Reynolds sides with Big Energy over her allies

I recently received a notice of proposed rate increase from MidAmerican Energy. I’m sure quite a few of us in Eastern Iowa did. The energy giant, headquartered in Des Moines, is seeking permission from the Iowa Utilities Commission to add an “automatic adjustment clause” to our bills.

According to MidAmerican, the rate increase is to offset costs associated in part with “natural gas projects that are required by government mandates or regulations or projects.” If the IUC approves the increase, MidAmerican’s Iowa natural gas customers will see a new charge on their bill.

According to the letter, a small-volume customer with a typical monthly bill of $43.88 will see a new fixed monthly charge of 17 cents, or about 0.4%, a scant increase.

Small increases add up

Of course, it’s not the only involuntary increase many of us were notified about last month. According to the annual budget year statement sent out by my County Auditor as required by state law, my school district has proposed adding an extra 0.0872% to the rate of taxes they levy on my home. My county has proposed tacking on another 0.19% to their existing property tax rate, and my city wants to raise theirs, too.

Those also seem like tiny numbers — until you estimate your property tax increase in actual dollars. It probably doesn’t help that property assessment notices also show up in the mail around this time, when some see that their property value — including the taxable value — has gone up, so those taxes shoot even a bit higher.

On top of all that: though it may be a bad time to mention it, a certain large school district (cough, cough, Cedar Rapids) wants voters to approve a big bond referendum that would add about $185 a year to the taxes on a $200,000 home within the district while the bond amount — $211 million — is being repaid.

Whether paid at the county office twice a year, escrowed by your mortgage holder, charged by your landlord via rent increase or rolled into some other monthly bill, those little charges have a way of adding up to not-so-little amounts.

The 17 cents that MidAmerican proposes adding to small-volume Iowa consumers’ bills is, according to the notice sent out, part of the rate increase intended to “recover” about $1.6 million annually in revenue diverted in part to government mandates and regulations.

In short, MidAmerican Energy appears to want to bill customers a bit more every month to protect their revenue from the effects of government mandates.

And speaking of government mandates, here’s a good one: MidAmerican has also joined other energy and power giants in the state of Iowa, including Alliant Energy and ITC Midwest vying for a government mandate that if implemented, could boost their revenue.

Right of First Refusal bills in Iowa Legislature

The mandate that these industry titans seek is known as Right of First Refusal, or ROFR, a legal concept in which a specific party is granted the exclusive right to enter into a transaction before any other party has a chance at the same.

Under Senate File 585 and House File 834, a pair of twin bills introduced by Gov. Kim Reynolds, energy companies who already own electric transmission lines in the state of Iowa as of July 1, 2024 would be offered the exclusive chance — or the right of first refusal — to construct, own and maintain any new power line federally approved for construction if the line connects to a transmission facility they already own. The company would not have to bid to have the project awarded. Any competitor interested in constructing the same federally approved power line would not get to try for the project unless and until the “incumbent electric transmission owner” refuses it.

Supporters of the ROFR proposal say Iowa needs a reliable infrastructure to meet the growing demand for electricity, and no one can deliver it faster and more reliably than those who have already built lines and facilities and are putting in the money and the work to maintain them.

Opponents, however, say that giving the right to grow and build electrical infrastructure exclusively to existing transmission line owners would stifle the market — potentially hampering innovation and creating a monopoly for existing providers.

That’s a problem. Absent the competitive forces of the free market that keep prices in check and service at high standards, a ROFR-centered electricity market in Iowa would likely deliver higher prices. But unlike the rate increase recently proposed for natural gas, higher electricity costs from a lack of market competition don’t show as a line item on a monthly statement.

Other uses of ROFR

Not usually a problematic concept, ROFR is often applied in a contractual setting. For example, two partners who establish a business might include ROFR in their contract so that if one has to sell, the other has the first opportunity to buy that stake and keep the business going before a third party snaps it up and dramatically alters the business.

A rural landowner could include ROFR in a lease with the deserving farmer renting that land so that when it is sold, the farmer gets the exclusive first chance to buy it. A homeowner could put a ROFR provision in their will to guarantee the neighbor who admired the house a chance to make it their own.

The problem with the governor’s twin bills in the state Legislature is that under those bills, ROFR wouldn’t be a provision in contract binding two or more specific parties. It would be state law, binding any and all who hold a stake in electrical transmission in Iowa to a process that shuts out the competition.

It’s a really bad game of Monopoly, where you can’t buy Park Place because the rules say the player who already owns Boardwalk is entitled to first dibs.

Trump DOJ weighs in

Pushback on Reynolds’ twin ROFR bills has come from a few surprising sources. Following an inquiry from Republican Sen. Jesse Green of Boone and Republican Rep. Harry Stone of Forest City, the Trump Department of Justice encouraged Reynolds and the legislature to pump the brakes and consider the potential harm to consumers in a March 24 letter from Abigail Slater, Assistant Attorney General for the DOJ’s Antitrust Division.

“By restricting the construction of new power grid infrastructure to incumbent electrical transmission owners, the Bill can harm consumers by reducing or eliminating competition,“ wrote Slater, who cited examples from New Jersey, New York and Texas in which the traditional competitive bidding process — that ROFR would end — saved taxpayers significant sums of money.

Slater also pointed out that existing ROFR law in Iowa, which passed in 2020 and is smaller in scope than Reynolds’ current proposal, is currently enjoined by the Iowa Supreme Court. The Court found in 2023 that the narrower statute violated the Iowa Constitution.

Allies, opponents line up

Nevertheless, Reynolds is flexing her Big Kim Energy on this proposal, and it’s no surprise that Big Energy has sent multiple lobbyists to Des Moines to encourage its passage. Also not surprisingly, many smaller companies who likely stand to get stomped by their bigger competitors are against it.

Perhaps more surprisingly, some organized labor advocates such as the International Brotherhood of Electrical Workers, usually staunch Democrat allies, are for the Reynolds ROFR plan. Americans for Prosperity, a free-market, limited government advocacy group typically in Reynolds’ corner (and for which your friendly neighborhood opinion columnist was a volunteer before taking journalism for a spin) is actively opposed. Probably because there’s clearly nothing “free market” about this proposal.

But this legislative fight isn’t between Gov. Reynolds and her usual allies. Nor is the fight between her and the Trump DOJ.

No, this is a David and Goliath-style battle between Big Power and the smaller transmission builders. The latter is saying, “We want it all” while the former says, “Could we just have a shot?”

ROFR or no ROFR, the Davids of the electricity industry might need a sling and a rock to stay in the fight. But it seems the Goliaths don’t even want them on the pitch.

The kingdom, however, isn’t interested in seeing a giant slayed. They just want to keep their lights on and their devices charged and not be billed up the wazoo.

Comments: 319-398-8266; althea.cole@thegazette.com

Editor’s note: An error in the original version of this column referencing the name of an energy company has been corrected. The company is ITC Midwest, not Midwest ITC.