The utility attack on Iowa's clean energy leadership

Josh Mandelbaum of the Environmental Law & Policy Center advocates for clean energy and clean water policies in Iowa. -promoted by desmoinesdem

I started off my post last week lamenting that Senate Study Bill 3078 was one of the worst energy bills that I had seen at the legislature. I still believe that to be the case. Unfortunately, a new bill that has been introduced (Senate Study Bill 3093 and its companion House Study Bill 595) is even worse.

In short, SSB 3093 undermines Iowa’s clean energy leadership by significantly scaling back energy efficiency, allowing new charges on solar customers, and removing consumer protections and oversight. As state Consumer Advocate Mark Schuling explained to the Des Moines Register, “It looks like the utilities’ Christmas list was all rolled into one bill. It’s good for utilities but not for customers.”

Energy Efficiency Under Attack

The energy efficiency provisions in SSB 3093 represent a significant change in the approach to energy efficiency. There are many bad energy efficiency provisions, but I want to focus on three: 1) mandating the evaluation of the programs under the Total Resource Cost test, 2) allowing large industrial customers to “opt-out” of the programs, and 3) capping the programs at 2% of rate revenue.

These three changes are all technical in nature, will significantly reduce the size of the energy efficiency programs, and are changes included in MidAmerican Energy’s November 2017 plan filing in front of the Iowa Utilities Board. Any of these changes would shrink energy efficiency programs in Iowa. The net result of all of them would dramatically curb these programs.

The change to the Total Resource Cost test alters the way programs would be evaluated for inclusion in energy efficiency plans. This change effectively eliminates a significant number of program measures – notably this is what cuts out the home energy audit and the insulation measures from MidAmerican’s programs.
The industrial opt-out gives some of the largest customers the ability to opt-out of the energy efficiency programs. Alcoa, now Arconic, has led the charge for the opt-out provision for years. We litigated this issue in 2013 during the last five-year plan cycle, and it was litigated in the cycle before that as well. The Iowa Utilities Board ruled against these large customers, noting (p.26): “Iowa has a strong public policy supporting and developing energy efficiency. The Board has not in the past and will not begin now to undermine that policy by allowing certain customers to opt out from the energy efficiency paradigm.”

MidAmerican and Alliant both opposed the opt-out in the past. Sometime in the last year, MidAmerican changed its position and supported the opt-out in its plan filing. It is now in this legislation, proposed by Republican chairs of the Iowa House and Senate Commerce Committees. The impact would be to take significant resources out of energy efficiency. Since the opt-out provision would require customers to take action to get out of the programs, the other changes will shrink the programs and then customers will opt-out shrinking the programs even more.

Much of what I wrote last week about the importance of energy efficiency applies to these changes. The following is particularly important to keep in mind:

Energy efficiency benefits everyone. Energy efficiency helps keep utility rates low and stable for all customers, even those that do not choose to participate directly in the programs. When utilities build or purchase energy resources, they pass the cost along to customers. Energy efficiency works to meet new energy demand by getting existing customers to use less energy so that increased demand created by new customers can be met without new generation or by delaying the need for that new generation.

Helping pay for the cost of energy efficient technology is a cheaper way to meet energy needs, so eliminating energy efficiency programs would increase costs for all customers by causing the utility to invest in more expensive energy generation. In addition, customers who participate directly in energy efficiency programs get an additional benefit of reducing their energy use and utility bills further.
Energy efficiency improves air quality and public health by reducing the use of fossil fuels. While Iowa has successfully increased wind generation and reduced the use of coal and gas to meet energy needs in recent years, we cannot continue to reduce our reliance on fossil fuels at the same pace if we stop implementing energy efficiency.

Discriminatory Charges for Solar Customers

SSB 3093 allow utilities to discriminate against solar customers and charge them separate and higher rates. This significant shift would undermine one of the key policies supporting Iowa’s clean energy economy and protecting customer-sited renewable energy generation. This policy protected Pella Electric Cooperative customers when the utility attempted to impose $85 fixed charges on customers in 2015. It was also used to argue against Alliant’s proposal to create separate rate classes for solar customers in its recent rate case. The Board rejected Alliant’s proposal on other grounds just this past Friday and did not address the non-discrimination arguments. Alliant is anticipated to have another rate case in 2019 where this issue will almost certainly come up.

The legislation also allows for revenue neutral tariffs, with only a cursory 30-day review. This 30-day review does not allow time for other parties to intervene, discovery to be conducted, or experts to develop testimony. Effectively, the review will be an up or down vote on the utility proposal without independent analysis or oversight. This could allow for massive rates shifts from high-use high-income residential users to low-use, low-income residential users, with only nominal review. Similarly, large fixed charges that would discourage both energy efficiency and customer-sited renewable energy could be implemented with little IUB oversight. Such a change would undermine Iowa’s clean energy leadership.

The bill also guts the Iowa Utilities Board oversight role and makes it harder for stakeholders to provide any accountability as well. For example, it would allow voluntary programs like the Beyond Solar program Alliant proposed this past fall. This expensive green marketing program would have consumers paying high premiums for a product that did not lead to any new renewable energy on the grid. It was a marketing gimmick that stakeholders objected to and ultimately forced Alliant to the table to negotiate on a more substantive community solar project. Alliant didn’t like this outcome, and the bill would make it harder to resist programs like this that are designed to pick off potential solar customers.

These changes create a real risk of massive increases in rates to solar customers coupled with no protection from deceptive utility led programs targeted at potential solar customers. The impact of these changes could effectively shut down the solar industry in Iowa.

There are many more troubling pieces in this bill. As the Consumer Advocate noted, the bill is a utility industry wish list. This legislation could move quickly. SSB 3093 was introduced on Monday and initially scheduled for a subcommittee hearing the next day. That was slowed down some. Democratic State Senator Matt McCoy did a great job raising questions about the bill in subcommittee on Thursday, but it was not enough to stop the bill from moving on to full committee. In addition, the companion bill in the House is scheduled for a subcommittee on Wednesday.

If you’re concerned about the clean energy future in Iowa, let your legislator and your utility know.

Josh Mandelbaum is a staff attorney for the Environmental Law & Policy Center working on clean energy and clean water litigation and policy issues in Iowa.

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