Who’s footing the bill for $45.3 million power plant that never happened?

The cancellation of Alliant Energy's Sutherland Unit 4 power plant in Marshalltown eight months ago has left state regulators with a problem.

Somebody has to pay the $45.3 million Alliant spent on getting the project to the point of a build or no-build decision. Alliant would prefer it be someone else.

Who pays is a delicate issue that, in the worst case, could cause about 500,000 Alliant customers to pay about 1 percent more for their electricity over a five-year period than they otherwise would have to pay.

The request is part of an18.9 percent overall electric rate increase for Alliant that the Iowa Utilities Board is considering.

Concerned about a potential rejection, Alliant offered the board an option that might seem more palatable to customers, at least in the immediate future.

After initially asking that customers be required to pay the full $45.3 million, Alliant lowered its requested increase to 16.5 percent. It did so by omitting $13 million it says minority partners in the Sutherland plant should pay for cancellation costs, which reduced the cancellation cost requests to $26.5 million, and by eliminating $6 million in costs to buy 1,134 acres for the plant that the company still owns.

Then the utility asked regulators for permission to take the remaining $26.5 million, when rounded, in cancellation costs from a regulatory reserve account established with proceeds of the sale of its nuclear power plant about two years ago.

The proposal has been acceptable to most environmental advocates who opposed the coal-burning plant as unnecessary and environmentally damaging. “We didn't want to penalize them for agreeing with us in the end,” said Carrie La Seur, president of Plains Justice, a Cedar Rapids-based nonprofit environmental law organization.

The state's consumer advocate's office is bluntly averse to the plan, however, suggesting it merely takes the money from one pocket of ratepayers instead of the other.

“We don't think ratepayers should have to pay anything,” said Ron Polle, senior staff attorney for the Iowa Office of Consumer Advocate. “The customers didn't ask for the plant.”

Polle said the state approved the sale of Duane Arnold Energy Center in Palo with the understanding that the money set aside in the regulatory reserve account would be used to defray the impact of rising electric costs on consumers. The power plant costs were not the kind of increases envisioned in that order, Polle said.

As a backup position, the consumer advocate proposed that Alliant shareholders and electric ratepayers split the construction costs equally.

Alliant spokesman Ryan Stensland says the utility's request is based on ratemaking principles established for the power plant project by the Iowa Utilities Board. One of the principles said the utility would be entitled to recover “cancellation costs” from ratepayers if it canceled the project with good cause.

The consumer advocate's office says Alliant shouldn't be allowed to use that argument, however, because it never agreed to the ratemaking principles.

Alliant canceled the $1.3-billion-plus project because it decided the 10.1 percent return on investment the Iowa Utilities Board approved for the project was too low, and could make it hard or impossible to borrow money through a bond sale to pay for the project. It had been seeking a 12.55 percent return.

Few consumers seem to know that Alliant is seeking to recover the $26.5 million, and could come back to ask for another $20 million from ratepayers if it is can't get minority partners in the project to pay that share.

Several consumers interviewed by the Gazette said they're resigned to whatever state regulators decide, noting that it's a small part of a large overall rate case, and will be decided on regulations few even understand.

Some customers who opposed Alliant Energy's plans for a coal-burning plant because of the links between coal combustion and climate change take a harder line on the utility's request, however.

“The shareholders should pay,” said Don White, a Cedar Rapids software developer and member of the Iowa Renewable Energy Associatio's board of directors.

White said Alliant's customers have never had any control over Alliant's headlong pursuit of the coal-burning plant. “Shareholders invested in the stock and they have a stake in what the company does, good and bad.”

Stensland said Alliant Energy decided not to seek cost recovery for 1,134 acres of land purchased for the plant in part because it is not sure what it will do with the property. It included 719 acres of land that it acquired from an Alliant-owned real estate company, Alliant Land and Building.

The Iowa Utilities Board is expected to rule on the case by the end of January 2010. The Office of Consumer Advocate often asks state regulators to award a lower rate increase than a utility is seeking, but this time is asking the Iowa Utilities Board to lower Alliant's rates by 2.8 percent. State Consumer Advocate John Perkins blames Alliant management actions such as selling the company's Iowa transmission system to ITC Midwest. The sale resulted in much higher transmission costs than Alliant predicted when it sought state permission to sell the transmission system.

The cancellation of Alliant Energy's Sutherland Unit 4 power plant in Marshalltown eight months ago has left state regulators with a problem.

---- @Body copy ragged right:Somebody has to pay the $45.3 million Alliant spent on getting the project to the point of a build or no-build decision. Alliant would prefer it be someone else.

---- Who pays is a delicate issue that, in the worst case, could cause about 500,000 Alliant customers to pay about 1 percent more for their electricity over a five-year period than they otherwise would have to pay.

---- The request is part of an18.9 percent overall electric rate increase for Alliant that the Iowa Utilities Board is considering.

---- Concerned about a potential rejection, Alliant offered the board an option that might seem more palatable to customers, at least in the immediate future.

---- After initially asking that customers be required to pay the full $45.3 million, Alliant lowered its requested increase to 16.5 percent. It did so by omitting $13 million it says minority partners in the Sutherland plant should pay for cancellation costs, which reduced the cancellation cost requests to $26.5 million, and by eliminating $6 million in costs to buy 1,134 acres for the plant that the company still owns.

---- Then the utility asked regulators for permission to take the remaining $26.5 million, when rounded, in cancellation costs from a regulatory reserve account established with proceeds of the sale of its nuclear power plant about two years ago.

---- The proposal has been acceptable to most environmental advocates who opposed the coal-burning plant as unnecessary and environmentally damaging. “We didn't want to penalize them for agreeing with us in the end,” said Carrie La Seur, president of Plains Justice, a Cedar Rapids-based nonprofit environmental law organization.

---- The state's consumer advocate's office is bluntly averse to the plan, however, suggesting it merely takes the money from one pocket of ratepayers instead of the other.

---- “We don't think ratepayers should have to pay anything,” said Ron Polle, senior staff attorney for the Iowa Office of Consumer Advocate. “The customers didn't ask for the plant.”

---- Polle said the state approved the sale of Duane Arnold Energy Center in Palo with the understanding that the money set aside in the regulatory reserve account would be used to defray the impact of rising electric costs on consumers. The power plant costs were not the kind of increases envisioned in that order, Polle said.

---- As a backup position, the consumer advocate proposed that Alliant shareholders and electric ratepayers split the construction costs equally.

---- Alliant spokesman Ryan Stensland says the utility's request is based on ratemaking principles established for the power plant project by the Iowa Utilities Board. One of the principles said the utility would be entitled to recover “cancellation costs” from ratepayers if it canceled the project with good cause.

---- The consumer advocate's office says Alliant shouldn't be allowed to use that argument, however, because it never agreed to the ratemaking principles.

---- Alliant canceled the $1.3-billion-plus project because it decided the 10.1 percent return on investment the Iowa Utilities Board approved for the project was too low, and could make it hard or impossible to borrow money through a bond sale to pay for the project. It had been seeking a 12.55 percent return.

---- Few consumers seem to know that Alliant is seeking to recover the $26.5 million, and could come back to ask for another $20 million from ratepayers if it is can't get minority partners in the project to pay that share.

---- Several consumers interviewed by the Gazette said they're resigned to whatever state regulators decide, noting that it's a small part of a large overall rate case, and will be decided on regulations few even understand.

---- Some customers who opposed Alliant Energy's plans for a coal-burning plant because of the links between coal combustion and climate change take a harder line on the utility's request, however.

---- “The shareholders should pay,” said Don White, a Cedar Rapids software developer and member of the Iowa Renewable Energy Associatio's board of directors.

---- White said Alliant's customers have never had any control over Alliant's headlong pursuit of the coal-burning plant. “Shareholders invested in the stock and they have a stake in what the company does, good and bad.”

---- Stensland said Alliant Energy decided not to seek cost recovery for 1,134 acres of land purchased for the plant in part because it is not sure what it will do with the property. It included 719 acres of land that it acquired from an Alliant-owned real estate company, Alliant Land and Building.

---- The Iowa Utilities Board is expected to rule on the case by the end of January 2010. The Office of Consumer Advocate often asks state regulators to award a lower rate increase than a utility is seeking, but this time is asking the Iowa Utilities Board to lower Alliant's rates by 2.8 percent. State Consumer Advocate John Perkins blames Alliant management actions such as selling the company's Iowa transmission system to ITC Midwest. The sale resulted in much higher transmission costs than Alliant predicted when it sought state permission to sell the transmission system.The cancellation of Alliant Energy's Sutherland Unit 4 power plant in Marshalltown eight months ago has left state regulators with a problem.

Somebody has to pay the $45.3 million Alliant spent on getting the project to the point of a build or no-build decision. Alliant would prefer it be someone else.

Who pays is a delicate issue that, in the worst case, could cause about 500,000 Alliant customers to pay about 1 percent more for their electricity over a five-year period than they otherwise would have to pay.

The request is part of an18.9 percent overall electric rate increase for Alliant that the Iowa Utilities Board is considering.

Concerned about a potential rejection, Alliant offered the board an option that might seem more palatable to customers, at least in the immediate future.

After initially asking that customers be required to pay the full $45.3 million, Alliant lowered its requested increase to 16.5 percent. It did so by omitting $13 million it says minority partners in the Sutherland plant should pay for cancellation costs, which reduced the cancellation cost requests to $26.5 million, and by eliminating $6 million in costs to buy 1,134 acres for the plant that the company still owns.

Then the utility asked regulators for permission to take the remaining $26.5 million, when rounded, in cancellation costs from a regulatory reserve account established with proceeds of the sale of its nuclear power plant about two years ago.

The proposal has been acceptable to most environmental advocates who opposed the coal-burning plant as unnecessary and environmentally damaging. “We didn't want to penalize them for agreeing with us in the end,” said Carrie La Seur, president of Plains Justice, a Cedar Rapids-based nonprofit environmental law organization.

The state's consumer advocate's office is bluntly averse to the plan, however, suggesting it merely takes the money from one pocket of ratepayers instead of the other.

“We don't think ratepayers should have to pay anything,” said Ron Polle, senior staff attorney for the Iowa Office of Consumer Advocate. “The customers didn't ask for the plant.”

Polle said the state approved the sale of Duane Arnold Energy Center in Palo with the understanding that the money set aside in the regulatory reserve account would be used to defray the impact of rising electric costs on consumers. The power plant costs were not the kind of increases envisioned in that order, Polle said.

As a backup position, the consumer advocate proposed that Alliant shareholders and electric ratepayers split the construction costs equally.

Alliant spokesman Ryan Stensland says the utility's request is based on ratemaking principles established for the power plant project by the Iowa Utilities Board. One of the principles said the utility would be entitled to recover “cancellation costs” from ratepayers if it canceled the project with good cause.

The consumer advocate's office says Alliant shouldn't be allowed to use that argument, however, because it never agreed to the ratemaking principles.

Alliant canceled the $1.3-billion-plus project because it decided the 10.1 percent return on investment the Iowa Utilities Board approved for the project was too low, and could make it hard or impossible to borrow money through a bond sale to pay for the project. It had been seeking a 12.55 percent return.

Few consumers seem to know that Alliant is seeking to recover the $26.5 million, and could come back to ask for another $20 million from ratepayers if it is can't get minority partners in the project to pay that share.

Several consumers interviewed by the Gazette said they're resigned to whatever state regulators decide, noting that it's a small part of a large overall rate case, and will be decided on regulations few even understand.

Some customers who opposed Alliant Energy's plans for a coal-burning plant because of the links between coal combustion and climate change take a harder line on the utility's request, however.

“The shareholders should pay,” said Don White, a Cedar Rapids software developer and member of the Iowa Renewable Energy Associatio's board of directors.

White said Alliant's customers have never had any control over Alliant's headlong pursuit of the coal-burning plant. “Shareholders invested in the stock and they have a stake in what the company does, good and bad.”

Stensland said Alliant Energy decided not to seek cost recovery for 1,134 acres of land purchased for the plant in part because it is not sure what it will do with the property. It included 719 acres of land that it acquired from an Alliant-owned real estate company, Alliant Land and Building.

The Iowa Utilities Board is expected to rule on the case by the end of January 2010. The Office of Consumer Advocate often asks state regulators to award a lower rate increase than a utility is seeking, but this time is asking the Iowa Utilities Board to lower Alliant's rates by 2.8 percent. State Consumer Advocate John Perkins blames Alliant management actions such as selling the company's Iowa transmission system to ITC Midwest. The sale resulted in much higher transmission costs than Alliant predicted when it sought state permission to sell the transmission system.