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.

Alliant proposal: Equity, efficiency failure

The proposed Alliant rate increase is a sweeping denial of equitable treatment of customers and a rejection of environmental responsibility.

Alliant Energy, called Interstate Power and Light (IPL) in Iowa, is proposing a nearly 25 percent increase in its basic service rate. Since Alliant divides its charges to customers into energy, transmission, and basic service, the total bill increase will not be that large but it is a pretty big increase.

Since electric utilities are monopolies, some entity needs to “regulate” their actions. In Iowa this is the role of the Iowa Utilities Board (IUB), which must decide on the rate increase. The IUB can certainly reduce the proposed rate and can change the way IPL wants to charge individual customers.

Several electricity users in the Decorah area (the city of Decorah, Luther College, Winneshiek Energy District, and others). formed the Decorah Area Group (DAG) and intervened before the IUB to challenge the proposed rate increase. I wrote testimony on rate design for the DAG, and the following is the conclusion of my testimony:

It is apparent to me that IPL’s overriding desire is to sell more electricity at exactly the wrong times. The Company proposes in this case to:

•    Raise the Basic Customer Charge, which is already much higher than that of the other investor-owned electric company in the state; [$13.00 compared to $8.50 charged by MidAmerican Energy. Low-income customers use less electricity so boosting this charge hits them hardest.]

•    Reintroduce declining block rates during the summer peak period, which will likely cause IPL to add capacity for its system; [few utilities give large residential users a break for using more electricity in the summer and so again the smallest users — low income and conservationists are hurt again by this proposal.]

•    Discourage the production of solar power, when encouraging development of solar generation might help IPL to avoid adding generation do accommodate the super peak days; and,

•    Refrain from introducing a “super” off-peak rate that could redirect demand away from peak periods. [Their new meters allow them to make electricity really cheap around midnight so customers could charge electric cars or big capacity water heaters, but they aren’t doing it.]

These proposals, combined with IPL’s actions to convince the Iowa General Assembly to completely bypass the Board and greatly dismantle the state’s energy efficiency programs [in 2017], compels the conclusion that IPL wants to sell more power — not less — especially during the times of the day when IPL’s system is more costly to operate so that IPL will reap more profits.

As noted in the testimony, the Alliant/IPL proposal goes backward on both equity and energy efficiency, which are responsibilities of the IUB to ensure.

IUB’s own mission states that it “regulates utilities to ensure that reasonably priced, reliable, environmentally responsible, and safe utility services are available to all Iowans.” Note — “all Iowans.” This is IUB’s own assurance to even the least-powerful among us that they will be protected in the monopoly marketplace for electricity.

State law [476.1(5)] demands that the IUB “promote the use of energy efficiency strategies by gas and electric utilities required to be rate-regulated.” The Alliant proposal, by contrast, is a recipe for energy inefficiency.

The IUB has limited latitude to deny this rate increase. However, this rate increase is such a sweeping denial of equitable treatment of customers and a rejection of environmental responsibility that they might. The decision will only come after months of more filings and hearings. Stay tuned.

David Osterberg is co-founder and former executive director of the nonpartisan Iowa Policy Project. He is a former state legislator and is IPP’s lead researcher on energy and environment issues.

dosterberg@iowapolicyproject.org

Monopoly power without regulation

With few watching, backroom efforts produce unforeseen blows to public utility oversight

Editor’s Note: This post updates a previous post by David Osterberg, “New blows to public accountability,” about features of a proposal to weaken regulation of Iowa electric utilities.

A version of this piece appeared as a guest opinion in The Gazette, Cedar Rapids

170118_capitol_170603-4x4A bill scheduled for debate the week of February 26th in the Iowa Senate would remove the public’s principal check on monopoly power of the state’s regulated electric utilities.

Utilities are permitted monopoly status for economic efficiency. It would be difficult, and expensive, to set up two or more competing electric or gas utilities to serve one community, with separate lines connecting homes and businesses. In exchange for a monopoly presence in a given area, privately owned utilities are subject to community scrutiny and state regulation of their rates and services.

Senate File 2311 would remove a significant share of oversight from electric utilities. Presently the Iowa Utilities Board (IUB) oversees MidAmerican Energy and Alliant Energy. This protects customers, who have no choice as to which company brings them electricity.

It is ironic that legislators would threaten a structure that works and promotes economic development. Iowa has some of the lowest energy rates in the nation (third- or fourth- lowest depending on the year). At the same time, this state has been developing one of the strongest clean energy economies. These features make Iowa a big draw for certain industries — a far more attractive reason to locate here than the tax breaks offered by so many states.

Under the proposed bill, many policies that have led to Iowa’s cost-effective clean energy leadership would disappear, especially energy efficiency programs mandated almost 30 years ago by the Iowa Legislature, which require utilities to file energy efficiency plans every five years.

Without regulation, monopolies could profit by producing more power, rather than helping customers save energy. They could unfairly treat customer-generated solar and wind energy and discriminate in favor of their own energy generation.

Left to their own preferences, monopolies might charge the smallest users more. Alliant proved this in its last rate increase filing. The Alliant plan would have increased the cost of residential electricity by about 10 percent while increasing the mandatory fixed charge just to hook up by 30 percent. The plan was designed to put more costs on those who use less, including those with low-income, essentially penalizing customers who have used the utility rebates to buy efficient appliances or those who generate solar energy.

But because Alliant needed permission from the IUB to raise rates, this rate scheme was reviewed and ultimately not allowed. Instead, the energy charge and the mandatory fixed charge were allowed to increase by roughly the same percentage.

SF2311 would reduce this longstanding oversight on all utilities, shifting costs and risks to their customers. Alliant could discriminate against solar customers by putting them in a separate rate category so they could be assessed a higher fixed charge. This could shut down solar firms and cost many of the state’s 700 solar jobs. The changes threatening the energy efficiency industry endangers even more jobs — more than 20,000.

The forces behind this bill lessen public oversight and public accountability. They would change Iowa law in ways never promoted publicly in the last legislative campaigns.

160915-59170_dox35x45David Osterberg, a former state representative (1983-95), is professor emeritus of occupational and environmental health at the University of Iowa, and co-founder of the non-partisan Iowa Policy Project.

dosterberg@iowapolicyproject.org