Ann Arbor for Public Power comments on muni feasibility study RFP

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Ann Arbor for Public Power comments on muni feasibility study RFP

There is an urgent need for Ann Arbor to transition to renewable power sources. Recognizing this, the Ann Arbor City Council, in its January 18, 2022 resolution, required the completion of a municipal electric utility feasibility study. In response, city staff recently issued the Request for Proposal RFP # 22-35, “100% Renewable Energy Options Analysis,” with a May 23 due date.

Ann Arbor for Public Power (A2P2) emphatically supports a thorough and unbiased municipalization feasibility study. However, this RFP is flawed, and could lead to a study that does not provide the information to accurately determine the technical and economic feasibility of an Ann Arbor municipal electric utility. We are disappointed that the city rejected our requests to provide public comment prior to the release of this RFP, which could have prevented these flaws. To ensure the completion of a reliable feasibility study, we ask that an A2P2 representative be appointed to the proposal selection committee as an external collaborator, and that the proposal selection process be conducted with public transparency. Our representative should be present at contractor interviews (if needed), at negotiations, and at selection committee meetings. Our concerns with the RFP as written follow.

Affordability

The city must thoroughly evaluate both the potential costs and the potential benefits of municipalization to determine feasibility. This task is typically performed in two steps. The first phase typically takes a modeling approach, based mainly on FERC and state regulatory filings, presenting various scenarios to determine if a more rigorous followup engineering-based study justifies the added expense.

In line with standard practice, we advocated for an affordable preliminary feasibility study similar to those recently conducted by Pueblo, Colorado and Chicago, Illinois, each of which cost about $120,000. The scope of work of section 2 of this RFP is so extensive that we expect bids for this portion alone to come in many times higher. The city has allocated $250,000 for this RFP, we believe that funding amount will still be severely inadequate to fund the scope of work. Steve Vandermeer, an executive consultant for Hometown Connections, a national nonprofit that advises communities going through the process of municipalization, told us, “…. this SOW (scope of work) seems enormous and unwieldy. While the city will likely get a number of proposals, the number of firms that have the experience and expertise to cover the entire spectrum of analysis the city is looking for is close to zero. I personally know of no firm active in public utility consulting that could address this SOW … I would expect proposals to be well into six figures for cost and involve multiple subcontractors. And at the end of the day, I’m not confident that the study will provide city leaders the information they need to move forward.”

Potential study bias

The current RFP requires exhaustive evaluations of the costs, concerns and risks of municipalization without a correspondingly complete assessment of its potential benefits. “Overall, it seems a bit biased negatively toward the municipalization option,” said Ursula Schryver, American Public Power Association Vice President of Strategic Member Engagement & Education. She also noted that the RFP deliverables should have included estimates of muni benefits, such as the potential value to the city of owning the distribution assets. These might include the ability to improve service reliability, to generate cash reserves, and the potential to improve overall city services by integrating the electric utility. For example, Pueblo Colorado’s RFP explicitly called for the contractor to project “whether additional funds would remain that could be regarded as a reasonable return to the City.”

Contractor experience with cities

 Finally, section IIIB, “Minimum information required—past involvement with similar projects,” should have specified that the contractor must have experience working with cities or other public entities. This should be emphasized going forward.

Conclusion

We need to determine to what extent a municipal electric utility will benefit Ann Arbor.  “Michigan residents who are served by a muni get cheaper, cleaner, and more reliable electricity,” says state senator Jeff Irwin. “Ann Arbor residents need a feasibility study that will answer the key questions to consider forming a municipal electric utility like we have for our water. How much cheaper, how much cleaner, and how much more reliable can our power be?”

More than 1,300 Ann Arbor residents signed petitions supporting a city-funded feasibility study, and they deserve an efficiently conducted study that delivers a sound, unbiased answer. Tax dollars should be spent on a fiscally responsible and open feasibility study process, one that reliably evaluates the municipalization option.

Because of the RFP deficiencies noted above, Ann Arbor for Public Power requests a full seat at the table in the proposal evaluation process which should be conducted with full transparency.