DTE can provide gas service in Ann Arbor until 2035 under new climate-action deal
ANN ARBOR, MI — Ann Arbor is striking a deal with DTE Energy to let the Detroit-based utility continue providing gas service in the city for the next decade, but with stipulations.
That includes a new climate-action agreement as the city aims to gradually transition away from gas to renewable energy, including creating geothermal heating and cooling networks.
City Council voted unanimously Monday night, April 7, to give the initial OK to an ordinance update granting DTE a new gas franchise agreement. It’s due for final approval April 21.
Rather than lasting 30 years like a typical gas franchise, the new agreement only lasts until 2035, signaling to DTE, developers and residents the city is exploring alternatives for heating that better align with the city’s A2Zero carbon-neutrality goals, said Missy Stults, the city’s sustainability director.
It’s a great accomplishment, said City Attorney Atleen Kaur, standing alongside other members of the city’s negotiating team, including attorney Valerie Brader and Skye Stewart, the city’s public services chief of staff.
“We have not been able to find in the country another city that has been able to negotiate climate and carbon-reduction goals in a gas franchise,” Kaur said. “I couldn’t be prouder today.”
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Ann Arbor last granted a non-exclusive gas franchise to DTE in 1997 to supply and sell natural gas to customers in Ann Arbor for 30 years. The agreement, which has allowed use of the city’s public rights of way for gas service, expires in 2027.
City officials said in 2023 — after shelving a proposed city ban on new gas connections — they wanted to replace DTE’s gas franchise with a new sustainable heating franchise with provisions for a transition away from gas. Negotiations with DTE have led to the deal now on the table.
“It is really only an eight-year extension from the original franchise,” Kaur said. “It clearly signals that this community is serious about moving away from carbon.”
There could be another franchise agreement with DTE beyond 2035, but it’s not guaranteed, Stults said.
The climate-action agreement included as part of the franchise creates a process for continued work and a decision every two years about what actions can be taken together by the city and DTE, Brader said, and it gives the people at the table making the decisions the authority to carry them out.
They’ve already worked out an initial plan for the first two years of activities. That includes an energy-efficiency pilot program for energy waste reduction specifically focused on city renters and landlords with DTE providing $500,000 in incentives.
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A networked geothermal system to tap into the earth’s energy to heat and cool homes and other buildings in the Bryant neighborhood is another project listed in the plan. That’s expected to cost over $30 million and DTE is expected to submit a bid proposal to the city to possibly take it on.
“The parties will reasonably work together to develop a training and development plan to train local union trade members with the skills necessary to operate and maintain thermal energy networks or district geothermal systems,” the plan states.
Specifically, the parties will work to implement a plan created as part of the U.S. Department of Energy’s Community Geothermal program submitted by the city and Local UA 190, it states.
Several other initiatives are listed in the initial work plan, including reducing greenhouse gas emissions from heating and cooling at city facilities and DTE technical support to analyze installing a biodigester at the city’s wastewater treatment facility.
The city’s broader vision to get off gas for environmental and health reasons includes replacing gas lines and gas furnaces throughout the city with geothermal networks and heat pumps.
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John Mirsky shows off the heat pump for his geothermal heating and cooling system and his dual water heater system, which taps into the output of the heat pump, at his home in Ann Arbor on Wednesday, Jan. 11, 2023.Jacob Hamilton
Stults said she gives DTE’s negotiating team a lot of credit, saying they came to the table sincerely.
Council Member Jen Eyer, D-4th Ward, agreed it’s a big deal for the city. She served on a working group that advised the city’s negotiating team and what they’ve achieved is momentous, she said, saying it can serve as a model for other cities in Michigan and the U.S. that are serious about climate action.
“Going into it, the question was could we use this rare opportunity — a utility franchise agreement that was expiring — to make real progress toward our climate goals,” she said.
That’s not how franchise agreements usually work, but Ann Arbor decided to try something different and the result is an agreement that puts the city on a stronger path, Eyer said.
“We’ve also secured annual public reporting on gas usage in the city, so we can measure and respond to trends, a shared commitment to electrification and decarbonization, a framework for collaboration to support residents and businesses as they move off gas, training to facilitate a just transition for workers and a clear expectation that any future agreement must align with the city’s adopted energy and climate plans,” she said.
Mayor Christopher Taylor echoed Eyer, calling it an excellent step forward for the community.
“I am particularly excited about DTE’s willingness to work with us with respect to implementing district geothermal,” he said. “This is something that I think we all hope will be the gas company’s future. A gas company is a heating company and district geothermal is heating.”
If the city can be part of the structural transition to that service, that’s amazing, Taylor said.
Ann Arbor resident Ken Garber suggested there’s room for improvement in the plan. He wants to see DTE rebates to help residents convert to heat pumps and franchise fees to help finance projects to get off gas, he said.
“There’s nothing about limiting gas hookups to new construction,” he added, suggesting that should be on the table, too.
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