On Wednesday the Iowa Utilities Board delivered a long-awaited ruling on "ratemaking principles" for the coal-fired power plant that Interstate Power and Light (a subsidiary of Alliant Energy) wants to build near Marshalltown. The ratemaking principles determine how much of a return the investor-owned utility can make on its investment. A higher return for the utility means the company can pass more of the cost of building a new plant onto customers.
The Iowa Utilities Board's decision was well below what Alliant requested and not far above what the Iowa Consumer Advocate's Office was seeking. The Cedar Rapids Gazette quoted an energy industry analyst:
"We expect LNT (Alliant Energy) will not accept the ratemaking principles as approved by the Iowa Utilities Board, instead allowing the proposal to die," said David Parker of Robert W. Baird in Milwaukee. He said Alliant will probably look instead to building more wind and natural-gas electric turbines.
At Century of the Common Iowan, noneed4thneed links to an article from the Marshalltown Times-Republican that similarly suggested the future of the project is in doubt.
Alliant's official statement left options open but made clear that the company was not happy with the ratemaking ruling. Excerpt:
In its decision, the IUB established a return on equity of 10.1 percent and a cost cap of $2816.00 per kilowatt, excluding AFUDC. IPL had requested a return on equity of 12.55 percent and a cost cap of $3483.00 per kilowatt, excluding AFUDC. IPL has proposed to own 350 megawatts of the facility's output, with the remaining output owned by other partners or included in purchased power agreements.
"We will need to review the IUB's written order to determine our next steps," states Tom Aller, president-IPL. "However, the conditions placed by the IUB on the proposed hybrid power plant present a number of challenges in today's financial climate, and we are disappointed that this decision seemingly does not take that reality into account. We will continue to work with our partners to determine how today's decision will impact our respective companies' long-term generation plans. IPL remains committed to pursuing safe, reliable, environmentally responsible and cost effective energy supply options to meet Iowa's future energy needs."
I would not be surprised if Alliant follows the lead of LS Power, which opted last month not to pursue a proposed coal-fired power plant near Waterloo. Alliant's subsidiary in Wisconsin may ask state regulators to allow an emergency rate hike because the economic slump has reduced demand for electricity:
Utility executives said the increase would be needed to offset a dramatic decline in power sales because of the recession.
With the closing of the Janesville General Motors plant and other factory cutbacks, the utility is forecasting power sales to drop 6% this year.
"It is understandable that our customers find it frustrating that the economic hardships many of them are experiencing could in turn compel us to increase their electric bills," said Patricia Kampling, the utility's chief financial officer, during a conference call Thursday.
Think about that for a minute. All along Alliant and their boosters in Marshalltown have been telling us that a new coal-fired power plant is needed to meet increased electricity needs. But future demand is almost surely going to be below what they have projected.
We could reduce our baseload needs further with an aggressive energy efficiency policy.
While several analysts interpreted Wednesday's ratemaking ruling as bad news for Alliant, it's worth noting that Plains Justice had a different take:
"The Iowa Utilities Board has missed an important opportunity to protect our state's economy and shield Iowa consumers from a significant electricity rate increase," said Carrie La Seur, President of Plains Justice.
"New coal power plant proposals are being canceled across the country because they cost too much and pose too many financial risks. The IUB has really let Iowans down by opting for an expensive, polluting coal plant instead of the available cheaper alternative of aggressive energy efficiency programs," she added.
I put the full text of the Plains Justice release after the jump.
On a related note, Plains Justice passed along this news via e-mail a few days ago:
Last week, the Iowa Utilities Board (IUB) denied a petition to re-open the generating certificate proceedings for the proposed Marshalltown coal plant. The generating certificate grants permission for the power plant to be built.
A petition for re-hearing had been filed by the Iowa Office of Consumer Advocate and joined by Plains Justice on behalf of Community Energy Solutions, Iowa Environmental Council, Iowa Farmers Union, Iowa Physicians for Social Responsibility, and Iowa Renewable Energy Association (the Coalition). Now that the petition has been denied, the IUB's decision to grant the generating certificate can be appealed in state court although it is not yet known whether anyone will appeal.
A lawsuit would only add to the delay and expense of building this power plant.
Meanwhile, the Iowa Department of Natural Resources is expected to issue a draft air permit for the Marshalltown plant very soon. Opponents of this 50-year investment in the wrong direction on energy will want to make their voices heard during the public comment period on that permit. Coal-fired power plants are a major source of fine-particulate matter pollution, which is linked to various respiratory illnesses.