Too soon to consider recovery?

Even economists point the immediate focus to public health — and keep recovery in the wider view.

What is needed in a pandemic is for citizens to stay home, and for public policy to assure access to unemployment insurance and health care, and push support to the health system.

Economists such as former Labor Secretary Robert Reich are making these points — that limiting the spread of the coronavirus is the top priority to save lives.[1] When even economists are pressing the point about public health, our leaders should pay attention. Now is not the time to talk about being “open for business” prematurely, as President Trump once suggested we do by Easter.

That is not to say a public health spotlight precludes steps in the coming weeks and months to set up recovery when that can be the main focus.

Now, jobs remain in critical services in hospitals and electric stations, and some in construction. Factories where people stand next to each other on a production line have different social distancing from workers who build things in the open air. We could expand more of the latter jobs right now where the materials are at hand.

Good examples: Wind turbines and solar installations and the power lines that connect them to the electric grid. Right now we could be constructing clean energy facilities that can be producing electricity in six months or a year when we all want demand to expand. It is an opportune moment to think ahead and start replacing older coal production plants, which have their own health problems.

Public policy has a role here. Just before the Iowa legislators recessed because of the COVID-19 pandemic, they passed — and Governor Kim Reynolds signed — a bill to stabilize the solar industry. It would do this by setting the price for the next seven years for the electricity that MidAmerican and Alliant buy from homeowners and businesses.[2]

Another step the Legislature could take is lifting the limit on the tax credit for businesses and homeowners when they install solar.

The annual amount that could be taken on the credit was not fully used in the first year, but in all years since 2013 installations exceeded the cap, now at $5 million per year, pushing installations completed later in the year to a waitlist.[3] The tax credit eventually comes but not until at least a year later. While an installation completed today will get a federal tax credit when taxes are filed in April 2021, the Iowa tax credit will not happen until 2022 or later.

Why make these Iowa investors wait? Extending the total amount eligible for the credit from $5 million to perhaps $20 million would further stimulate the construction of solar panels just when the economy needs the jobs.

There also is a federal role, as the amount of that credit for both solar and wind is phasing out. This would be a good time to stop the phaseout for the next several years. Tax credits of electric cars could also be enhanced.

COVID-19 has slammed the economy. We need to think about when we will recover but also how we will recover. Jobs in clean energy have been on a growth curve that can be re-established quickly. And these jobs are creating a new energy system that will help us with the next crisis, climate change.

Most agree we should follow science to confront the pandemic. We should also follow the science to prepare for the next crisis — climate change.

David Osterberg is an economist and lead environmental researcher at the nonpartisan Iowa Policy Project in Iowa City. Contact: dosterberg@iowapolicyproject.org.

A version of this column also ran in the April 1 Quad-City Times.

 

 

 

 

[1] MSNBC interview, March 17, 2020. https://www.msnbc.com/the-beat-with-ari/watch/-our-economy-is-shutting-down-clinton-wh-veteran-pushes-lives-over-dollars-in-covid-19-crisis-80868933847

[2] O. Kay Henderson. Iowa House and Senate give solar bill unanimous support. Radio Iowa March 4, 2020. https://www.radioiowa.com/2020/03/04/iowa-house-and-senate-give-solar-bill-unanimous-support/

[3] Iowa Department of Revenue. Solar Energy System Tax Credit Annual Report for 2019. https://www.legis.iowa.gov/docs/publications/DF/1126111.pdf

Lip service to utility transparency

Transparency — a critical aspect of good governance that applies to a rate-regulated monopoly — was a casualty in the Alliant/IPL rate decision, gaining impressive lip service but little action.

I agreed to be a witness in the recent proposed rate increase by Alliant Energy (officially, Interstate Power & Light or IPL). The decision by the Iowa Utilities Board (IUB) was announced today (January 9, 2020).

The Winneshiek Energy District partners with IPP on energy issues. They were able to get the City of Decorah, Luther College, a local hospital and large retirement home to join them in forming the Decorah Area Group (DAG), which intervened in the rate case. DAG hired witnesses and worked to change the amount the company was proposing in rates.

DAG and other intervenors made some headway in the case. The total amount of increase was cut from $204 million to $127 million. Alliant was not able to punish residential customers like me who have solar panels or large solar users like Luther College. That was good.

But transparency — a critical aspect of good governance that applies to a rate-regulated monopoly — was a casualty, gaining impressive lip service but little action.

DAG was the main intervenor group to call for punishment to the company for misrepresenting their future rate increase plans when the city of Decorah tried to form a municipal utility. The vote in 2018 went down to defeat by just four votes. It might have passed if customers knew that Alliant was about to propose a 25 percent increase in rates. The $127 increase amounted to only 15 percent but still, the company had promised the citizens of Decorah to increase rates by about one percent per year.

The IUB talked about this mischaracterization of the facts in a section on Management efficiency, finding:

“(T)he actions taken by IPL in opposition to the Decorah municipalization effort demonstrate a lack of management efficiency by withholding from and not providing to the citizens of Decorah accurate information about anticipated rate increases. Because a rate-regulated electric utility is a monopoly in its service territory, it has the duty to be transparent and to provide accurate information to customers and communities in that service territory. The evidence in this case regarding IPL’s behavior during the Decorah municipalization campaign shows that IPL did not fulfill this responsibility and failed to meet the expected standard of conduct for a regulated monopoly.”

Great words, right? But that was all. There was no punishment, no reduction in the rate increase (Revenue Requirement) below the $127 million. The company profit was not reduced.

That got under the skin of one of the three board members, Commissioner Richard Lozier, who in a dissent stated:

“The majority’s position is unacceptable. Instead, the Board should reduce the level of IPL’s profit or adjust the revenue requirement until IPL demonstrates it has corrected its inefficient operations.”

I agree with the Commissioner. Decorah can try to municipalize again in two years. When and if they do you can be sure Commissioner Lozier’s words will be used by the proponents who want to buy out IPL and run a more efficient electric company.

David Osterberg is founder, former executive director and lead researcher at the nonpartisan Iowa Policy Project.

dosterberg@iowapolicyproject.org

Also: Hear David Osterberg’s interview on “The Devine Intervention” with KVFD’s Mike Devine.