Government

Alliant, Decorah residents battle over power control

"This has never been an anti-Alliant movement. This has always been pro-Decorah"

Alliant Energy lineman Andy Dunt performs maintenance work on lines in an alley behind Viking State Bank & Trust in Decorah, Iowa, on Tuesday, April 24, 2018. Decorah residents go to the polls May 1 is determine whether to authorize the city to establish its own municipal electric utility. (Jim Slosiarek/The Gazette)
Alliant Energy lineman Andy Dunt performs maintenance work on lines in an alley behind Viking State Bank & Trust in Decorah, Iowa, on Tuesday, April 24, 2018. Decorah residents go to the polls May 1 is determine whether to authorize the city to establish its own municipal electric utility. (Jim Slosiarek/The Gazette)
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DECORAH — In the northeast Iowa town of Decorah, a battle brews over control of the community’s power.

A group of residents called Decorah Power are exploring the creation of a public electric utility for the community of about 8,000 people. Doing so would seize control of the city’s energy infrastructure away from Alliant Energy, the current energy provider.

In a Tuesday special election, residents will vote on whether to authorize the Decorah City Council to pursue a municipalization request with the Iowa Utilities Board, which regulates such matters.

Supporters of a municipal utility say local control could reduce energy rates and allow the community more control over the use of renewable power.

“For us, this has never been an anti-Alliant movement. This has always been pro-Decorah,” said Emily Neal, a volunteer with Decorah Power. “What can we do for our community to move us forward in a direction we want to go in?”

However, officials with Alliant Energy — which has provided power to Decorah for a century — argued the opposite, that cutting ties with Alliant could raise energy rates and put local reliability at risk.

“We believe Alliant Energy is the clear choice when it comes to delivering reliable, affordable and increasingly clean energy to the residents of Decorah,” Terry Kouba, vice president of operations with Alliant, said in an email.

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What’s a municipal utility?

There are about 2,000 community-owned utilities in the United States, according to the American Public Power Association.

Iowa is home to 136 municipal electric utilities, which serve about 900,000 total customers, according to the Iowa Association of Municipal Utilities.

Tim Whipple, general counsel with the utilities association, said much of the state’s public power was built decades ago during the electrification of rural Iowa.

Building the infrastructure needed to run power from generation hubs out to smaller communities was expensive, so many towns powered themselves.

“Communities kind of decided to bootstrap it a little bit, do it themselves — buy their own generators, build their own plants in their own communities and provide power to their residents,” Whipple said.

A municipal utility manages its own power and places energy rates and grid investment in the hands of a local entity, such as a city council or appointed board.

As technology and energy transmission methods advanced, for-profit utilities expanded their footprints. Cities seeking to get out of the power business could dissolve their municipal power operation and become customers of an investor-owned utility.

In 1976, the Iowa Utilities Board established exclusive service areas for all state electric utilities, which essentially allow a monopoly of service within a defined geographic area — with rates regulated by the state board.

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If Decorah wishes to become a municipal utility, the Iowa Utilities Board must approve the acquisition of a portion of Alliant’s service territory. The city would use eminent domain to acquire the infrastructure and pay Alliant a board-approved price.

In 2006, the communities of Everly, Kalona, Rolfe, Terril, Titonka and Wellman each filed municipalization requests with the utilities board. Titonka ultimately dismissed its petition, and the state board in 2008 denied the remaining five applications.

Whipple said one challenge communities often face is the financial effects of municipalization.

If the shift to municipal power appears too costly for a community, it could effect rates, which would run counter to the Iowa Utility Board’s mission to ensure customer reliability and reasonable rates.

“When you cut one little piece out, your costs get dramatically smaller, but the number of customers over which you have to spread those costs also gets smaller,” Whipple said. “What the board has to figure out is, what will everyone’s bills do as a result of this process?”

Back in Decorah, feasibility studies by Alliant and Decorah Power came to very different conclusions on the overall cost of the infrastructure, including a substation and all components downstream, that carries power to about 3,600 residential, commercial and industrial customers, according to Alliant.

Decorah Power estimates the cost at about $5 million, but a feasibility study by Alliant puts the cost at close to $50 million.

Map by John McGlothlen / The Gazette

Municipal vs. investor-owned

Ursula Schryver, vice president of education and customer programs with the American Public Power Association, said the biggest benefit of a municipal utility is local control.

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With a municipal provider, energy rates can be set and investment decisions made by the city council or an appointed board.

The revenue from rates stays in the community — reinvested into the utility system or distributed to the city itself, Schryver said.

“It all stems from local control. If citizens have an issue, they can go into a city council meeting and raise it there, so there’s a lot more accountability,” she said.

However, Alliant officials contend that local control doesn’t necessarily mean rates will go down. That decision would fall on the city.

“Municipal utilities are not regulated by the Iowa Utilities Board and as such can raise electric rates as easy as they can raise water and sewer rates,” Kouba said in an email.

In addition, investor-owned utilities such as Alliant make investments across a much larger grid. Those sunk costs in infrastructure and power generation and distribution are covered through customer rates.

“You’re setting your rates over time in order to recover the costs,” Whipple said.

A municipal utility has a smaller footprint and less infrastructure to manage, but also less customers to cover costs.

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According to a 2017 economic-impact study by the Iowa Association of Municipal Utilities, the average residential electric rates per kilowatt-hour for publicly owned energy providers was 10.7 cents, compared to 12 cents for investor-owned providers.

What’s more, Alliant officials caution against potential impacts of municipalization to reliability in the event of an outage.

“Our local crew that serves Decorah has more than 356 years of experience with the energy grid and substations in the community. That is valuable experience you just can’t replace overnight,” Kouba said in an email.

Those with Decorah Power argue that mutual aid agreements between communities allow for just as reliable services.

“You help your neighbor and they help you,” Neal said.

 

A city divided

If the vote passes, the city council would have to formally discuss the next course of action, Decorah City Manager Chad Bird said.

“The vote really is the authority to explore municipalization, not a mandate,” Bird said.

Benjamin Steines, Winneshiek County Auditor said close to 900 votes already had been cast for the May 1 special election as of Friday.

As the vote nears, residents have become more engaged, he said.

“It definitely has been busier than a city election,” Steines said. “It does seem like there’s a lot of interest.”

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In a March 1 letter to the Decorah City Council, representatives with six businesses — including Rockwell Collins, Gemini Sign Products, Iowa Rotocast Plastic and Toppling Goliath — cited concerns of reliability and energy rates associated with municipalization.

Meanwhile, 27 other Decorah businesses — including B&B on Broadway, Go Solar, Donlon Pharmacy and Wadsworth Construction — issued a statement April 23 in the Decorah Newspapers supporting a municipal utility.

Decorah officials say residents have been engaged in municipal-power discussions, fueled by social media posts, billboards, yard signs and small-town chatter.

“It’s a pretty big conversation piece. It’s consumed a lot of coffee shop banter,” Bird said.

If the vote does fail, officials with Decorah Power and Alliant also noted the expiration of the city’s multiyear franchise agreement with Alliant this summer. Negotiations will take place during the agreement’s renewal.

“Regardless of the outcome of this election, we’d like to sit down with city leaders and work to help Decorah meet its energy goals for the future,” Kouba said.

However, for those with Decorah Power, such as Vice President Tim Wagner, municipalization remains the top goal.

“What Decorah is doing is basically capitalizing on that trend that is happening all over the country — more communities are figuring out they want to have more say in their power,” he said.

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“There are a lot of communities watching this thing, but it’s a huge gamble. It’s a huge undertaking.”

l Comments: (319) 398-8309; mitchell.schmidt@thegazette.com

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