A CRA team of energy experts conducted a comprehensive study on the impacts of a potential municipalization of the electric system serving Ann Arbor, MI.
Key study findings include:
- Ann Arbor customers would face a 30% to 40% retail rate increase in year one, depending on the municipal utility’s choice of energy supply (market supply vs. green energy). This increase is attributed to the substantial upfront investment requirements, higher energy supply costs and a loss of economies of scale.
- The municipal utility would face significant upfront costs to set up (e.g., purchase of assets and set-up of utility operations), amounting to over $1B in the near term plus further investments of another $1B over the next 20 years that would need to be financed by Ann Arbor customers.
- Shifting away from asset-backed long-term utility planning would bring a major change in energy procurement for Ann Arbor customers and drive up energy supply costs; in addition, the loss of economies of scale would increase utility operating costs.
- Operational and market risks (e.g., cybersecurity risks, securing energy supply, etc.) could further increase costs for Ann Arbor customers.
- Ann Arbor customers would lose key benefits (e.g., generation ownership, operational experience, access to low-cost renewables) upon leaving a vertically integrated utility.
These factors collectively point to substantial financial burdens and heightened risks for Ann Arbor customers should municipalization proceed.
The study was commissioned by DTE Energy and the full report can be found here.
