Ann Arbor for Public Power Calls for Rejection of Feasibility Study Proposal in Current Form

  “The main purpose of any phase 2 is to clarify the cost of acquiring the utility, and this study fails that purpose,” says A2P2 Executive Director Brian Geiringer. “The study will only create public confusion over costs. We’re asking Council to instruct NewGen to first modify its proposal before approving the contract.”

  The study should produce a complete valuation of DTE’s assets. The current study proposal, while it does include a thorough field survey of DTE’s physical assets, does not provide enough funds (only 2% of the study’s overall price) for addressing intangible costs, which is the area of biggest need. Those costs, which are currently the biggest unknown, include ‘going concern’ and ‘stranded costs.’ ‘Going concern’ consists of goodwill and the value of DTE Electric’s franchise to serve the city; and stranded costs are reduced retail income, if any, to DTE from leftover generation capacity after Ann Arbor takes over the system. The rules for setting these costs require significant legal analysis to understand.  

  “It’s a major undertaking to resolve the legal rules around intangible costs, and the current study does not come close to providing the necessary funding,” says Geiringer. “NewGen needs to rebalance its proposal to emphasize these costs and provide a complete valuation. Only then will this study provide Ann Arbor residents the information they deserve.”

  A valuation will also enable the city’s lawyers to move forward with the condemnation of DTE’s assets, as state law allows, should voters decide to take that important step. “If this study fails to deliver a thorough valuation, it could set the process back years and means the city will need additional studies in the future,” says Geiringer. “For 1.7 million dollars the public deserves a study that will answer all the important questions.”