Electric Rates Matter To Every Community
Andy Johnson, Executive Director
A coalition of entities called the “Decorah Area Group” (including your Energy District) is collaborating to oppose the dramatic increase in electric rates proposed by Alliant Energy earlier this year. This article will summarize the extensive set of testimony submitted recently to the Iowa Utilities Board (IUB), provide links for you to dig as deeply as you desire, and explain where the process goes from here.
Alert: it’s a long-ish article. Teaser: testimony includes rate impacts on households, businesses, institutions, and economic development; potential effects on locally-owned solar and energy efficiency; the unfair nature of rates relative to most other utilities in Iowa and the Midwest; the need to transition away from fossil fuels towards locally-owned clean energy; and a strong call for the IUB to step in and say “enough is enough”!
The Decorah Area Group
We should clarify a couple of things right up front. First, the Decorah Area Group coalition is not about municipalization. Of course, the muni and rate case issues are both about electric service in Decorah. But the testimony in this case is fundamentally about “just, reasonable, sufficient and nondiscriminatory rates”, which are mandated by Iowa Code.
We reference the municipalization issue briefly (less than 5% of testimony) to explain the rate claims made by Alliant to the community during the muni debate (that Alliant rates would rise extremely slowly for over 20 years) because the IUB has received extensive public comment on the issue.
Second, the testimony submitted by the Decorah Area Group is a challenge to Alliant’s proposed rates, not an attack on local Alliant personnel. We respect the work of local professionals and their contributions to the community.
A Brief History
And now a brief history: early in 2019, Alliant Energy filed a rate request with the Utilities Board to raise base rates 24.45% for residential customers, 18.36% for general service customers, and 25.29% for large general service customers. The current docket is RPU-2019-0001, and filings can be found on the IUB web site at https://efs.iowa.gov/efs/ShowDocketSummary.do?docketNumber=RPU-2019-0001.
After Alliant sent out the required “customer notice”, Winneshiek Energy District (WED) was asked by many customers – households, businesses, organizations, and entities – what could be done, and we began discussing testimony. On April 22nd, the Decorah City Council passed a resolution opposing the rate case and committing to “intervene”, and soon thereafter hundreds attended an IUB “customer comment meeting” at the Hotel Winneshiek.
On May 1, the Decorah Area Group (DAG) filed a “Petition to Intervene” in the docket with the IUB. The group includes the City of Decorah, Luther College, Winneshiek Medical Center, Aase Haugen Senior Services, and Winneshiek Energy District. The petition states:
DAG collectively represents a large and diverse set of electric customers of IPL. The Group shares a broad set of concerns and interests relevant to the current docket, including the overall economic impact of IPL’s proposed rate increase on rural Iowa communities; the growing energy poverty burden on low to middle income and fixed income households; the burden on businesses, institutions, and local government of disproportionately high electricity costs; the ability of customers and communities to save and prosper through customer and community-owned distributed energy resources; and the importance of a rapid transition away from fossil fuels and towards climate stewardship that avoids the inefficiencies and unreasonable pricing trends represented by the current and near-future rate proposals.
A rate case is based upon hundreds and even thousands of pages of documentation submitted by the utility (Alliant) to the regulator (IUB). So we went to work finding experts who could address various aspects of the rate case with credibility. At the end of July, DAG filed a set of testimony from six witnesses. Here we present the testimony theme/s of each witness, a relevant quote or two, and, of course, links for you to read further.
- Dave Berg is an electrical engineer, consultant with decades of experience in utility rate design, and national instructor for utility professionals in cost-of-service studies and rate design. Berg’s testimony focused on Alliant’s proposals for revenue growth, and rate design changes, including: details showing Alliant rates as some of the highest in the Midwest; a disturbing discrepancy between company statements and actual plans for repeated rate hikes; and a challenge to dramatic rate hikes for larger customers (including most institutions in Decorah, e.g. WMC, Luther, NICC, Decorah Wastewater, DHS) wanting to own solar.
“The State of Iowa is a nationally recognized leader in renewable energy. Proposing, approving and implementing a retail rate like the proposed tariff 800 [Supplementary Power] rate punishes customers that install renewable capacity for their own consumption and discourages future customers from making that choice.”
“As shown, IPL’s rates were approximately 37% higher than MidAmerican’s rates in 2008 (11 cents/kWh vs. 8 4cents/kWh). Since that time, IPL has raised its rates 45% while MidAmerican has raised its rates 25%. The 2018 difference between IPL and MidAmerican rates is now 60% (16 cents/kWh vs. 10 cents/kWh). Proposed increases by IPL will cause this rate disparity between Iowa’s two investor-owned utilities to widen further.”
- Warren McKenna served as General Manager of Farmers Electric Cooperative and on the Executive Board of the Resale Power Group of Iowa for 25 years. McKenna’s testimony focused on Alliant’s proposed community solar program, and made the following strong recommendations:
“I recommend the Board approve the community solar program only as a short-term pilot, subject to the following terms and conditions:
- That adjustments be ordered to the solar valuation as described above, to include at a minimum; full value for avoided transmission costs, renewable energy credits (at customer choice), and other values as applicable to IPL at the current time;
- That the buy-in or subscription cost be clearly defined as the actual cost of construction, with no adder, or rate-basing or ROE to IPL;
- That a stakeholder advisory group be convened immediately to design effective approaches and practices to enable and maximize participation among lower-income and otherwise disadvantaged customers; and,
- That the Board orders a full value of solar study to be conducted by a neutral third party to better develop a robust valuation for all distributed generation.
- David Osterberg has been an economist, economics professor, state legislator, and most recently founder and long-time director of the Iowa Policy Project, a state-based policy research organization. Osterberg’s testimony focused on Alliant’s proposed increase to the fixed monthly charge for residential and commercial customers, the proposed summer declining block rate and overall impacts on low-moderate income households.
“The fixed mandatory customer charge should not be increased. Rather, I recommend that the IPL Basic Customer Charge be reduced by $1.35 for residential customers and by $3.13 for general service customers, and the Board should order IPL to put whatever rate increase is approved by the Board based on the volume of electricity used by each residential customer. Customers should have the option to reduce their consumption and reduce their total bill. Raising a fixed mandatory customer charge specifically discriminates against the customers in the residential class [low-moderate income, and solar owners] that I have identified.
- Steven Holland holds a law degree, a PhD in Economics, and is a Professor of Economics at Luther College. His research explores the intersection of economic systems and legal systems, including various aspects of local economics. Holland’s testimony covers the economic impact of the proposed rate increase on the Decorah community, including on households, current businesses, employment, economic development, and industrial migration to lower-cost regions. He concludes:
“I recommend the Board deny IPL’s proposed rate increase. A rate increase of this magnitude can put Decorah businesses at a competitive disadvantage and, over time, may incentivize business to migrate to communities with lower electricity rates. Businesses may also be forced to raise prices and reduce employment. Residential customers will see a much greater percentage of their income go to their electricity bills, with low-income customers being particularly vulnerable to an increased “energy burden” coupled with higher prices for locally produced goods and services.”
- James Martin-Schramm is a Professor of Religion at Luther College and Director of Luther’s Center for Sustainable Communities. His scholarship and writing has focused on ethics and public policy, he has been a board member of the Iowa Wind Energy Association, Iowa Interfaith Power and Light, and WED, and worked closely on Luther’s investments in energy efficiency and renewable energy. Martin-Schramm’s testimony focused on the unreasonable and unjust nature of the proposed increase; the growing disparity between Alliant and other utilities; the growing prosperity disparity between Alliant shareholders and its communities and ratepayers; and specific recommendations for actions the Board can take to correct these disparities and impacts.
“I have argued throughout my Direct testimony that IPL’s current and proposed rates are unreasonable and unjust. Given the fact that IPL’s average rates have been significantly higher than MidAmerican’s for over ten years, and given the fact that the gap is widening, the Board should “consider both the short-term and long-term impacts of its decisions, ”and “inquire as to whether the utility is implementing its decisions in a reasonable and prudent manner.” [as stated in Iowa Code.] Throughout my Direct Testimony, I have also argued that IPL is not operating in a reasonable, efficient, and prudent manner. IPL’s actions have enriched its ultimate shareholders at the expense of its customers.”
“As the Board reflects on the merits of IPL’s application to revise rates, the Board and its staff would do well to reread some of the thousands of comments by IPL customers in the docket and to reread the transcripts of the public hearings. Many of those who took the time to write or speak have a tone of desperation. Many are stretched far too thin. This is not just another rate case. This is an opportunity for the Board to redress a structural injustice between IOU-customer rates in Iowa while also putting IPL on notice that its performance in the past does not meet the high standards of the Board.”
- Andrew Johnson is Director of Winneshiek Energy District and a livestock and Christmas tree farmer. His professional career has included natural resources conservation, sustainable agriculture, community development, and clean energy, at home and abroad. Johnson’s testimony focuses on how Alliant rates and actions undermine community efforts towards locally-owned clean energy prosperity, and the critical importance of the evolution of rate-making principles in the 21st century to protect the public interest and the common good.
“The totality of DAG’s testimony suggests that IPL’s rate request in this case is not fundamentally just and reasonable, sufficient, and nondiscriminatory. As a result, DAG’s witnesses have proposed that specific aspects of IPL’s proposals be disallowed and that specific changes be ordered in IPL’s proposed rate design. DAG witnesses have also encouraged the Board to exercise its authority under Iowa Code § 476.52 to impose a penalty, in the form of disallowance of a portion of IPL’s proposed revenue requirement or its proposed ROE for management inefficiency. We in addition urge the Board to use its “broad general powers” under Iowa Code §476.2(1) to think outside the norm when considering what an acceptable range of ROE figures may be. As the impact of high and rising electricity prices –and of IPL efforts to preclude and exclude customers and communities from saving and investing in clean energy –grows ever more severe, the importance of regulatory leadership also grows. A severe cut to IPL’s allowed ROE, together with adjustments to rate design and the exclusion of much of the requested revenue requirement, would represent a significant step towards recognizing the public interest primacy of ratepayers over shareholders, establishing the first monopoly rights of customers, and communities, and countering the severely growing deleterious impact of IPL’s actions on its ratepayers and Iowa’s communities.”
In conclusion: stay tuned
The Decorah Area Group is far from alone in opposing this major rate increase proposal. The Office of Consumer Advocate continues its proud tradition of leadership in filing extensive testimony on behalf of ratepayers. A partnership of the Iowa Environmental Council and the Environmental Law and Policy Center have also filed excellent testimony on rates, plus a special focus on transitioning away from coal (as has the Sierra Club). Most of the other “intervenors” represent large business and industry groups.
Just as importantly, however, thousands of comments have been filed by customers throughout Alliant’s Iowa territory. This outcry represents an unprecedented level of participation in an Iowa rate case. Notably, it includes at least fifteen local units of government that – like Decorah – felt obligated to stand up for their residents and communities and ask the IUB to reject the rate hike.
The process will likely continue throughout 2019. Next steps include Alliant filing “rebuttal” testimony to all intervenors like DAG, the intervenors filing replies to Alliant’s rebuttal, and then a hearing at the IUB in Des Moines in October. A final ruling by the Board is likely late 2019 or early 2020.
Stay tuned, and as always, thanks for your actions, support, and membership. Together we’re building a wealthier, fairer community and region, and a healthier world.