Des Moines Register: IOWA BUSINESS GROUPS SAY LAWMAKERS SHOULD CHANGE HOW INVESTOR-OWNED UTILITIES GET RATE HIKES
The Des Moines Register
November 12, 2024
Four Iowa business groups want state lawmakers to change the way its largest utilities raise rates, saying rising energy costs are hurting small businesses' ability to compete.
The groups — the Iowa Economic Alliance, the Iowa Business Energy Coalition, Iowa Business for Clean Energy, and a large energy group that represents industrial users — say the state’s process is flawed and has led to Alliant Energy’s energy charges being among the highest nationally.
Madison, Wisconsin-based Alliant Energy, which operates in Iowa as Interstate Power and Light Co., and Des Moines-based MidAmerican Energy, owned by Warren Buffett’s Berkshire Hathaway, are the largest state-regulated investor-owned utilities serving Iowa.
"Alliant’s residential and commercial rates in 2023 were higher than the average residential and commercial rates in 37 other states,” said Delia Meier, president of Iowa Business for Clean Energy.
Meier, who also is executive vice president of the Iowa 80 Group, which owns large truck stops including Iowa 80 in Walcott, billed as the world's largest, pointed to an Alliant’s rate increase that could be as high as 15%. Based on the groups' research, “only the Northeast, Michigan, California, Alaska, and Hawaii had higher average rates. This latest rate hike will make it increasingly difficult for Iowa businesses to compete,” Meier said.
Alliant's Morgan Hawk said Iowa's rate increase process ensures customers have power that's reliable and affordable, adding that the Iowa Business Energy Coalition was among the groups reaching an agreement on the rate increase. Hawk said in a statement the decision stabilizes Iowa's “customer base rates until the end of the decade."
MidAmerican's Tina Hoffman said in an email the state’s “current rate regulations and oversight, along with MidAmerican's prudent business decisions on behalf of our customers, are precisely how we are able to deliver electric rates that are 42% below the national average.”
POWER GENERATION PLANNING PROCESS NEEDS STATE OVERSIGHT, GROUPS SAY
Among changes the four business groups say the Iowa Legislature should make is requiring a “robust integrated resource planning process” that’s “overseen and approved by the Iowa Utilities Commission.” The recommendation came this month as MidAmerican submitted a resource evaluation plan to state regulators outlining its solar, natural gas, and nuclear power generation needs for the next two decades.
Bob Rafferty, the Iowa Business for Clean Energy’s executive director, welcomed MidAmerican’s resource evaluation study, but added that it highlighted why the utility “should not be solely in control of the process.”
MidAmerican’s study outlined 20 years of power generation needs, saying it would add 3,495 megawatts of natural gas-fired generation, 3,050 megawatts of solar energy and 345 megawatts of modular nuclear energy, which would pair with 155 megawatts of molten salt power storage.
In the next five years, the Des Moines-based company says it will need to build two natural gas plants to meet peak demand and install 750 megawatts of solar.
But Rafferty said MidAmerican "used future-cost assumptions that are not consistent with industry norms” and “refused to consider” distributed energy generation like solar, wind and energy storage that businesses and residents create, as well as gains through energy efficiency and conservation.
“If the strategy did not increase their profits, the strategy was not considered in the plan,” Rafferty said. “The plan includes ratepayers paying for a large number of gas ‘peaker plants’ that will sit idle for most of the year.”
The study was part of an agreement with industrial users paving the way for approval of the Des Moines utility’s WindPrime project, which will build $3.9 billion of additional wind and solar energy capacity.
A report from London Economics, the consultant that analyzed Iowa’s ratemaking process, said state lawmakers should mandate resource planning. “This absence of compulsory filing of long-term resource plans impedes” the Iowa Utilities Commission’s “access to vital information essential for informed decision-making,” including “assessing the reasonableness of utility costs and rates discussed,” the report said.
BUSINESS GROUPS SAY IOWA RATE MAKING SYSTEM OUTDATED
The groups also want to revamp how Iowa allows utilities to receive rate hikes. Currently, they said, the state enables “advance ratemaking,” initially created in 2001, to help offset the risks tied to investing in renewable energy. With regulators’ approval, it ensures utilities recoup their capital costs and a return on the investment.
But the groups say the process, which Iowa lawmakers expanded last year to include nuclear energy and storage, lets Iowa’s investor-owned electric utilities receive higher returns than utilities in Iowa’s peer states and is no longer warranted.
Rafferty said advanced ratemaking “was really designed to provide an extra profit incentive to the utilities to develop wind — back when wind was considered a much more risky investment.”
Robert Palmer, executive director of the Iowa Business Energy Coalition, agreed, saying advanced ratemaking “solved a problem when it was enacted over 20 years ago. But that problem no longer exists."
The process is “costing Iowa ratepayers many millions of dollars in excess profits for Iowa’s utilities," Palmer said in a statement. “No other state allows such inflated rates of return for technologies that are now well proven, and no other state allows such inflated rates of return to remain beyond challenge in perpetuity.”
MidAmerican’s Hoffman said the advanced ratemaking process encourages investment in energy infrastructure and ensures reliable service. It’s “exactly the policy that Iowans need going forward as utilities prepare to navigate through a profoundly changing energy landscape,” she said in an email.
“Making arbitrary changes to this process could hurt energy reliability and affordability by deterring future investments at a time when Iowa's utilities are seeing unprecedented load growth,” Hoffman said.
But the former Iowa State Rep. Rob Taylor, a member of Iowa Business for Clean Energy and owner of Revelton Distillery in Osceola, said reform is essential.
"For the future competitiveness of Iowa’s businesses as well as the pocketbooks of hardworking Iowa families, we ask legislators to stand with Iowa’s ratepayers and support these critical rate reforms endorsed by their own requested study,” Taylor said.
Donnelle Eller covers agriculture, the environment and energy for the Register. Reach her at deller@registermedia.com.
Source:https://www.desmoinesregister.com/story/money/business/2024/11/12/
Iowa Business Groups Call for Electric Rate Reform
The Gazette, Olivia Cohen
Nov. 2, 2024 5:30 am
Four Iowa business groups are advocating for a reform of how both residential and business electric rates are set in the state.
The groups — the Iowa Economic Alliance, the Large Energy Group, the Iowa Business Energy Coalition and Iowa Business for Clean Energy — released a statement this week saying it is “important to assess how legislative initiatives could meaningfully improve future utility infrastructure deployment, ensure reasonable energy costs, and give the (Iowa Utilities) Commission additional tools to adjudicate future rate requests by Iowa’s utilities.”
Business Groups join to present recommendations for electric utility reform.
The Tuesday statement comes after the Iowa Utilities Commission — formerly the Iowa Utilities Board — approved an Alliant Energy rate increase for customers on Sept. 17.
“This latest rate hike will make it increasingly difficult for Iowa businesses to compete,” Delia Meier, board president of Iowa Business for Clean Energy, said in the news release.
The Iowa Utilities Commission a year ago hired London Economics to conduct a study on rate making in Iowa.
The study showed Iowa electric utilities have the highest rate of return on equity — how much profit a company generates for each shareholder’s dollar — of seven states in the region.
The rate of return for Iowa electric utilities was 10.2 percent and 10.4 percent. The average rate of return for the other six states — South Dakota, North Dakota, Kansas, Missouri, Colorado and Texas — was just under 9.8 percent between 2010 and 2019.
”Alliant and MidAmerican have been making well above the peer groups of our neighboring states,“ said Bob Rafferty, executive director of Iowa Business for Clean Energy. “And from what I understand, it's just an unusually high rate.”
Iowa Utilities Return on Equity far out paces our neighboring states.
Rafferty, said the groups formed a coalition “to raise awareness as to how our electric grid is organized and really create a discussion of how we need to reform it. That's the role we try to play.”
The reform proposal calls for:
Requiring a “robust” integrated resources planning process to be overseen and approved by the Iowa Utilities Commission.
Reforming the advanced rate-making process, which, the group says, has resulted in investor-owned utilities receiving significantly higher return rates than Iowa’s peer states.
Restricting automatic rate adjustments and requiring a regular cadence of rate cases.
Enabling customers to be “part of the solution.”
Utilities respond to call for reform
Alliant Energy responded Friday that IUC’s decision on the company’s proposed rate hike will pave the way for “substantial economic development and growth.”
“Implementation of an individual customer rate for large business customers provides us greater flexibility to offer even more competitive rates designed to attract new, large customers to the state and drive economic development in Iowa,” Alliant spokesperson Morgan Hawk told The Gazette in an emailed statement. “Growing our customer base further spreads out costs and positively impacts all customers and communities we serve.”
Hawk said the company is committed to investing in a diverse energy mix and modernizing the grid to deliver “a more reliable, sustainable, resilient and secure energy future.”
MidAmerican spokesperson Geoff Greenwood said the company filed a “long-range resource evaluation study/plan” with the Iowa Utilities Commission on Friday.
Greenwood said the company held a series of meetings with stakeholders while drafting the plan. Those participants included IUC staff, the Office of Consumer Advocate, the Iowa Business Energy Coalition, the Iowa Association of Municipal Utilities, the Environmental Law and Policy Center, Iowa Environmental Council, Sierra Club, Microsoft and Google, according to a news release.
Greenwood said the plan stemmed from MidAmerican’s Wind PRIME settlement that the IUC approved last December, which allows the company to build 2,042 megawatts of wind and 50 megawatts of solar generation.
Tina Hoffman, vice president of Corporate Communications and Public Affairs, said MidAmerican’s rates are 42 percent below the national average.
“That's something that takes a lot of hard work and a lot of planning, and we think that efforts like the resource evaluation study [will] continue to further that conversation and allow us to be able to continue to serve customers that way,” Hoffman said.
Is it time to update Iowa’s regulatory system?
Rafferty said Iowa’s current electric regulatory system hasn’t been updated in any significant way in more than 20 years and that the state still is using the same principals established in the 1920s.
He said about 35 other states use a system similar to Iowa’s, where a utility is granted a monopoly on a certain geographic area.
Of those 35 states, 30 of them require a long-term planning process, which allows stakeholders to have input into what investments a utility is making before it goes to the higher utilities commission for approval. Rafferty said Iowa does not use this practice.
“When we have different rate proceedings before the Iowa Utilities [Commission], they only have a partial picture of what's going on,” Rafferty said. “They have to basically look at each proposed large investment in its own little silo, instead of looking at how is this going to fit into the big picture.”
Advanced ratemaking — another key pillar of the recommended reform — is a process that allows utilities to establish a set of regulations and rate of return for future energy projects before construction begins.
Robert Palmer, executive director for the Iowa Business Energy Coalition, said the advanced ratemaking process needs to be reformed because the problem it was created to address no longer exists.
“The present mechanism is costing Iowa ratepayers many millions of dollars in excess profits for Iowa’s utilities,” Palmer said in the release. “No other state allows such inflated rates of return for technologies that are now well proven, and no other state allows such inflated rates of return to remain beyond challenge in perpetuity.”
David Vognsen, with the Large Energy Group, said the first step in bringing customers into the conversation is helping them build awareness.
Vognsen said it is important for companies to consistently notify their customers about changes, provide opportunities for them to be involved in the process and offer more information about how the processes works.
He said these pathways will help to bring customers into the conversation so they can “aggravate together,” and have “a common representation for the utility commission to address their common interests.”
R.G. Schwarm, executive director of the Iowa Economic Alliance, said customers who are “strapped” with increasing bills need to know how the monopoly utilities are “obligating” consumers with future payments.
“Today, customers across the state are left in the dark but are still required to pay the bills,” Schwarm said. “A robust integrated resource planning will provide existing and prospective businesses with the transparency needed to make future investment decisions.”
Hawk said Alliant is looking forward to continuing to engage with the IUC, state and local officials, and other stakeholders to manage costs and meet customers’ needs.
Large energy users previously pushed to buy power on open market
A secretive group of “large energy users” made a push in 2022 to purchase electricity on the open market, rather than through Iowa utilities.
The Iowa Economic Alliance released results of a poll in September 2022 that showed 64 percent of Iowans supported competition among utilities, rather than a territory-based system where customers have just one provider choice.
Schwarm told The Gazette at the time, these large energy users would agree to pay the costs of “stranding” a utility so smaller energy users — like individuals — wouldn’t see rate increases.
Olivia Cohen covers energy and environment for The Gazette and is a corps member with Report for America, a national service program that places journalists in local newsrooms to report on under-covered issues.
Comments: (319) 398-8370; olivia.cohen@thegazette.com
https://www.thegazette.com/business/iowa-business-groups-call-for-electric-rate-reform/
KCRG.COM: Group Calls for Electric Rate Reform in Iowa
Article and TV News report on KCRG.COM
By Lacey Reeves
Published: Oct. 31, 2024 at 6:52 PM CDT
CEDAR RAPIDS, Iowa (KCRG) - Four organizations have formed a an advocacy group calling for reform in the way utility companies set rate increases. The entities that make up the group are Iowa Business Energy Coalition, Iowa Economic Alliance, Iowa Business for Clean Energy, and Large Energy Group. Although the coalition doesn’t have a group name.
The group cited Alliant Energy’s most recent rate increase as a concern for both residents and businesses. Alliant’s increase was approved by the Iowa Utilities Commission back in Sept. In a news release, the group called Alliant a monopoly.
KCRG Reporting
According to the U-S Energy Information Administration, Alliant had the highest electric rates in all of Iowa in 2023. And Iowa’s average rate was higher than 37 other states.
The advocate group said the cost of electricity is making it harder to operate a business in Iowa. It said the larger companies in Cedar Rapids like Quaker Oats and the hospitals already have expensive electric bills every month and the increase has added to that.
“Some of these larger customers, their bills are a million dollars or more. So when you’re talking about some of the increases they’ve recently seen, a 15% increase, that’s a substantial impact,” Dave Vognsen with Large Energy Group said.
The business group also suggested changing how Iowa utilities can charge customers for future projects. Right now, electric companies can charge customers before they start a new project.
“What the utilities plan for in their resource plans are eventually going to be paid for by customers,” Vognsen said. “So that’s why it’s important to take a look and make sure you know that it’s the least cost based upon the needs of customers,” he said.
Ultimately, the group said it is pushing for legislation changes that would allow the Iowa Utilities Commission to regulate the way utility companies increase their rates, serving as a check of sorts.
“The commission can make sure those decisions are based on the best interests or rate payers and not just in the best interest of the utilities,” Bob Rafferty with Iowa Business for Clean Energy said.
KCRG reached out to Alliant Energy about the group’s push for reform. It said in a statement:
“We remain committed to cost-effectively meeting customers’ energy supply needs. Investing in a diverse energy mix and modernizing the energy grid delivers a more reliable, sustainable, resilient and secure energy future. The IUC’s decision positions us to accomplish this as we continue planning ahead, acting on behalf of our customers to ensure we’re ready to manage the rapidly changing energy landscape,”
Copyright 2024 KCRG. All rights reserved.
https://www.kcrg.com/2024/10/31/group-calls-electric-rate-reform-iowa/
IOWA BUSINESS GROUPS UNITE TO ADVOCATE FOR ELECTRIC RATE REFORM
Oct 31 Press Release
For Immediate Release
Thursday, October 31, 2024
The Iowa Economic Alliance, the Large Energy Group, the Iowa Business Energy Coalition, and Iowa Business for Clean Energy jointly call for the adoption of the reforms recommended by the rate review study done by the Iowa Utilities Board (now Iowa Utilities Commission), “Review of Current Iowa Code Provisions and Ratemaking Procedures” (the “Study”)*.
Iowa Utilities Commission
These four organizations advocate for business and energy users before the Iowa Utilities Commission and participated in numerous stakeholder sessions, called “charrettes,” in furtherance of the Study.
On September 17th, the Iowa Utilities Commission issued its Final Decision and Order approving new Alliant rate increases of 15% for Iowa businesses. Following this proceeding, it is important to assess how legislative initiatives could meaningfully improve future utility infrastructure deployment, ensure reasonable energy costs, and give the Commission additional tools to adjudicate future rate requests by Iowa’s utilities.
“Alliant’s residential and commercial rates in 2023 were higher than the average residential and commercial rates in 37 other states. Only the northeast, Michigan, California, Alaska and Hawaii had higher average rates. “This latest rate hike will make it increasingly difficult for Iowa businesses to compete,” stressed Delia Meier, EVP of Iowa 80 Group, in Walcott. (See attached comparisons).
The four basic reforms consist of the following:
1) Requiring a robust Integrated Resource Planning process, overseen and approved by the Iowa Utilities Commission.
2) Reforming advance ratemaking, which is a process that has resulted in Iowa’s investor-owned utilities receiving significantly higher returns than Iowa’s peer states.
3) Restricting automatic rate adjustments and requiring a regular cadence of rate cases, which gives the Iowa Utilities Commission adequate controls and comprehensive oversight; and
4) Enabling customers to be a part of the solution, through rates that value customer-owned generation and actions fairly compared to utility assets.
While the legislature debated bills during the 2024 session that addressed these issues, utility opposition stopped those reforms from moving forward. The single utility bill that passed expanded advance ratemaking without making any reforms to control customer rates. The legislation, HF 2279, will make it easier for Alliant to justify rate increases in the future due to the expanded capital expenses that will be eligible for advanced ratemaking and the higher Return on Equity on those expenses – which aren’t available in any other industry.
“Captive customers who are strapped with increasing bills need to know how the monopoly utilities are obligating them to future payments. Today, customers across the state are left in the dark but are still required to pay the bills. A robust integrated resource planning will provide existing and prospective businesses with the transparency needed to make future investment decisions,” noted RG Schwarm, Executive Director of the Iowa Economic Alliance.
“We ask legislators to be on the side of energy users – rather than taking the side of the utilities. For the future competitiveness of Iowa’s businesses as well as the pocketbooks of hardworking Iowa families, we ask legislators to stand with Iowa’s ratepayers and support these critical rate reforms endorsed by their own requested study,” stated Rob Taylor, owner/President of Revelton Distillery and former legislator.
“The Advanced Ratemaking statute solved a problem when it was enacted over 20 years ago, but that problem no longer exists. The present mechanism is costing Iowa ratepayers many millions of dollars in excess profits for Iowa’s utilities. No other state allows such inflated rates of return for technologies that are now well proven, and no other state allows such inflated rates of return to remain beyond challenge in perpetuity,” noted IBEC Executive Director Robert Palmer
* The Study can be found at https://iuc.iowa.gov/press-release/2023-12-21/iub-delivers-legislative-report-regarding-utility-ratemaking-laws-and-procedures. House File 617, passed in the 2023 Legislative Session, directed the Board to conduct the review.
For additional information, you may contact each group directly at:
· Iowa Business Energy Coalition – Robert Palmer, (515) 283-3139, rpalmer@nyemaster.com
· Iowa Economic Alliance – RG Schwarm, (515) 242-2474, rg.schwarm@brownwinick.com
· Iowa Business for Clean Energy – Bob Rafferty, (515) 314-9462, rafferty@raffertygroup.com
· Large Energy Group - Dave Vognsen – (319) 365-6488, dave@lev-energyadvisors.com
The following attachments contain Iowa utilities’ 2023 average residential and commercial rates comparison, from data that was realized recently by the Energy Information Administration. The last chart is a comparison of Alliant’s average 2023 residential rates with the overall state average residential rates.