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/