Most of us rarely think about the power supply until we flip the switch and nothing happens. Or until we received the bill and it was much higher than we expected.
But changes are coming that affect the way we use electric power, from the rise of electric vehicles and renewable energy sources to the replacement of fossil fuels used in buildings. New expectations vis-à-vis the electricity grid have also emerged. Increasingly, customers want to see values like environmental justice and decarbonization reflected alongside historical expectations like reliability and affordability.
A group of Iowans are working to spark a discussion about how government regulations should adapt to respond to and manage these changes.
Iowa Business for Clean Energy launched in the fall of 2020 and is now beginning to make the case for overhauling Iowa’s regulatory structure for electric utilities.
At a workshop last week in Des Moines, Bob Rafferty, group executive director, pointed to differences in rates paid by Iowa commercial and residential customers of MidAmerican Energy and Alliant Energy as a reason to consider changes. regulations.
“If you’re in Alliant territory, whether you’re a commercial or residential customer, you’re paying more than 50% more than your on-the-road comparable competitors in MidAmerican territory,” he said. “And that’s going to be concerning, that clearly creates a competitive disadvantage.”
Currently in Iowa, the two investor-owned utilities generate most of the electricity they sell. The rates charged by utilities largely depend on their capital investment, what it costs them to supply energy to their customers, and how much energy they sell. It’s an oversimplification, workshop speakers said, but it’s essentially the same model that dates back to when the country was electrified and the incentives were to reach as many customers as possible.
This model can conflict with newer goals like energy efficiency, if that means selling less electricity and therefore earning less money. This may also conflict with the integration of private solar panels. The Iowa Legislature has dramatically reduced incentives for energy efficiency and solar power in recent years, despite the clear benefits of addressing climate change.
Read more: Iowa drops 13 spots in energy efficiency rankings
Another emerging conflict concerns the reception of electric vehicles. One of the founding members of Iowa Business for Clean Energy is Delia Moon-Meier, senior vice president of the Iowa 80 Group, owner of the Iowa 80 Truckstop in Walcott. His company wants a regulatory structure that can accommodate the resale of electricity, so that the truck stop and other service stations can make money from charging electric vehicles.
Performance-based regulation is changing the way utilities are paid
One of the proposed solutions presented at last week’s workshop was the idea of performance-based regulation. This regulatory model is currently in place in various forms in a dozen states, including Iowa’s neighbors Minnesota, Wisconsin and Illinois.
Output-based regulation could replace all or part of the current utility pricing structure with measures based on various types of output. Utilities might, for example, be able to make more money by hitting reliability and resilience targets, a particular issue as climate change spurs more frequent extreme weather events. Other goals may involve environmental performance, reducing their peak load, customer service or engagement, and more.
The idea is to allow utilities to make money even as they shrink their capital portfolio, for example by incorporating renewable energy sources owned by third parties.
What exactly that would look like in Iowa or how that state would get to this point remain important questions. In some states, public utility commissions led the discussion. In others, it was legislators or third-party interests.
Chaz Allen, executive director of the Iowa Utility Association which represents investor-owned utilities, said “caution” is a good word for how utilities view this discussion. He cautioned against moving too quickly in response to “political delays”.
“I believe this industry is central to decarbonization,” he said in an email.
While there are “lots of voices with well-meaning ideas, our industry just needs to make sure we bring renewable energy and policy change online at the speed of value for our customers to ensure a affordable, reliable and sustainable energy,” he said.
He also questioned whether performance-based regulation would do anything to address cost disparities between different utilities, which he attributed largely to differences between rural and urban territories.
Geri Huser, chair of the Iowa Utilities Board, was also cautious in how she approached the subject. I asked her if she saw any advantages in performance-based regulation over the current system. “I think it’s another way to work with utilities on a statewide energy independence plan,” she said. “That was an old fashioned way of not really answering your question,” she added.
Huser said the utility board is already engaged in discussions about integrated resources and cost allocation, as well as resource planning for greater resilience to extreme weather.
She said she doesn’t know if the public utility commission has the legal authority to pursue performance-based regulation, except perhaps if a utility asks for it in a rate case. Otherwise, there would have to be a law.
Sen. Eric Giddens, a Democrat from Cedar Falls, was the only current lawmaker at Thursday’s workshop, but caucus staff from both chambers also attended. “I think that’s going to be key to having bipartisan support for everything we do here in Iowa. I’m not sure yet, at this point, if he needs legislative action,” Giddens said.
He said lawmakers should agree on a direction the utility board could work on. “But that framework is definitely where we need to start,” he said.
Obviously, there are more questions than answers, as Rafferty acknowledged at the start of the workshop, and I’m barely scratching the surface here.
One of the workshop speakers was Neil Chatterjee, former chairman of the Federal Energy Regulatory Commission. He said that to do anything in our polarized society, Americans must take politics out of energy policy.
“We need to make energy policy boring again,” he said.
If Rafferty and his group can successfully engage the people of Iowa in this discussion, energy policy will be anything but boring for some time to come.
Managing Editor Kathie Obradovich has covered Iowa government and politics for more than 30 years, most recently as a political columnist and opinion editor for the Des Moines Register. This column published on May 2 on the Iowa Capital Dispatch website.