Alliant's rate increase request riles customers

For Alliant Energy Vice President Tom Aller, the defense of his company's request for an 11.7 percent residential rate increase - on top of a 7 percent increase last year - would be tough enough.

But Aller, the top executive of Alliant subsidiary Interstate Power, also has to explain why his customers will pay as much as 50 percent more for power than fellow Iowans who are MidAmerican customers if the latest rate increase is approved by the Iowa Utilities Board.

"I suppose we'll have to live with the comparison with MidAmerican in the forseeable future," Aller said wearily during a public hearing Tuesday night at Newton High School, where he was peppered with questions about the rate disparity.

The next night in Osceola, business owner Bill Riesinger said to Aller: "Here we are, just 42 miles from Des Moines, and we'll pay 50 percent more for power. This is unbelievable."

Bill Trickey, executive director of the Clarke County Development Corp., noted that the county has a jobless rate of 9 percent. "For some people here, it's a question of paying the utility bill or buying shoes or food."

Even Gov. Chet Culver has asked the MidAmerican question. He wrote a letter to Aller last month asking Alliant to suspend a temporary 10 percent rate increase on customers while it awaits regulatory approval of a permanent increase.

Aller and Alliant turned down the request by Culver, who has no direct statutory authority over electric rates.

If the utilities board approves the rate increase, Alliant's residential rates will average 12.6 cents per kilowatt hour for customers in Cedar Rapids, Dubuque, Keokuk, Marshalltown, Mason City, Ottumwa, Newton and Osceola.

MidAmerican's customers in Des Moines, Davenport, Iowa City, Waterloo, Fort Dodge, Sioux City and Council Bluffs will pay 8.24 cents per kilowatt hour through the end of 2013 under an agreement MidAmerican has made with the board.

At Osceola, Aller said: "MidAm is a fine company. But they're energy-long. They have more energy to sell in the wholesale markets. We are energy-short, because of the nature of our predecessor companies. Our costs are higher and our rates are higher. We don't deny it."

Under Warren Buffett's Berkshire Hathaway of Omaha, MidAmerican aggressively added 540 megawatts of generation at Pleasant Hill in 2004 and 790 megawatts in Council Bluffs, as well as 1,300 megawatts of wind power mostly in western Iowa.

MidAmerican last year won approval for an additional 1,000 megawatts of wind generation after admitting to the utilities board that it doesn't need the power.

Much of MidAmerican's extra juice is sold to Alliant, which typically is about 30 percent short of power to meet its customer needs, particularly in industry-heavy eastern Iowa.

Alliant also must buy power from the Duane Arnold Nuclear Plant at Palo, which it sold to what is now NextEra Energy of Florida in 2004.

On March 10 Alliant asked for the 11.7 percent rate increase and then imposed a temporary 10 percent increase that will stand until the utilities board can hold its public hearing in September and decide by January.

The utility said it needs the rate increase to pay for its new 200-megawatt wind farm in Franklin County (Alliant's only company-owned wind facility) as well as environmental improvements to its big generator at Lansing in Allamakee County.

Alliant's rates have increased steadily beginning in 2002, three years after Alliant, of Madison, Wis., merged the old Interstate Power, Iowa Electric Co. and Iowa Southern Utilities.

That merger created a utility that served more than 600 of Iowa's 950 communities, many of them under 1,000 population. At the Newton hearing, Aller noted that "MidAmerican has a more concentrated, urban service territory. That makes their service more cost-effective."

Alliant tried to catch up with its generation shortage with a 550-megawatt natural gas-fired generator at Mason City, opened in 2004. Some of the money for that new plant came from the 2004 sale of the company's Duane Arnold nuclear power plant to the Florida company for $373 millon.

Alliant also sold its transmission system to ITC Holdings for $750 million in 2007.

One of the ideas behind the sales of those assets was to generate cash for a new 600-megawatt generator at Marshalltown, which would give Alliant much-needed generation.

But the Marshalltown plant has been scuttled, at least for the time being, after the utilities board last year declined to give Alliant what the utility considered a sufficient allowable rate of return on customer rates.

Alliant, meanwhile, has endured rising costs for wholesale power and a 60 percent increase in transmission fees charged by ITC Holdings to cover system upgrades.

"We were told the sale of the transmission lines would keep transmission costs under control, and now they've gone up," said Ron Polle, an attorney with the Iowa Office of Consumer Advocate, which opposed the sales of the Duane Arnold plant and the transmission system.

Polle said Alliant has asked for automatic rate adjustments to cover further transmission charges from ITC.

"That tells us Alliant thinks there'll be more transmission charge increases, and we're worried about it," said Polle. The consumer advocate will release its stand on the increase in July.