A BRIEF REVIEW of the docket • The PROPOSED “non-unanimous partial SETTLEMENT agreement” • THE COALITION’S POSITION, and hopes for Commission decision-making • FURTHER OPPORTUNITIES to reform Iowa rate regulation to better stabilize rates and strengthen the voice of Iowa communities
The following update on the Alliant rate docket was recently provided to members of the CEDI Coalition intervention group. It is public information, and we share it here in the belief that all ratepayers and communities should be well-informed about the ratemaking process.
As promised, here is an update on where things stand with regard to Alliant Energy’s proposed electric rate increase. We’re also providing background, for the benefit of communities that have expressed interest and/or passed a resolution, but did not join the Coalition.
The CEDI Coalition includes 50 Iowa communities that receive electric service from Alliant, and 13 county-level clean energy districts that include Alliant electric service territory.
The Clean Energy Districts of Iowa (CEDI) created the Coalition to give voice to Alliant communities and customers experiencing the runaway train of Alliant Energy’s high electric rates. As one example, Alliant’s residential rates are higher than those of all of Iowa’s 43 Rural Electric Cooperatives, which have dramatically more distribution infrastructure to build and maintain per customer than Alliant.
From the beginning, Coalition expert witnesses have attempted
- to illustrate to the Commission how “business as usual” regulation has resulted in the current untenably high rates;
- to emphasize that a significant course correction will require action beyond business-as-usual by the Commission, and;
- to suggest mechanisms for such a course correction.
Where do things stand right now? What are the chances of a significant course correction in the docket? What might this docket mean in the broader context of rate regulation in Iowa?
Docket and Coalition Context
We have updated the Coalition intervention web page to make it an effective learning and reference tool for Coalition members. The page now includes:
- The historical and present day context of Alliant’s high rates, and impact of those rates on communities and on low-income households
- A review of the current rate increase proposal
- A list and a map of the 50 communities that joined the CEDI Coalition
- A list and a map of 88 communities that passed and filed a resolution opposing the magnitude of the rate increase (including the 50 that joined the Coalition)
- Information about the Coalition’s legal counsel, and three expert witnesses
- A listing of and links to the Coalition’s key docket filings, representing hundreds of pages of expert testimony
We will continue to update this page with additional information, including docket developments, the Commission’s final decision and order, and opportunities for communities to impact rate regulation and energy policy in Iowa.
A Proposed Settlement Agreement
On June 20, Alliant Energy reached a “partial, non-unanimous settlement agreement” with the Office of the Consumer Advocate (OCA) and the Iowa Business Energy Coalition (IBEC).
As our Coalition web page explains, the proposed settlement includes a number of key components, including:
- A $99 million reduction in the revenue requirement from $284 million to $185 million
- A five-year moratorium on base rate increases
- An earnings-sharing agreement
- A three-year resource evaluation study
- A $900 million distribution spending cap
Rate dockets are complicated, but they can be broken down very roughly into two pieces:
- the total “revenue requirement” requested by the utility, and;
- the cost allocation or “rate design” portion.
The revenue requirement is the big number that determines the all-inclusive rate increase. The utility documents all the new spending on distribution and generation infrastructure, operations, administration, and other costs that the company proposes to add to the “rate base” (recover through electric rates).
Once the total revenue requirement is determined, rate design is how that total amount of new company revenue gets allocated to customer classes and recovered in class-specific rate increases (e.g. for residential, commercial, and industrial rate classes).
The proposed settlement agreement is “partial” because it addresses the revenue requirement portion of the docket, but does not address the rate design issues, which are significant. We show the company’s proposed rate design on the web page, which would result in an estimated 6% increase for residential customers, and a 15% increase for commercial and industrial customers.
The proposed settlement is “non-unanimous”, because only two intervenors were originally party to the agreement. Many intervenors – including CEDI – filed objections to all or portions of the proposed settlement. These objections were heard during the three-day Commission hearing in July, as well as extensive testimony on rate design.
All parties then filed briefs stating their final positions on the proposed settlement terms and conditions, and on aspects of the docket that were not included in the proposed settlement. A final decision and order is due in the docket by September 23rd.
The Coalition’s Position: Business-As-Usual Hurts Ratepayers; Commission Leadership Is Needed
The CEDI Coalition filed an objection to the non-unanimous settlement, testified against many aspects of the proposal at the July hearing, and explained final positions in our post-hearing legal brief.
Before delving into why we opposed the proposed settlement, it’s important to note the progress made in this docket. Rate dockets are never black and white, winner-take-all situations. They are extremely complicated, and the outcome is always some form of a compromise.
As noted above, the company has agreed to reduce their overall “revenue requirement” (that will be recovered in rates) from an initial $284M to $185M. This represents a 35% reduction in the overall rate increase proposal, which, while not enough, is significant.
The proposed settlement agreement also includes a 5-year moratorium on new rate increases, and an earnings sharing mechanism, both of which could help stabilize rates going forward. These elements are not nearly as strong as they should be, but together with the revenue requirement reduction may help to bring the potential rate increase more in line with the past four years of inflation than otherwise.
That said, the proposed settlement doesn’t nearly go far enough towards halting the runaway train of Alliant electric rates. In our final brief, we:
- Argued for a rate freeze in our testimony and welcome consideration of a “moratorium,” but argued that the proposed five-year moratorium is business-as-usual if the company simply returns in five years for another major rate increase. To be meaningful, a rate freeze or moratorium must be for a longer term than the normal interval between rate dockets.
- Criticized Alliant in testimony for not proposing or supporting a revenue-sharing agreement, thus CEDI welcomes the proposed earnings-sharing agreement. That said, CEDI believes a new rate case should not be triggered until Alliant’s return on equity falls 150 basis points below Alliant’s approved ROE.
- Explained why the few details associated with the three-year resource evaluation study are a poor substitute for an integrated resource plan that is comprehensive, transparent, and includes meaningful stakeholder participation.
- Explained how the $900 million distribution spending cap allows the company to maintain business-as-usual high spending levels, and why there should be no such pre-authorization of distribution grid spending.
When faced with a runaway train, it’s not enough to simply stop the acceleration, and leave the train running at speeds bound to hurt onboard customers and nearby communities. Similarly, slowing the pace of rising Alliant rates is not enough to correct 20 years of unreasonable rate increases that have resulted in an untenable situation for customers and communities.
The proposed settlement is clearly not the serious course correction Alliant customers and communities need. However, this docket is not an easy ask of the Iowa Utilities Commission. When presented with thousands of pages of utility and intervenor documentation, it’s easy to get bogged down in piecemeal analysis of the weeds. Ultimately, even if all the weeds seem reasonable, the outcome and impact on ratepayers may not be.
We are hopeful that the Iowa Utilities Commission will address this conundrum, and significantly modify the proposed settlement in its final decision. The Commission could, for example, layer an outcome-based evaluation over the existing docket record, and establish key metrics that are meaningful and clear to ratepayers and communities. These metrics could include:
- That Alliant’s rates not rise faster than inflation;
- That Alliant’s rates should not exceed the average rates of Iowa’s Rural Electric Cooperatives; and
- That every rate docket should make progress towards reducing the dramatic cost discrepancy between Alliant and MidAmerican Energy.
Integrated Planning Would Help Ensure Ratepayers Only Pay For What They Need
One issue that the Coalition raised in testimony is the need for the Commission to order a comprehensive and participatory Integrated Resource Planning (IRP) process to cover generation resources, and an Integrated Distribution Planning (IDP) process to cover distribution grid investments.
IRP and IDP may sound wonky and intimidating, but they are really just robust planning processes designed to ensure ratepayers only pay for what they really need. These planning processes should be separate dockets, comprehensive of all utility investments, and fully transparent and participatory so that ratepayers and communities have meaningful rights in the decision making process. Without strong participation rights, IRP and IDP processes become just another example of ratepayer taxation without representation.
Though other intervenors agreed with the CEDI Coalition on the need for robust and participatory IRP, the settlement proposed a “Resource Evaluation Study” that is a relatively meaningless and poor substitute for a quality IRP process. To make matters worse, the proposed settlement pre-authorizes an unprecedented level of utility distribution grid spending, with no meaningful IDP process whatsoever.
While we hope the Commission will modify the proposed settlement and implement meaningful IRP and IDP, these planning processes can also be legislatively required. Indeed, a legislative mandate was suggested by a recent London Economics study ordered by the Legislature, and commissioned by the Iowa Utilities Commission.
We will update you again with a review and explanation of the Utility Commission’s final order in this rate docket, when available. Meanwhile:
- Communities (and all customers) are still free to submit comments in the docket (using docket number RPU-2023-0002).
- Be in touch with us if you would like to learn more about how to advance IRP and IDP in Iowa.
- Communities, like all customers, have significant opportunities to reduce bills through the pursuit of energy efficiency and renewable energy options. CEDI will soon be offering technical assistance services to communities in certain counties, so please contact us if your community may be interested in such assistance.
We thank you for your participation in the CEDI Coalition, and will provide a final docket update in September.
James Martin-Schramm, CEDI Policy Analyst
james.martin-schramm@cleanenergydistricts.org
Andrew Johnson, CEDI Executive Director
Posted: August 15, 2024
