Reprinted from the Mason City Globe Gazette May 19.
Wouldn’t it be great if we could all get money right now based on our own private calculations of our future needs?
Incredibly, that’s exactly what utility giant Alliant Energy expects — and is at least temporarily receiving.
Alliant seeks an increase of 24.45% for residential electric customers and 25% for gas customers. A resident who was paying $82.31/month (typical usage, according to Alliant) for electricity would see an increase of more than $20 a month after Jan. 1 under the proposed changes.
But slightly less than half – $8/month for a $116/month bill – of the projected total increase in electric bills already went into effect on April 1.
Alliant officials said they expect no increase in gas bills, due to other savings off-setting the proposed base rate increase.
What is different about this is that Alliant and Interstate Power and Light Co. (Alliant’s energy company in Iowa) are basing their ask on projected cost increases, rather than historical data, as used in the past. Alliant’s ability to ask for the increase on projections comes from a law passed by the Iowa Legislature, and which provides a test case for the Iowa Utilities Board.
Not surprisingly, this “test” has not been well received. Early in April, the Mitchell County Board of Supervisors OK’d a resolution opposing the increase. Last week, the Mason City City Council followed suit.
When the utilities board took its public hearing on the road to Mason City on May 2, residents packed a meeting room at the Park Inn to blast Alliant representatives in attendance.
We give this test case a failing grade as well.
When a business seeks to expand or change its operations in a significant way, it raises capital for it via investors or bank loans. A public business asks its shareholders to bear the burden on the promise that the project will offer better returns on the shareholder’s investment.
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Alliant is instead demanding its customers — most of whom have no alternative for utilities, by the way — to pay for its projects, with the only promise being if costs are lower than anticipated the company will refund the customers’ money, with interest.
Alliant backs up this argument with ... nothing. In the docket for its requested rate increase filed with the state utilities board, one of the first things the company does is seek confidentiality for any documents that provide insight into its bottom line.
And the IUB granted its request.
In support of the idea of using financial forecasting as a means to determine rate increases, Alliant also provided documentation of a similar process used by utilities in Wisconsin.
Except a quick examination of the rules Wisconsin’s utilities board uses to govern rate increases reveals it’s not the same at all ... because the Iowa Utilities Board has no rules yet.
Of course, Alliant generously offered the IUB some “rules” that it had put together to govern the process, but in a move that gives us at least a glimmer of hope for the future, the IUB rejected these.
Last November, Alliant proudly announced to its shareholders a 6% dividend increase. Coincidentally (or not), an examination of all the energy providers in Iowa reveals that Alliant ranks among the lowest for its rate structure — meaning it charges among the most per unit of energy for its services.
The state’s Office of the Consumer Advocate has been watching Alliant’s proposal closely and intervened in March to oppose the interim rate increase that went into effect on April 1, stating that Alliant was inflating its return on equity by $10 million in order to boost earnings for shareholders.
The IUB ruled in favor of Alliant.
The ball has been dropped in all kinds of places here — the General Assembly shouldn’t have passed a law allowing forecasting as a basis for a rate increase without allowing the utilities board to first consider what rules would be needed to govern that process.
The Iowa Utilities Board should have developed those rules before allowing Alliant to enact even an interim rate increase. It isn’t prepared for a “test” case.
The board has five months in which to fix this mess. It will hear arguments about Alliant’s Jan. 1 rate increase in October. By then, we hope it will have a set of requirements for using forecasting that will drive it to postpone — or reject outright — any rate increases until a more in-depth (and public) review of the numbers upon which Alliant based its proposal can be undertaken.