Alliant defends management decisions in rate case

Interstate Power & Light is defending the effectiveness of its management as its argument to state regulators for a 16.6 percent increase in electric revenue draws to a close.

The Iowa Utilities Board is set to rule by mid-January on the request for $171 million in additional annual revenue from the division of Alliant Energy. Briefs were filed this week by IP&L and four customer groups.

Alliant is asking for a transmission adjustment clause that would automatically pass charges from the company's new transmission provider to customers before a state review. Alliant also wants to halve the depreciation period for its Iowa electrical meters in expectation it will install new smart meters in the next few years. The utility is seeking an 11.8 percent return on invested equity.

Several consumer groups say the utility should get no more than a 10 percent return on equity.

The Iowa Consumer Coalition says IP&L's return on equity should be lowered 0.3 percent because of its ineffectiveness in managing transmission costs. The Iowa Office of the Consumer Advocate says IP&L should be forced to cut its electrical rate demands by $30.4 million per year.

“The enormous magnitude of IP&L's proposed rate increases, add on to of the existing rates that are among the highest in the region, demand scrupulous attention by the Iowa Utilities Board,” wrote the Large Energy Group, a coalition of industrial users. Many of the group's members are suffering from the recession and face competitive threats from outside the United States, in addition to competition for investment from sister plants in the United states, the group said.

Lehigh Hansen Inc., a cement plant in Mason City, will become the highest-cost Midwestern plant of its parent company if IP&L gets the rate increase. Griffin Wheel, a Keokuk manufacturer of rail car wheels, may be at additional risk of permanent or temporary closure by its parent company if the rate increase goes through and causes an estimated $1 million annual jump in electrical costs.

IP&L says higher rates are needed to recover $200 million to $250 million in flood recovery costs, five years of investment in its power system since the last rate hike and increased transmission costs since the late 2007 sale of its transmission system to ITC Midwest.

The company rejects comparisons of its rates to the much lower rates of MidAmerican Energy Co., saying that MidAmerican can subsidize its electric costs to customers through wholesale electric sales.

Most of the consumer groups urge rejection of IP&L's request for the transmission adjustment clause, saying the utilities board established precedent against automatic transmission pass-throughs in a recent Black Hills Energy case.

Some customer groups endorsed an IP&L proposal to dampen the impact of the rate hike it's seeking by accelerating refunds to customers from the sale of its transmission system to ITC Midwest. IP&L wants to increase the 2010 refund from $11.5 million to about $48.4 million.