Warren Buffett's MidAmerican Energy Co. is again at odds with Iowa's consumer advocate and a trio of the nation's biggest technology companies over regulatory treatment of federal production tax credits — this time involving older turbines that the utility wants to refurbish. (The motion filed by the technology companies can be accessed by clicking the document icon on this page)
The dispute is set to go before the Iowa Utilities Board in a hearing today.
The case was initiated by MidAmerican's request for a declaratory order ensuring the utility retains PTCs associated with more than 1,000 megawatts of older wind turbines that it plans to repower.
Ordinarily, the PTCs associated with wind farms in the utility's rate base would benefit customers directly by flowing through a regulatory mechanism known as an energy adjustment clause. But MidAmerican said in its petition that it wants and needs to keep the PTCs for itself to make repowering more than 1,000 MW of older wind turbines economically feasible.
Repowering more than 700 of the 1.5-MW turbines that were originally placed in service between 2004 and 2008 involves replacing significant portions with new, more efficient parts, such as new, longer blades and gearboxes that can lead to increased production.
Doing so is another step toward the Des Moines-based utility's move to 100 percent renewable energy. So far, the company has installed more than 4,000 MW of wind generation, with an additional 2,000 MW of wind generation in development through its Wind XI project, approved last year.
The utility said the project would be done at no net cost to customers, who will reap hundreds of millions of dollars in benefits through reduced fuel and capital costs and revenue sharing, as well as economic and environmental benefits that go along with increased reliance on wind energy.
"Repowering presents a significant opportunity for a 'win-win-win' for MidAmerican's customers, the state of Iowa and MidAmerican," the company said in a filing. "There is a limited time for MidAmerican to pursue the investments that will allow it to continue to obtain PTCs from these turbines that will bring these benefits to the state."
But some of the very customers cited by MidAmerican — including technology giants Microsoft, Google and Facebook — argue the utility's request for a declaratory ruling be dismissed, or instead considered as part of a more exhaustive rate-change proceeding.
A filing that included the cost of the repowering project was filed with state regulators but redacted because the information was deemed confidential.
Besides taking exception to the procedural tack chosen by MidAmerican, the tech companies said the commission should decide the prudence of the proposed investment instead of doing it when the utility fields its next rate case, which will be at least a decade.
"MidAmerican's attempt, through the use of an inappropriate declaratory ruling proceeding, to short-circuit a decision on its proposed repowering project should be rejected," the tech companies said in a filing. "The board must thoroughly consider the proposal in a deliberative process to ensure that it arrives at the right decision."
The MidAmerican PTC dispute is the second heard by Iowa regulators this spring. In April, regulators held a hearing to decide how to treat costs associated with running utility turbines at night when energy prices are negative.
That case involves newer wind farms not yet part of the utility's rate base. For those projects, MidAmerican was allowed to retain PTC revenue.
In dispute is whether the utility should also be required to pay costs of running turbines when prices are negative, or if the company should be allowed to pass those costs to customers through the energy adjustment clause.
Today's hearing, meanwhile, is all about refurbishing older turbines that are no longer eligible to receive PTCs.
MidAmerican said the IRS allows wind farms to requalify for the PTC for an additional 10 years under the 80/20 rule — a rule that requires no more than 20 percent of the fair market value of the repowered turbine to be used equipment.
MidAmerican said the tower structure and foundations of the 700 turbines that it wants to repower would be left intact, while the nacelle and blades would be replaced.
If the company's request is approved by the board, the repowering project would begin later this year and continue through 2020.