Good news on energy in final days of Iowa legislative session

UPDATE: Governor Branstad signed Senate File 2342 on May 25.

Iowa lawmakers always cram so much action into the last few days of the legislative session. Instead of writing one long news roundup on the final decisions by the Iowa House and Senate, I’m covering specific issues in separate Bleeding Heartland posts this year.

Rod Boshart posted a good, comprehensive list here on what bills did and didn’t pass during the 2012 legislative session. Follow me after the jump for details on a good renewable energy bill, which made it through at the eleventh hour, and some thoughts on the nuclear power bill, which for the second year in a row didn’t make it to the Iowa Senate floor.

Most Iowans are aware that our state has favorable conditions for wind-generated power, but solar energy has surprisingly strong potential in Iowa too. Senate Ways and Means Committee Chair Joe Bolkcom has advocated additional state income tax credits for installing small wind and solar generation systems. Last year Bolkcom floor-managed Senate File 516, which creates a state tax credit worth 50 percent of the value of the Federal Solar Tax Credit, passed the upper chamber by 49 votes to 1 but never got out of the Iowa House Ways and Means Committee. This year too, Iowa House Ways and Means Chair Tom Sands showed no interest in moving the solar and wind power tax credit bill.

A few weeks ago, Bolkcom introduced a new bill seeking to accomplish the solar energy tax credit. Senate File 2342 contains several important provisions. Property owners who install geothermal heating and cooling systems would receive “a geothermal heat pump tax credit equal to twenty percent of the federal residential energy efficient property tax credit allowed for geothermal heat pumps […].” Value added to residential property by any new or refitted geothermal system would be exempt from property taxes for ten years.

The new bill includes the same tax incentives for solar the Senate approved last year: a state income tax credit equal to “fifty percent of the federal energy credit related to solar energy systems provided in section 48 of the Internal Revenue Code, not to exceed fifteen thousand dollars.”

Finally, Senate File 2342 includes sales tax exemptions for auto body shops and car washes. The Iowa House had previously approved a bill containing those provisions. When I first heard about this deal, I wondered why on earth Iowa House Republicans would want state government to grant special exemptions for car washes. Senate Democrat Rob Hogg explained the concept to Radio Iowa this week:

If you run a car wash, for example, you will no longer be required to calculate and charge the state sales tax on each individual component used in the process – like the water, the soap and the wax. Instead, the sales tax can just be charged on the car wash itself. Senator Rob Hogg, a Democrat from Cedar Rapids, says when you buy a sandwich, you don’t pay sales tax on the meat, the cheese, the bread and the mayo – you pay it on the entire sandwich.

“In the car wash industry, under current law, it becomes, practically for that industry, imposssible because you have to item out each expense on the bill to the customer. Well, you go in and buy a car wash, right? You don’t want a bill that itemized out the expense on each input,” Hogg says. “In my mind, this is sort of a clean-up thing.”

Senate File 2342 cleared the Iowa Senate in late April by 45 votes to 1 (pdf). Democrat Daryl Beall was the only no vote, and four Republicans were absent (Hubert Houser, David Johnson, Tim Kapucian, and Kent Sorenson).

On May 7 the Iowa House approved the same bill by 82 votes to 14 (pdf). Most House Republicans and Democrats supported the measure. The following state representatives voted against it: Democrats Ako Abdul-Samad, Vicki Lensing, Rick Olson, Phyllis Thede, Mary Mascher, Beth Wessel-Kroeschell, Bruce Hunter, Jerry Kearns, Kevin McCarthy, and Todd Taylor, and Republicans Betty De Boef, Kim Pearson, Tom Shaw, and Glen Massie. Republicans Dwayne Alons, Rich Anderson, and Jack Drake were absent for that vote, as was Democrat Pat Murphy.

To my knowledge, Governor Terry Branstad has not said whether he will sign this bill. I would be surprised if he blocked tax incentives for solar or geothermal energy or the sales tax break for car washes and auto body shops. Branstad considers himself an “all of the above” person on energy policy. He’s never led the charge to generate more renewable energy in Iowa, but I see no reason for him to stand in the way of this bill.

LATE UPDATE: Senate File 2342 was among 16 bills the governor signed on May 25. Nathaniel Baer described the likely impact and potential economic benefits of expanding solar power here.

The other big energy policy news this week was the failure of the nuclear bill. The Des Moines rumor mill indicated weeks ago that this bill was likely dead, but I was wary, because you never know what can be resurrected in the final hours of a legislative session.

MidAmerican Energy lobbied hard for legislation to help them pursue a nuclear power project in Iowa. House file 561 would have allowed the investor-owned utility to charge ratepayers in advance for anticipated costs of building a nuclear power plant, and to keep the money even if the company abandoned construction. In addition, the bill would have prevented the Iowa Utilities Board from using standard criteria to determine whether MidAmerican had considered alternative sources of electricity generation, or whether the costs of the nuclear project were reasonable “when compared to other feasible alternative sources of supply.” House File 561 easily passed the Iowa House in 2011 as well as the Iowa Senate Commerce Committee, but Senate leaders never brought it up for debate last year.

The Iowa Senate’s leading proponent of the nuclear bill in 2011 was Swati Dandekar, who resigned last fall to accept a position on the Iowa Utilities Board. Dandekar’s successor as Iowa Senate Commerce Committee chair, Matt McCoy, did his best to get the pro-nuclear bill to the governor’s desk this year. He offered some amendments intended to address concerns about consumer protection and just barely got the bill through his committee in March, with Republicans providing most of the votes.

Senate Majority Leader Mike Gronstal supported House File 561, which isn’t surprising, because MidAmerican is a major employer in his district and has been a large campaign donor. So how did opponents keep this bill from reaching the Senate floor, where most Republicans and a few Democrats probably would have voted for it?

Several Iowa opinion polls have shown the terms of House File 561 to be deeply unpopular. AARP Iowa Associate State Director for Advocacy Anthony Carroll pointed out that McCoy’s amendments did not address “the many red flags raised by Iowa Utility Board staff” in a December 2011 memo. Several Senate Democrats especially Joe Bolkcom, Rob Hogg, and Pam Jochum, worked hard to make the public aware of the risks to consumers. Hogg and Jochum also deterred supporters from bringing up the bill by offering a bunch of amendments senators wouldn’t want to vote on.

The AARP was the most influential advocacy group to weigh in against the bill, but some credit should also go to others who lobbied against House File 561, including the Sierra Club Iowa chapter, the Iowa Environmental Council, the Environmental Law and Policy Center, the Iowa Renewable Energy Association, and the Iowa Public Interest Research Group.

I’m disappointed that the Office of Consumer Advocate, a division of the Iowa Attorney General’s Office, was missing in action on this fight. Attorney General Tom Miller takes pride in protecting consumers. The Office of Consumer Advocate is supposed to represent the public interest in matters relating to utility company practices.

MidAmerican’s CEO has indicated that without advanced cost recovery legislation, his company will pursue new natural gas-fired power plants rather than a nuclear reactor. Natural gas makes more sense on many levels–the retired CEO of the Exelon corporation, which operates many nuclear power plans, has said so on many occasions. Still, I expect MidAmerican to make another big push for the nuclear bill during the 2013 legislative session. I wouldn’t want anyone to get complacent about this issue, because if Republicans take control of the Iowa Senate and hold the Iowa House, a nuclear bill is more likely than not to pass. Branstad supports the concept and would certainly sign a bill like House File 561 if he had the chance.

That said, I believe supporters of advanced cost recovery legislation won’t find it easy to pass a nuclear bill in 2013. Whichever party controls the Iowa Senate is likely to have only a narrow majority. Republicans are becoming more aware that this approach is a raw deal for consumers. At a recent candidate forum in Iowa House district 36, all three GOP candidates strongly opposed letting MidAmerican charge ratepayers up front for possible future construction costs. None of them will be elected, because House district 36 is strongly Democratic, but their statements reflect a growing understanding in both parties that the nuclear bill is bad policy and bad politics.

Share any relevant thoughts in this thread.

MAY 14 UPDATE: Rod Boshart reports,

“We are evaluating future options, and at this time it’s premature to speak in detail about those plans,” said Tina Potthoff, media relations manager for MidAmerican Energy. She said the company likely will hold internal meetings to decide how to proceed.

MidAmerican has been exploring a new technology using small modular units, which officials said are cheaper than larger reactors but produce less energy. The utility has projected the cost of building the proposed nuclear facility at between $1 billion and $2 billion. […]

Gaining legislative support and Gov. Terry Branstad’s signature would be one step in a process that would require approval a proposed rate structure by the Iowa Utilities Board. MidAmerican also would be required to apply for federal and state permits for a new plant. Getting a federal license from the Nuclear Regulatory Commission likely would cost millions of dollars and take at least four years.

It’s worth noting that the Nuclear Regulatory Commission has not approved the modular reactor design MidAmerican wants to use in Iowa. The company would do better to focus on energy efficiency programs to ensure that power generation can meet demand. If a new power plant needs to be built in Iowa, natural gas would be a cheaper and faster alternative.

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