2023 was an important year for energy efficiency in Iowa. The Clean Energy Districts of Iowa (CEDI) was significantly engaged in these matters and has recommendations for 2024.
Key Highlights of 2023
Iowa’s investor-owned and rate-regulated utilities proposed new energy efficiency (EE) and demand response (DR) plans for 2024-2028. The Iowa Utilities Board (IUB) reviewed, revised, and approved these plans after considering testimony from several intervenors. CEDI was an official intervenor and submitted multiple rounds of testimony in each docket. Other intervenors included the Office of the Consumer Advocate (OCA), the Large Energy Group (LEG), and the Iowa Business Energy Coalition (IBEC). Modest improvements were made to these plans in no small measure due to our partners at the Office of the Consumer Advocate.
The Iowa Utilities Board also convened a series of meetings in the fall of 2023 in response to a mandate by the Iowa Legislature to initiate and coordinate an independent review of how utility services are provided at rates that are nondiscriminatory, just, reasonable, and based on the utility’s cost of providing service to its customers within the state. CEDI was one of many parties that participated in these meetings and contributed comments before or after the meetings.
The study process culminated in a final report by London Economics International (LEI), the firm the IUB selected to conduct the review of ratemaking procedures in Iowa. One of the many recommendations in its extensive report is that the IUB initiate a cost-benefit study evaluating the current 2 percent spending caps on energy efficiency and demand response for rate-regulated electric utilities and the 1.5% cap on spending for rate-regulated natural gas utilities. The study recommended that the EE/DR spending caps should be raised or eliminated and that a related opt-out policy should be revisited.
The study also recommended that the Iowa Legislature enact a statute mandating that rate-regulated electric utilities periodically submit an Integrated Resource Plan (IRP) to the IUB for review and evaluation. The authors of the study recommend that these IRPs require the consideration of EE/DR programs alongside other resource options in short-term and long-term planning, guaranteeing that all potential solutions are given due consideration.
CEDI’s Regulatory Recommendations:
Program Alignment Requires Proactive Action by the IUB In 2024
The IUB should accept LEI’s recommendation to initiate a study regarding the EE/DR spending caps that were introduced in 2018 as well as the opt-out provisions. These arbitrary caps have denied Iowa ratepayers the benefits of cost-effective investments in EE and DR that would reduce the need for more expensive investments in generating assets. It would be better to view the current caps as minimum floors rather than maximum ceilings and to reconsider whether any ratepayer should be allowed to opt out of EE and DR programs that benefit all ratepayers.
It is worth noting that Black Hills Energy and MidAmerican Energy both proposed energy efficiency plans that met the state’s 2% cap, but Alliant Energy proposed spending only around 1.2% of their retail sales, which is far below the cap. In other words, Alliant was less ambitious and more recalcitrant than MidAmerican and Black Hills.
The IUB should acknowledge that cold-climate heat pumps represent a significant opportunity for both savings and indoor air quality improvement in lower-income households, but there are many obstacles. The IUB can and should lead the process to ensure effective alignment between Iowa’s rate-payer-funded EE programs, the federally funded rebate programs that are still being developed, the federal weatherization program, and contractor training programs.
The IUB should open a Notice of Inquiry (NOI) docket to explore how electrification and decarbonization can benefit Iowa citizens and ratepayers. The Iowa Legislature has expressed its desire “to manage carbon emission intensity in order to facilitate the transition to a carbon-constrained environment.” (Iowa Code 476.53). One of the things that should be addressed in this NOI docket is the value of using a social cost of carbon to evaluate strategies to decarbonize the use of energy in Iowa.
CEDI’s Legislative Recommendations:
Legislators Can Offer Ratepayer Relief With Key Program Improvements
The Iowa Legislature should carefully review the LEI report it commissioned and pass legislation to implement its key recommendations–especially LEI’s recommendation that the Legislature enact a statute mandating that rate-regulated electric utilities periodically submit an Integrated Resource Plan (IRP) to the IUB for review and evaluation.
Once the IUB has completed its review of the current EE/DR spending caps as well as the related opt-out provisions, the Iowa Legislature should pass legislation that requires Iowa’s rate-regulated utilities to offer Iowa ratepayers access to all cost-effective means of achieving energy and energy cost savings via energy efficiency and demand response programs.
The IUB should pry away from the rate-regulated utilities some of the ratepayer funds for energy efficiency and utilize them to create a new statewide technical assistance fund and implementation structure to provide all ratepayers with access to local, high-quality, comprehensive energy planning services. This initiative will address the disincentive rate-regulated utilities have to reduce sales and increase the likelihood that Iowa ratepayers will identify and benefit from investments in energy efficiency.
CEDI’s IUB Docket Intervention Outcomes:
2024-2028 Energy Efficiency Plans
As noted above, every five years, Iowa’s investor-owned utilities are required by law to propose new energy efficiency plans. In the summer of 2022, Alliant Energy, Black Hills Energy, and MidAmerican Energy proposed their plans for 2024-2028.
An earlier CEDI newsletter article summarized the three priorities CEDI championed in each energy efficiency plan docket. This article concludes by assessing how well CEDI was able to address these priorities.
CEDI’s first priority was to ensure that the rate-regulated utilities’ five-year energy efficiency plans would complement new federal rebate programs funded via the Inflation Reduction Act. This priority has been met. The Board-appointed presiding officers accepted CEDI’s recommendation that Alliant, Black Hills, and MidAmerican be required to file a report after the details on the IRA-funded programs are finalized and to specify modifications to their plan that will help customers maximize complementary benefits. These reports have to be updated every six months.
CEDI’s second priority was to secure the provision of high-quality technical assistance to all ratepayers. This priority was met only with modest success–in part because Alliant Energy did not offer to enter into settlement negotiations over 50+ contested issues, whereas MidAmerican and Black Hills were willing to do so. MidAmerican agreed to consider offering in-home assessments on a limited basis to low-income customers as a part of its supplemental weatherization offering. Black Hills agreed to several improvements to its residential assessment program including the use of local, qualified energy assessors as an evaluation component in the RFP process when selecting an implementation contractor.
CEDI’s third priority was to increase funding and more effective assistance for low-income households. This priority was met with some modest success. The Board-appointed presiding officer in the Alliant docket agreed with CEDI that Alliant can do much more for the 25% of its customers that it defines as low-income. Per CEDI’s recommendation, the presiding officer ruled that the company must provide more energy efficiency measures to qualified low-income customers and required the company to develop related training for contractors. MidAmerican agreed to work with low-income communities to customize programs based on need. The offering may include a free smart thermostat if feasible. In addition, MidAmerican will work with the Iowa Department of Health and Human Services (IDHHS) to facilitate weatherization assistance program contractor education and certification. Finally, Black Hills agreed to promote and provide technical information to customers on the waitlist for the Weatherization Assistance Program; to inform its income-qualified customers about the free assessment tools available; and to work with IDHHS to get the largest number of income-qualified homes weatherized while maintaining the comprehensiveness of the weatherization.
In conclusion, 2023 was an important year for energy in general and energy efficiency in particular. At this point, 2024 is shaping up to be no less important. Rest assured that CEDI will continue to do its best for all Iowa ratepayers as these discussions continue at the Iowa Utilities Board and in the Iowa Legislature. We are fortunate to have terrific partners in this work–especially the diligent and competent staff at the Office of the Consumer Advocate.
Posted: January 5, 2024
