Surplus of wind energy sparks utilities board fight

Iowa has begun to produce so much wind energy that a quarrel has broken out over who will get to sell the surplus.

MidAmerican Energy of Des Moines, Iowa's largest wind energy provider with 1,300 megawatts of wind capacity, has asked Iowa regulators to approve more than 1,000 megawatts of wind generation to be built at yet-undisclosed locations in the state.

But MidAmerican's largest rival in Iowa wind energy, NextEra Energy Resources of Jupiter, Fla., has objected in a filing with the Iowa Utilities Board.

MidAmerican wanted rate-making approval for the wind generation by May 29, it said, to take advantage of a surplus of inexpensive wind turbines. But it won't happen that fast - the utilities board set a public hearing for the proposal for June 22.

By law, the board must act on MidAmerican's request by January.

The dispute is over who would get to sell what is a growing - and potentially profitable - surplus of wind energy that Iowa is expected to produce and make available on regional transmission grids in coming decades.

Iowa's wind power now goes on the state grid. But long-term plans would run super-voltage interstate transmission lines through Iowa, to sell the surplus to Chicago and cities east.

Merchant generator NextEra cites competitive price

NextEra, owned by the parent company of Florida Power and Light, is a merchant generator that doesn't provide utility service to homes and businesses. It generates and sells electricity, primarily to Alliant Energy of Cedar Rapids.

NextEra has about 600 megawatts of generating capacity in Iowa, mostly in Cerro Gordo, Hancock, Osceola, Story and Winnebago counties, and wants to build more.

NextEra said in its petition to intervene in the MidAmerican proposal that Iowa already has plenty of wind power, much of which it can supply.

"We are filing an intervention in this case because we want MidAmerican's customers to have the best power at the best price, and we think we can provide it," said Steve Stengel, NextEra spokesman.

Robert Latham, a Cedar Rapids electricity consultant, said: "NextEra is a merchant generator, meaning it can't get a guaranteed rate of return for its investment from the (utilities board) the way MidAmerican can as an investor-owned utility. That puts NextEra at a disadvantage."

Latham said the dispute is the first instance in which a utility or merchant generator has stepped forward to challenge another wind farm proposal.

MidAmerican plans to benefit from lower costs of turbines

MidAmerican, owned by Warren Buffett's Berkshire Hathaway in Omaha, serves 770,000 Iowa customers in Davenport, Des Moines, Fort Dodge, Iowa City, Sioux City and Waterloo.

The company ranks No. 1 among investor-owned utilities in U.S. wind capacity, with 1,300 megawatts, or about half of Iowa's 2,700 megawatts of wind energy.

MidAmerican has conceded that Iowa doesn't immediately need more generation, wind or otherwise. The state ranks second nationally in wind generation, behind Texas. MidAmerican said it won't need new generation on its system until 2019.

The Des Moines utility bolsters its profits - and can thus promise no rate increases to its customers through 2013 - because it can sell the one-third of its electricity surplus to Alliant Energy and other utilities.

However, "Now is the time to consider building additional wind capacity," MidAmerican wrote in the filing.

"The current economic conditions and tight credit supplies may facilitate efforts to expand wind generation as long as MidAmerican has the mechanism in place to act quickly to take advantage of soft market conditions to obtain reasonably priced wind turbines."

It added that the recently enacted federal production tax credits would amount to $2,315 for each megawatt generated by new wind farms, which would enable MidAmerican to offset the capital costs of its new Walter Scott coal generating plant that it opened two years ago at Council Bluffs.

For that reason, MidAmerican wrote in the filing, it will agree to the same 12.2 percent allowable rate of return on equity that the utilities board set on its existing wind farms near Adair, Carroll, Blairsburg, Charles City, Pomeroy, Schaller, Walnut and Westside.

National, state support grows for transmission of energy

Another factor is the potential for a major interstate transmission line that would take the energy generated in the northern Great Plains from the Dakotas through Iowa and Minnesota to cities to the east.

At least one proposal, by ITC Holdings of Michigan, has won preliminary federal approval, and more proposals are expected.

Such a line has been blessed by President Barack Obama, who cited the need for such a facility in his Earth Day speech last month in Newton.

Iowa's bountiful wind has made it a likely supplier of electricity for this system. Gov. Chet Culver has urged a plan among Midwestern governors and federal electricity regulators to build expanded wind energy transmission lines.

MidAmerican had asked the utilities board for fast action on its proposal to "ensure (that) MidAmerican can take full advantage of economical opportunities to pursue wind generation as they arise during the remaining term of the current production tax credit."

The tax credit was extended for another two years by Congress at the request of the Obama administration as part of its economic stimulus package. The credit had expired at the end of 2008.

Its absence, along with the collapse of the equity and credit markets beginning late last year, had at least temporarily stanched the flow of wind energy projects in Iowa and elsewhere.

One result of the temporary hiatus in wind investment, MidAmerican wrote in its filing with the Iowa Utilities Board, is an ample supply of wind turbines.

"MidAmerican is proceeding with negotiations of certain contractual agreements in order to be in a position to take advantage of the softening of the turbine market and associated price reduction," MidAmerican said in its filing.