Title
An Ordinance to Amend Chapter 34 (Gas Franchise) and Replace it with a New Heating Franchise And Adopt Accompanying Agreement Regarding Climate Action (ORD-25-10)
Memorandum
In 2023, City Council unanimously adopted Resolution R-23-101 Directing the City Administrator to Negotiate a New Natural Gas Franchise. As noted in that resolution, “While researching the City’s opportunities related to beneficial electrification, limiting new natural gas connections, and achieving the A2ZERO goal of community-wide carbon neutrality by 2030, City staff reviewed the City’s natural gas franchise (Ann Arbor City Code, Chapter 34) and noted that it is set to expire in 2027. Under Michigan law, a franchise is a contract between a local unit of government and a utility that: (i) governs the use of the public rights of way, and (ii) sets the conditions under which the company may, for a set period, provide the specified utility service. Franchises can also include additional terms and several local governments across the country (e.g., Chicago, Salt Lake City, and San Diego) have successfully advanced affordability, equity, and clean energy goals via franchise negotiations while optimizing use of the public rights of way.”
Given the City’s aggressive and time sensitive A2ZERO goals, the community’s desire for more resilient, reliable, and affordable energy, and the need to accomplish these ends in a legally prudent manner, Council authorized staff to begin negotiations with the goal of bringing a new franchise aligned with A2ZERO and best practices regarding the use of the City’s rights of way, back to Council as soon as possible.
Attached as an Ordinance is the negotiated new Franchise. In addition to the Franchise, the City and DTE have negotiated an Agreement Regarding Climate Action (ARCA) which includes regular creation of a 2-year work plan outlining the specific actions DTE and the City will take to advance the goals outlined in the ARCA and Franchise. Staff are attaching the first 2-year work plan as an information item. No Council action is required regarding the work plan as it is shared only for informational purposes. However, staff are requesting Council’s review and adoption of a new Chapter 34 - Heating Franchise as attached.
The purpose of this ordinance is to grant DTE Gas Company a new franchise to transact local business in the City of Ann Arbor for the purposes of conveying gas into and through and supplying and selling gas in the City and other reasonably related incidental matters. Rather than lasting 30 years like a typical gas franchise, this franchise only lasts until 2035, signaling to DTE Gas, developers, and residents that the City is exploring alternatives for heating that better align with A2ZERO goals (geothermal, electric heat pumps, etc.). This does not mean the City could not choose to enter another franchise with DTE Gas (or another utility) at the end of this franchise term, but another franchise is not guaranteed. This franchise includes a commitment to identify opportunities for moving toward carbon neutrality, supporting the SEU, and for coordination of field work between DTE Gas and the City. All of these activities should help the City move toward its A2ZERO goals and achieve less infrastructure disruption for Ann Arbor residents.
Staff
Prepared by: Dr. Missy Stults, Sustainability and Innovations Director
Atleen Kaur, City Attorney
Skye Stewart, Chief of Staff, Public Services
Reviewed by: Milton Dohoney, Jr., City Administrator
Approved by: Milton Dohoney, Jr., City Administrator
Body
(See Attached Ordinance)
Sponsored by: Mayor Taylor