REGIONAL—Iowans across the state have expressed concerns over Alliant Energy’s interim rate increase and additional proposed increase which may take effect early next year.
The Wisconsin-based utility increased gas and electric rates on April 1, and intends to enact a larger increase if approved by the Iowa Utilities Board. A notice sent out by the company said the interim increase would about $8 per month per service for the average customer. The next increase would be about $12. The increases together equal about a 25 percent increase per service.
The rate increase amounts to about $204 million, but the Office for the Consumer Advocate is recommending only a $40 million increase, and offered several suggestions to cut the cost for customers.
Alliant seeks a 10 percent return on equity, which the OCA said is too high. The IUB denied the office’s request to lower that return rate and will make a final decision in its overall judgment of the rate increase, which is likely to come in early 2020.
“The company is entitled to recover their prudent investments plus a reasonable return on those investments in their rates,” said OCA attorney Jennifer Easler. “A fairly sizable difference between the company’s position and ours relates to the earning on those investments. We also include a recommendation that the return on equity be set to the lower end of the range to encourage Alliant to keep its customers in greater focus, in terms of managing rates going forward.”
Easler said a large part of the rate increase was intended to pay for bonus compensation for Alliant employees, which has been at the cost of shareholders in the past. The OCA contends shareholders should continue to cover those costs. The utilities board, the governing body which is reviewing the proposed base rate increase, agreed with the OCA.
“The way Iowa law exists, the utilities have a monopoly,” Easler said. “Our primary concern is making sure that costs that are included in rates are just and reasonable.”
Comments filed to the IUB are publicly viewable online through the board’s electronic filing system.
Kelsey Jensen, a 29-year-old Alliant/Interstate Power and Light customer in Melvin, said her bill increased by much more than $8 in April.
“On April 22, it was about $60 more expensive than the month prior,” she said. “It could have been quite a bit colder than the month before. I don’t know.”
Jensen said she lives alone and takes several measures to minimize her energy usage, including unplugging appliances, buying energy efficient light bulbs and covering her windows in plastic during the winter. During heat waves like the one that swept through the country in late July, there is little that can be done.
“Most people I know have kids and families — and are on limited budgets and have a hard time manipulating their budgets to try to make it work with ever-increasing rates and stagnant pay,” Jensen said.
Jensen’s concerns are echoed in the comments of hundreds of customers who call the almost 25 percent increase on both utilities “excessive,”
On Aug. 1, the company announced its second quarter earnings. More mild temperatures this summer, compared to 2018, meant sales were lower, but the increased rates offset the difference some, according to a news release by the company.
Alliant’s average cost per kilowatt hour for residential electric customers is 14.77 cents in 2017, about 4 cents higher than MidAmerican Energy which also is an investor-owned utility company. That made Alliant the eighth most expensive electric supplier in Iowa. Southern Iowa Electric Co-op, based in Bloomfield, is the most expensive at 15.55 cents per kilowatt hour.
The interim rate increase, which took place in April, did not require approval from the IUB, but it may be subject to a refund for customers depending on the IUB’s decision.
At the cash register
Residential utility customers are likely to feel the effects of a rate increase, not only at home, but at the grocery store, retail center and gas station.
Dozens of businesses and city leadership groups submitted their opposition to the IUB, including Walmart and Fareway. Cities that formally opposed the rate include Marion, Ottumwa, North Liberty and Decorah.
Fareway Senior Vice President Garrett Piklapp said the company has tried to understand how a 25.29 percent rate hike for large general service customers was determined by Alliant. The utility provides service to about 40 Fareway locations, including the 1 million-square-foot campus in Boone.
“We weren’t going to rush to judgment. Alliant is a really good partner of ours,” Piklapp said. “What we have found through our homework is that we do find that this rate increase is excessive.”
Piklapp said the increase would cost the company hundreds of thousands of dollars, a price that would reflect in operating costs and on store shelves.
“This proposed increase is so substantial that it can’t be absorbed, and it’s not just Fareway,” he said. “It’s anybody who currently gets provided power by Alliant. We also have a duty to our customers and our employees, given the financial impact of this increase.”
Alliant spokesperson Justin Foss said raising rates to invest in capital improvements is the most cost-effective approach long term.
“We’ve heard from customers who have asked, ‘Why are you doing anything? Why not just not do anything,’” Foss said. “And the answer is, really there would have been a cost of not doing anything. That cost would have come in the future from increased fuels costs. It would come from more environmental regulations at our existing facilities. There was no no-cost option.”
While many customers raised questions about why they aren’t seeing the benefits of the wind energy investment Alliant has made, Foss said those benefits are reaching Iowa customers.
“Any source of energy you use comes with really two costs; first is the cost to build the generator; second is the cost of the fuel to run the generator,” he said. “When you install wind turbines and wind energy, you’re only paying for the cost of the generator. We’re expecting tens of millions of dollars of savings.”
He noted the electric rate funds investments that are for electric customers. The gas rate is funding routine projects that the company does to maintain its gas system.