Think tank urges new electricity rate structure to encourage conservation

DES MOINES - An Iowa City-based think tank says raising the cost of electricity when usage rises could help encourage conservation and ultimately protect low-income Iowans from higher energy costs.Currently, some Iowa utilities charge less when energy usage rises.

"It definitely doesn't encourage conservation," said Christine Ralston, who authored a report on electricity rates for The Iowa Policy Project.

The report urges a flip in rate structures for residential customers, so that lower levels of electricity usage are cheaper and higher usage is more expensive.

Under their scenario, a separate rate structure would apply to low-income households, which also would see monthly service charges waived.

"What this does is makes the energy more affordable for low-income consumers but it preserves the conservation incentive for everyone," Ralston said.

Consumers are seeing energy prices rise more quickly than their income in recent years, the report said.

Iowans' average monthly energy consumption rose from 806 kilowatt hours in 2000 to 886 kilowatt hours in 2007, the report said.

The average residential home electricity bill also has risen, from $67.50 in 2000 to $83.65 in 2007.

Making energy use more expensive would make people think about how they are using electricity and would encourage them to cut back, the study said.

The report cited other states' success using an inverted rate structure like the one they are proposing, as well as Waverly Light and Power in Iowa.

Ralston said the average consumer would not see their costs go up under this type of rate plan.

Households with lower energy usage would see a decrease in their bills, while those with high energy use would see an increase, she said.

Ryan Stensland, a spokesman for Alliant Energy, which serves about 500,000 customers in Iowa, said they are open to debate on ideas to conserve energy.

"It's definitely an option," Stensland said.

But he said they don't want to get into a situation where the rates that customers are paying don't cover the costs of providing service.