Board must balance utility, consumer interests

The Iowa Utilities Board is in the spotlight because of high-profile rate and regulation cases that impact consumers.

The three-member board, appointed by the governor, ensures that Iowa consumers are charged reasonable rates by the utilities that serve them. This year, some Iowa utilities are proposing hefty rate increases.

“What's unfortunate is it's in such tough economic times, and the board is statutorily bound to kind of find a balance between obligations,” said board spokesman Rob Hillesland.

Those obligations include allowing the utilities a fair opportunity to make earnings on their investments and to stay economically viable, and being fair to customers.

David Osterberg, director of the Iowa Policy Project and former Democratic state lawmaker, said his organization worries most about the impact of rate increases on low-income Iowans.

“You've got to recognize that it's going to be a real big part of some people's budgets,” he said.

Some of the rate and regulation cases before the board this year:

Alliant Energy/Interstate Power and Light Co. is requesting an increase in its retail electrical rates to boost annual revenues by roughly $171 million, or about 17 percent overall.

The typical residential customer would see an 18.1 percent increase, or about $14.66 a month. The company imposed a temporary rate increase of 7 percent in March. For the typical customer, the temporary rate increase amounted to 8.9 percent, or $7.21 per month.

Alliant spokesman Ryan Stensland said the company is seeking the increase because of many factors, including damage suffered by floods and natural disasters in recent years. The company has spent about $260 million on flood restoration, with about $100 million covered by insurance. Transmission costs also have increased.

Alliant also has invested about $600 million since 2004 in its electrical system to improve reliability and safety, he said. Another $50 million has gone to environmental projects and to reduce power plant emissions.

The company serves about 450,000 customers in Iowa, primarily in the eastern and northern parts of the state.

MidAmerican Energy is seeking board approval of a 12.2 percent investment return on its proposed 1,001 megawatt Wind VII Iowa Project.

MidAmerican officials declined to comment on the proposal, which Iowa's Office of Consumer Advocate estimates could cost between $1.7 billion and $2.5 billion.

Public filings show the company wants the ability to earn a 12.2 percent return on equity, or investment, on the portion of the project included in Iowa's electric rate base.

“It's not guaranteed money; it's a guaranteed opportunity at that rate,” said Chuck Seel, manager of customer service for the utilities board.

The decision in this case would have no immediate impact on rates consumers pay, utility board officials said.

Florida based-NextEra Energy Resources, which has 600 megawatts of wind power in the state, is against the proposal.

NextEra Senior Vice President Michael O'Sullivan said the transmission system in Iowa can handle only so much wind and MidAmerican's project could have a chilling effect.

“If we decide that there's a chilled environment here or an inside straight that's been played with one company, well, why would we want to try to compete here if the rules are tipped in one guy's favor?” he said.

A hearing on the case is set for today.

Q&A: Utility rate regulation in Iowa

Who controls how much public utilities can charge Iowa customers?

A: The duty of the Iowa Board of Utilities is to ensure that public utilities charge reasonable rates for services they provide.

Q: Who serves on the Iowa Utilities Board?

A: The three-person board is appointed by the governor.

Q: What is the process utilities go through to raise rates?

A: Utilities notify customers of their proposal for rate changes and file a formal petition with the Iowa Utilities Board. The board takes testimony supporting or opposing the rate increases, and all parties get a chance to cross-examine those witnesses. Iowa customers also get a chance to weigh in at public meetings or comment in writing to the board.

Q: What is a temporary rate increase?

A: Utilities can impose a temporary rate increase or ask the utilities board to approve one. The temporary rate is effective while a request for a permanent rate increase is pending before the board.

Q: How does the board decide whether to approve a permanent rate increase?

A: The board looks at the revenue a utility needs to cover its general operating expenses, new capital expenditures and other factors to determine whether the proposed rate increase is reasonable. If the board approves a permanent rate increase that is lower than the temporary rate increase imposed by the utility, then the utility must refund customers what they overpaid, plus interest.

Q: Does anyone represent Iowa customers in decisions before the board?

A: The state's consumer advocate, appointed by the Iowa attorney general, represents the customers of utilities.

Q: Which Iowa investor-owned electric and gas companies are regulated by the board?

A: The board regulates rates and services of MidAmerican Energy Co. and Interstate Power and Light Co., a subsidiary of Alliant Energy Co. The board also regulates gas services by MidAmerican Energy, Interstate Power and Light, Black Hills Energy and Atmos Energy Corp.

Q: Which water companies are regulated by the board?

A: It regulates Iowa-American Water Co., which serves customers in the Davenport and Clinton areas.