Competition needed for electric transmission In Iowa

Who owns, operates, and maintains Iowa's electric transmission grid is being debated - again - right now in Iowa's legislature. The governor's energy bill - HF834 and SF585 - includes Right of First Refusal (ROFR) for existing transmission providers in Iowa. ROFR is an expensive hand-out to existing incumbent providers. It is wrong for incumbent transmission providers to ask legislators to pass protectionist, monopolistic legislation that locks out competition from other qualified builders.

The option to ROFR is a bidding process that allows any qualified builders to submit proposals to the independent system operator. In Iowa, Midcontinent Independent System Operator (MISO) and Southwest Power Pool (SPP) are the operators with jurisdiction. MISO and SPP are responsible for the reliable and affordable flow of power in their regions. MISO's territory extends from Manitoba through 15 states. MISO's own website states they have a planning process to 'enable competition among wholesale capacity and energy suppliers in the MISO markets, and allow for competition among transmission developers.'

MISO developed 4 tranches of projects for transmission line construction; tranches 1 and 2.1 involve nearly $6 billion in projects for Iowa, thus the fight for construction rights in Iowa. Total cost savings in a bid scenario would save 20% - 30%. In Iowa's case this would translate into $1.8 - $1.9 billion in savings. The bidding process does not leave out existing providers; they just don't want to sharpen their pencils and sacrifice profit.

Economic development is a concern in every part of Iowa. A bidding process that saves around 30% will have an impact on energy prices for decades, influencing whether families and businesses decide to settle or expand here.

Competition creates innovation. Innovation enhances efficiency. Efficiency allows for better use of resources and lower rates for ratepayers. Under ROFR, there is no mechanism to keep costs low, only maximizing profits. Incumbent utilities will build as expensive as possible to optimize their return on equity. Competition also allows for financial innovation, finding creative ways to finance these projects are opened up under competitive bidding that just isn't done under a ROFR. Let competition unleash innovation and lower costs.

The pro-ROFR coalition is using scare tactics about allowing non-incumbent transmission providers in Iowa. MISO has a list of 50 approved builders that are well-vetted, well-established players in the industry. Safety, reliability, quality of construction, storm response, and land restoration will not be issues. Once these companies establish themselves here, Iowa linemen, engineers, and other personnel will be hired.

Labor groups have lobbied in support of ROFR. This is only to show support for companies they have long, established relationships with. This is short-sighted. New companies in Iowa will expand union membership and grow their ranks.

We've been debating ROFR in Iowa since 2018. Incumbents have continued delaying the bidding process by having this legislation introduced multiple years. MISO's tranche 1 projects could have been bid out in late 2022. This proposed legislation has only made the end result more expensive for Iowa ratepayers.

Incumbents argue they already bid out labor and material, but it's not a true competitive process because incumbents control the planning and engineering of each project. A ROFR leaves room for price escalation. Competitively bidding the entire project allows for more cost control by using cost caps, innovation in finance and construction, and lowering return on equity and capital structure.

As written, ROFR should be the poison pill that brings down the energy bill. There is one way to fix it. Pull the ROFR out of the bill, leaving in the land restoration and joint ownership aspects, and save money for ratepayers in Iowa.

Tim Heisdorffer, Russell Eimers, Kevin Kirchner and Jon Walsh are officers and members of the Resale Power Group of Iowa.

Russell Eimers General Manager, Amana Society Service Company President, Resale Power Group of Iowa

Tim Heisdorffer is general manager at Farmers Electric Cooperative in Kalona and director for the Resale Power Group of Iowa. Russell Eimers is general manager, at Amana Society Service Company and president of the Resale Power Group of Iowa Kevin Kirchner is general manager of Vinton Municipal Electric and a director of Resale Power Group of Iowa. Jon Walsh is electric superintendent with the city of Tipton and member of Resale Power Group of Iowa.