Utility energy savings plummet after 2018 change in Iowa law

Iowa’s largest utilities have dramatically scaled back efforts to help customers conserve energy since a 2018 law gutted the state’s efficiency requirements.

MidAmerican Energy reported kilowatt-hour savings for 2020 that were 64 percent lower than what the utility achieved the year before the law took effect. Alliant Energy’s savings were down 40 percent during the same period.

“That’s just staggering,” said state Sen. Rob Hogg, a Cedar Rapids Democrat who voted against the legislation. “At the very moment when our country needs to be increasing energy efficiency quickly, this is terrible.”

Most states require utilities to make regular investments in energy efficiency programs such as lighting and appliance rebates, which can help keep costs down for customers by delaying the need for more expensive system upgrades.

In 2018, Iowa lawmakers passed a bill that critics at the time warned would “eviscerate” those programs in the state by capping how much utilities could spend on them, exempting several large customers from paying into the programs and subjecting spending to a tougher cost-effectiveness test.

Senate File 2311 was passed in the final days of the 2018 legislative session. All 32 Republican senators and all but five of the 59 Republican House members supported the bill over objections from Democrats and environmental advocates.

The outcome so far has fulfilled predictions made during legislative debate, said Josh Mandelbaum, a senior attorney for the Environmental Law & Policy Center.

“We thought there was going to be a significant reduction in energy savings, and we’re seeing a significant reduction in energy savings,” Mandelbaum said.

Alliant spokesperson Morgan Hawk said the company has continued to meet its energy savings goals — targets that were significantly lowered in the wake of the 2018 law.

“We are proud to have achieved 94 percent of expected electric energy savings in 2020, despite the COVID-19 pandemic and an unprecedented derecho storm which caused widespread damage across our service area,” Hawk said.

MidAmerican spokesperson Tina Hoffman said the company’s programs “meet budget and savings expectations as set forth in state law.”

“Importantly, because of the changes instituted by the legislature in 2019, customers were able to benefit twofold — first, from immediate savings on their monthly energy bills through the reduced energy efficiency charges, and secondly, from the robust energy efficiency programs that are available to customers to utilize.”

Alliant and MidAmerican filed revised five-year energy efficiency plans after the law took effect. The new and diminished efficiency programs took effect April 1, 2019.

According to an analysis by the Iowa Environmental Council, both utilities cut spending on electricity conservation programs by more than a third, and gas conservation programs by more than three-quarters.

“This means massive savings for customers left on the table and higher energy bills,” said Kerri Johannsen, energy program director for the Iowa Environmental Council.

The law also allowed utilities to eliminate free in-person energy assessments. MidAmerican now leaves its customers to make assessments on their own using an online tool the company provides.

The American Council for an Energy-Efficient Economy’s yearly state energy efficiency score card dropped Iowa a dozen places since the law’s passage, from 24th nationally in 2018 to 36th place last year.

Hogg acknowledged that utilities faced other hurdles last year, such as the pandemic and a freak windstorm that caused widespread damage across the state. Still, he doesn’t see them as major factors for the decline in energy conservation.

“I don’t think there’s any question that the primary problem here was a change in the law,” Hogg said.

In particular, the spending caps are “the clearest rationale for why this happened,” said Nick Dreher, policy director for the Midwest Energy Efficiency Alliance. The bill prohibited state regulators from requiring utilities to spend more than 2 percent of expected electric revenue or 1.5 percent of expected natural gas revenue on efficiency programs.

“There are measures that are more expensive to run but produce greater savings,” Dreher said. “You’re left with measures that are less expensive but don’t produce the deeper energy savings.”

Calling energy efficiency “the quickest, cheapest and cleanest way to deal with greenhouse gases,” Hogg said he believes his colleagues in the Legislature need to reevaluate the changes they made in 2018.

“Either Iowa needs to fix the law and allow the Iowa Utilities Board to use more energy efficiency,” he said, “or we need national utility legislation. A national clean energy standard would override what Iowa did.”

Karen Uhlenhuth, a former Kansas City Star reporter, covers Iowa, Missouri, Kansas, Nebraska, North Dakota and South Dakota for Energy News Network, a nonprofit news site dedicated to keeping influencers, policymakers and citizens informed in the transition to a clean energy system.