Rob,

In our previous month’s newsletter, we noted the Governor’s omnibus energy legislation (HF 834 and SF 585) was introduced and included important concepts, most notably a requirement for Integrated Resource Management.

Unfortunately, the bill as currently drafted would be a step backward that would be very costly for ratepayers.

The good news – a coalition of groups representing ratepayers, from residential customers to small businesses to the largest energy users - have come together to propose a Consumer Amendment that would create a bill that would be a win-win for consumers and Iowa’s future energy needs.

The amendment would change two key sections of the bill:

INTEGRATED RESOURCE PLANNING



A well-designed Integrated Resource Planning process ensures that all potential energy resources are evaluated in a balanced and impartial way. By doing so, it ensures that investments that ratepayers are obligated to pay for are in the ratepayers’ best interest.

The current bills state that the plan only needs to consider “resources proposed by the utility” and that the “plan shall reflect the circumstances and management judgment of an electric utility.”

The Consumer Amendment benefits the consumer and will make these changes:

• Requires planning every three years, rather than every five years. The best practice is every two to three years. 
• Requires investments to be “least cost and reliable” and in the ratepayers’ interest.
• Ensures meaningful stakeholder (consumer) involvement in the process. 
• Establishes the new State Load Forecasting Group at Iowa State University, which will be responsible for establishing critical inputs and assumptions for the planning. The current bill grants full control to the utilities to determine inputs and assumptions.
• Eliminates the current bill’s requirement that a “resource plan shall reflect the circumstances and management judgment of an electric utility.”

ADVANCED RATEMAKING AND REDUCING PREMIUM RETURNS



Advanced Ratemaking law currently allows utilities to receive a premium return (10.75% to 12%) over the life of the investment and was originally adopted two decades ago, when wind projects were considered a riskier investment. HF 834/SF 585 expands the Advanced Ratemaking Process to include all new generation assets, not just wind and solar. 

The 2023 Iowa Utilities Board Ratemaking Study made the following findings regarding the current Advanced Ratemaking statute:

• Eligibility criteria and review standards are not rigorous enough, and 
• Premium return on equity (ROE) is no longer necessary.

The proposed Consumer Amendment makes the following changes to this section:

• Eliminates the enhanced Return on Equity of 11-12%; projects will earn the rate awarded in the last approved rate case (approximately 9.5%) 
• Requires that the project to be “in the customers’ best interest” when compared to all other sources of supply.
• Requires the utility consider All sources of electric supply, not just “other” sources. 

We encourage you to contact your local legislators to ask them to vote with ratepayers, not with the monopoly utilities, and support the Consumer Amendment on HF 834 and SF 585.

While not a part of the Consumer Amendment, Iowa Business for Clean Energy has also raised concerns with two additional sections:

INNOVATIVE RATEMAKING

Enabling the implementation of innovative rates is an important concept. Iowa has a large amount of wind energy capacity that is either unused or sold out of state for less than one penny per kWh. Other states with large wind generation allow innovative companies to purchase this power at wholesale rates during these times, producing income that reduces the ratepayers’ burden. Innovative Rates would enable the leveraging of this unused wind generation.

Unfortunately, HSB 123/SSB 1112 changes Iowa law to allow utilities to keep 100% of the profits from these innovative rates, profits that current law directs to reducing future rate increases.

ELIMINATING COMPETITIVE BIDS FOR NEW TRANSMISSION LINES



While Iowa does not typically allow a competitive environment for electricity, the construction of new transmission lines is open for competition. As currently written, the legislation grants incumbent transmission providers with a Right of First Refusal (“ROFR”) for proposed new transmission, eliminating any competition for the more than $3 billion in new transmission planned for Iowa over the next ten years. 

Iowa Business for Clean Energy has voiced our concerns with eliminating competition for transmission lines. Iowa needs to find more ways to insert competitive market forces into the operations of our electric grid to ensure the most reliable grid at the lowest cost, rather than restricting the benefits of competition.