal-energy-ahead-of-city-council-vote-at-city-hall/; see also Paul Ciampoli, Moves to Expand Public Power in Michigan Grow in Wake of Recent Outages, Am. Pub. Power Ass’n (Mar. 3, 2023), https://www.publicpower.org/periodical/article/moves-expand-public-power-michigan-grow-wake-recent-outages; see also Meredith Bruckner, Recent power outages fueling push for municipal utility in Ann Arbor (Jul. 31, 2023), https://www.cbsnews.com/detroit/news/recent-power-outages-fueling-push-for-municipal-utility-in-ann-arbor/.
[4] 100% Renewable Energy Pathways, City of Ann Arbor, https://www.a2gov.org/departments/sustainability/Adaptation-Resilience/Pages/Renewable-Energy-Pathways.aspx (last visited Mar. 17, 2024).
[5] Suedeen G. Kelly, Municipalization of Electricity: The Allure of Lower Rates for Bright Lights in Big Cities, 37 Nat. Res. J. 43 (1997); see also Shelley Welton, Public Energy, 92 N.Y.U. L. Rev. 267, 304 (2017) (describing municipalized systems as those where “either the city council or an independent governing board or agency has direct control of a not-for-profit electric utility”).
[6] See Alexandra B. Klass & Rebecca Wilton, Local Power, 75 Vand. L. Rev. 93, 134–35 (2022) (explaining the motivations of local governments and other contemporary power advocates in their efforts to municipalize energy utilities).
[7] Public Power FAQs, Ann Arbor for Public Power, https://annarborpublicpower.org/faq/ (last visited Mar. 17, 2024).
[8] “Subject to this constitution, any city or village may acquire, own or operate, within or without its corporate limits, public service facilities for supplying water, light, heat, power, sewage disposal and transportation to the municipality and the inhabitants thereof.” Mich. Const. art. VII, § 24.
[9] Mich. Comp. Laws. Ann § 117.4f (2018).
[10] Id. § 460.10y (2018).
[11] See Administrative Rules / Laws, Mich. Pub. Serv. Comm’n, https://www.michigan.gov/mpsc/regulatory/administrative-rules-laws (last visited Mar. 17, 2024).
[12] See Electricity, Mich. Pub. Serv. Comm’n, https://www.michigan.gov/mpsc/about/electricity (last visited Mar. 17, 2024).
[13] See Klass & Wilton, supra note 6, at 114–19 (detailing the pattern that cities often follow when pursuing municipalization of a utility).
[14] See Electric Utility Service Area Map, Mich. Pub. Serv. Comm’n, https://www.michigan.gov/mpsc/consumer/electricity/electric-utility-service-area-map (last visited Mar. 17, 2024).
[15] See Ryan Stanton, ‘We do not have to live like this.’ Ann Arborites air frustrations over DTE outages, MLIVE (Jul. 26, 2023), https://www.mlive.com/news/ann-arbor/2023/07/we-do-not-have-to-live-like-this-ann-arborites-air-frustrations-over-dte-outages.html.
[16] See Renewable, Ann Arbor for Public Power, https://annarborpublicpower.org/clean/ (last visited Apr. 3, 2024).
[17] Ann Arbor, Mich., Resolution 22-1380 (Sept. 6, 2022), https://a2gov.legistar.com/LegislationDetail.aspx?ID=5778314&GUID=DB270D29-357E-4BCE-8A95-7B9AE379A647.
[18] Public Power FAQs, supra note 7.
[19] Dustin Olson & Sean Bartley, Strategic Insights from the Ann Arbor Energy Future Survey, American Pulse Research & Polling (2023), https://www.a2gov.org/departments/sustainability/Documents/Survey%20Full%20Results%20with%20Appendices.pdf.
[20] Id. at 10.
[21] City of Ann Arbor, 100% Renewable Energy Options Analysis 134–38 (2023), https://www.a2gov.org/departments/sustainability/Documents/Ann%20Arbor%20Renewable%20Energy%20report%20final.pdf.
[22] Id. at xxv.
[23] Id.
[24] Id. at xiv; see also Ann Arbor’s Sustainable Energy Utility (SEU), City of Ann Arbor, https://www.a2gov.org/departments/sustainability/Sustainability-Me/Pages/Ann-Arbor’s-Sustainable-Energy-Utility-(SEU).aspx (last visited Apr. 3, 2024).
[25] City of Ann Arbor, supra note 21, at xvii; see also Klass & Wilton, supra note 12, at 131–33 (discussing notable examples of IOUs opposing municipal takeovers).
[26] Public Power FAQs, supra note 7 (explaining that “existing municipal utilities in Michigan were all formed over a century ago”).
[27] See Synapse Energy Economics, Inc., An Analysis of Municipalization and Related Utility Practices 10–26 (2017) (comparing the municipalization efforts of Long Island, N.Y., Winter Park, Fla., Jefferson County, Wash., and Boulder, Colo.); see also Boulder Local Power: A History, Empower Our Future, https://empowerourfuture.org/boulder-municipalization-a-history/ (last visited Mar. 17, 2024) (chronicling Boulder’s recent unsuccessful attempt to municipalize).
[28] See Olson & Bartley, supra note 19, at 2–3.
[29] Id.; see also Stanton, supra note 15.