State's management audit of Interstate Power & Light begins

State utility regulators who said they didn't know enough to penalize Interstate Power & Light for management inefficiency have hired a Pennsylvania company to find the answers.

The Iowa Utilities Board contracted with Liberty Consulting Group of Quentin, Penn., this month to address questions that stacked up in two recent rate cases, mainly about the utility's management of costs on behalf of ratepayers.

The Iowa Utilities Board rejected requests from the Iowa Office of Consumer Advocate to penalize IPL for "management inefficiency" in two recent rate cases. The back-to-back rate cases ended with approval of a 9 percent rate increase in January, which was added to a March 2009 increase of 7 percent.

The advocate's office cited the company's cost overruns on a new wind farm in Franklin County, rapid increases in transmission costs since the company sold its transmission system to ITC Midwest and other issues.

The management audit will probe the way charges are allocated to Interstate Power & Light by the corporate services unit of its parent company, Madison, Wis.-based Alliant Energy. It also will look at whether the utility and Alliant Energy adequately studied the rate effects of the company's decision to sell its transmission assets to ITC Midwest. A total of 19 different areas of inquiry were identified in a request for audit proposals filed by the utilities board.

Work on the management audit will be starting soon, Iowa Utilities Board spokesman Rob Hillesland said, and is expected to take about one year. He said the company will submit a draft audit for review, and later a final audit that will be made public.

Whether action is taken in response to the audit's finding will be up to the three-member board, which is appointed by the governor.

Interstate Power & Light spokesman Scott Drzycimski said the management audit is the first to his knowledge since Interstate Power & Light became a company through a series of mergers. He said the company views the management audit as "an excellent opportunity for us to display how our company operates in the benefit of its customers."

Drzycimski added that Alliant expects based on a review of previous audits by Liberty Consulting that the company will provide advice for improvement in any areas in which it notes deficiencies. He said Alliant doesn't expect the audit to result in penalties, and it will take advantage of the advice it receives to make its processes better.

IP & L expects the audit to involve a significant amount of effort to explain how it operates, Drzycimski said.

The utility is Iowa's second-largest regulated utility. Drzycimski said the company is often compared to MidAmerican Energy, the state's largest regulated utility, in regulatory proceedings. He said the management audit will provide a broader context in which to view Interstate Power & Light's operations./