Do you like affordable electric rates? I find it hard to believe that anyone would answer this in the negative. But understanding how energy rates are set to be affordable is too complicated for simple generalities.
The Iowa Business Energy Coalition is an association of some of Iowa’s largest and most energy-intensive employers who consume over 3,500,000,000 kWh of electricity per year and employ tens of thousands of Iowans in over 25 of counties across the state. IBEC members are drivers of economic growth and keenly understand that an energy system balancing reliability and affordability can grow our economy; imbalance can hinder it.
Our members recognize that the electric grid is rapidly changing, and innovation is necessary for both utilities and customers. But Iowans should be wary of outsiders offering easy solutions to complex problems. In contrast to partial deregulation or some “market-based rate” proposals, large customer needs and sophistication are more easily achieved with “innovative rates.” This innovation works by providing utilities with regulatory flexibility to respond to large customer needs, while also ensuring that nonparticipating customers do not pay for the choices of participating customers. Our members have prioritized a legislative solution that would provide the Iowa Utilities Board the authority to approve innovative rates that balance reliability, sustainability, and customer demands while maintaining the IUB’s regulatory oversight of the process.
A column from December 21st in the Des Moines Register proposed introducing partial deregulation in Iowa, stating that “Allowing a small segment of Iowa’s energy users the ability to directly purchase electricity from an already existing exchange would bring benefits for our state and for our consumers.” This proposal may sound appealing, but, without context or specificity, is extremely risky. If a “small segment” means large energy consumers who remove themselves from Iowa’s system, then the energy costs that were contemplated prior to their exodus must be shifted to remaining users, like residential, commercial and industrial. There may certainly be benefits for some consumers in this proposal, but it is challenging to see where all consumers benefit. In other states, partial deregulation has saddled nonparticipating users, in particular large industrial users, with the costs of those opting out of the regulated system.
In a January 26th article in the Des Moines Register, the Iowa Economic Alliance posited that a spike in MidAmerican’s Energy Adjustment Clause (EAC) justified deregulation because the spike was a “symptom of a flawed, monopolistic regulatory framework that reinforces the need for market access.” But the EAC is pass through charge, reflecting a spike in fuels and market electric rates. Furthermore, the recent EAC jump was an historical anomaly with the rate moving modestly over the past decade. What the Alliance ignored is that their (undisclosed) members have the ability to join a settlement with MidAmerican that would provide immediate, significant EAC relief and buy down the rate for the next several years. Attempting to connect a one-year, anomalous increase on a single rider to justify an extreme shift in Iowa’s regulatory structure is not apples and oranges but more akin to apples and giraffes.
So, what about our answer? Of course, we want affordable electric rates. But not at the expense of our fellow Iowans.