Recent Actions and Decisions will have a Major Impact on the Energy Sector
In February, the Iowa Utilities Board ordered the public release of a redacted Zero Emission Study that MidAmerican Energy had commissioned for its internal use. MidAmerican’s own study concluded that solar was the best option to meet summer peak demand needs in 2040. The company had fought against sharing this internal report as a part of its $3.9 billion proposal known as WindPrime (the proposal contained just 2% of new solar generation). The study also highlighted the expensive nature of maintaining its existing large coal fleet.
The internal study’s findings were not surprising. Iowa’s peak energy use is on hot summer afternoons, as air conditioning is cranking up. Solar produces its greatest power on these hot days, while wind slows down. Iowa Business for Clean Energy had intervened in this case and highlighted this fact in our submittals to the Board.
On April 27, the Iowa Utilities Board issued its Final Decision and Order in the WindPrime docket. Citing MidAmerican’s own study, the Board highlighted that solar would meet Iowa ratepayers’ energy needs much better than wind. The Board noted that MidAmerican had adequate wind generation already, and thus the investment was not needed for Iowa’s customers. The Board did approve principles that would allow MidAmerican to build and recover the costs for the project since MidAmerican’s projections showed that building the generation and selling the power outside of its area was in ratepayers’ interests. However, the Iowa Utilities Board declined to place all the risk on ratepayers if MidAmerican’s projections failed to meet expectations.
The Board went even further, awarding a return on equity (“ROE”) of 9.5%, an amount equivalent to the ROE for general rate cases. The Board, over the past two decades, had awarded 11.5-12% ROE for previous advanced ratemaking cases. The Board highlighted that advanced ratemaking reduces the risk to the utilities and, therefore, no risk premium was warranted. Where in the past, the higher ROE was provided to encourage new generation, MidAmerican’s CEO acknowledged the wind would likely be developed by other parties if MidAmerican did not do so, since these projects are already in the MISO Generation Interconnection Queue.
Then, on April 28, the Iowa Supreme Court, in its second decision in two months to go against MidAmerican Energy, found that the Iowa Utilities Board must consider other options to achieve emissions reductions at the lowest cost other than options offered by the utility itself. The Board had declined to consider a study by the Environmental Intervenors showing a lower-cost option of pairing solar with storage over maintaining MidAmerican’s full coal fleet.
These actions now take on heightened importance as the Biden Administration EPA’s new regulation on power plants will substantially increase the costs of maintaining the full coal fleet. While the battle before was reserved to options offered only by MidAmerican, Iowa’s future power generation will now be open to more of a full-fledged debate.
Legislative Study
And finally, this week, the Iowa Utilities Board issued a Request for Proposal in response to HF 617, which called for an independent rate study. The consultants’ charge includes identifying and evaluating:
performance-based regulations that could enhance competitiveness, and
the impact of any proposals received from stakeholders on Policy Objectives, including, for example, flexible rate approaches, innovative rate structures, and integrated resource planning as a precondition for rate making.
The multiple administrative and judicial decisions coupled with the Iowa Utilities Board study will spark an unprecedented opportunity to ensure our future electric grid is guided as much by the competition for ideas and the marketplace competition. This new open debate will lead to a less expensive and cleaner grid.
Let the competition begin.