MidAmerican Energy Customers Could be Paying More Soon

By Lynn Campbell
Iowapolitics.com 

DES MOINES — A rate freeze has allowed 565,606 customers of MidAmerican Energy Co. to pay the same rate for electricity for more than 16 years, but two proposals on the table could soon change that. 

MidAmerican last week notified customers that they can expect to pay between 3 and 5 percent more per month beginning March 2, and an additional 2 to 3 percent next year. The increase is aimed at paying for an anticipated increase in the price of coal; as well as for the depreciation, operations and maintenance on $425 million of environmental upgrades. 

The proposal comes as MidAmerican also has a bill before the Legislature that would pave the way for the company to raise consumers’ rates upfront to build a nuclear power plant in Iowa. The Iowa Utilities Board estimates that under the legislation, rates would increase $7 a month, or 10 percent on an average bill of about $70. 

The two proposals have DeAnn Cline, 46, of Grimes, a mother of three, worried. 

“Just like any consumer, especially in today’s economy, you don’t want your rates to go up for anything, especially electricity which is something that you pretty much need these days,” Cline said. “We don’t wall want to go back to candlelight and oil lanterns.”

But Keith George, 50, of Sioux City, said he’d pay more for the construction of another nuclear power plant in Iowa. 

“I’m for a modest increase to support something like that, because we need it for the future,” George said. “At some point in time, natural gas is going to go up again so it’s going to increase our costs there, so we need to think now. It takes a long time to put a nuclear power plant online. If they start now, it’s going to take 10-15 years to get through all the red tape and a site picked. I think we need to be proactive on it.” 

MidAmerican’s electric rates have been frozen since 1995 as a result of agreements with the Office of Consumer Advocate, a state office that advocates on behalf of utility consumers and the public. Under “settlement agreements,” MidAmerican generates enough electricity for its customers, then sells energy to the wholesale market for a profit. Revenue from those sales are used to cover expenses that would otherwise would be covered by rate increases.

 “Customers have been lucky that their rates haven’t gone up. That’s very unusual across the country,” said Ron Polle, an attorney in the Iowa Office of Consumer Advocate. “The way the settlements have been worded, if MidAmerican’s return on equity falls below an established threshold, they are able to get out under the freeze and file a rate increase. That's what MidAmerican is asserting has happened.” 

MidAmerican Energy's average electric rates rank sixth lowest nationally. MidAmerican’s residential, commercial and industrial customers paid an average of about 6 cents a kilowatt hour in 2010, compared with nearly 8 cents in the Midwest region, and a national average of more than 10 cents according to the Energy Information Administration, an autonomous entity within the U.S. Department of Energy. 

Under the more immediate proposal, residential customers who pay an average of $73.41 a month would see their bills go up by $2.33 a month beginning in March, and another $1.30 a month in 2013. The rate increase is subject to approval by the Iowa Utilities Board, which has 10 months to make its decision.

But MidAmerican is allowed by state law to implement the rate increase in advance, and would be required to refund customers if the hike is rejected. Six public hearings will be held between Feb. 23 and March 13. Polle emphasized that the more immediate proposal is aimed at MidAmerican recovering costs, which is “completely independent” of any future decision to build a nuclear power plant. But he said both affect customers, whom he said are always concerned when their rates go up.

“If MidAmerican were to propose and get approved a nuclear power plant, that would obviously have an impact on rates, whenever that process occurs or takes place,” Polle said. “How much depends on what the expected costs are, etc. That would be on top of anything that would be implemented in this case.”

MidAmerican spokeswoman Tina Potthoff maintained that House File 561, the nuclear bill that the Iowa House approved last year and is now before the Senate Commerce Committee, does not automatically increase rates or lead to construction of a nuclear power plant. Those decisions would still be subject to approval by the Iowa Utilities Board.

But officials with AARP Iowa, a nonprofit advocacy group for seniors, said the intention of the bill is to raise rates to build a nuclear power plant. AARP members have so far made 3,578 calls to the Iowa Senate switchboard this year, in opposition to the bill.

Anthony Carroll, AARP Iowa’s associate state director for advocacy, said MidAmerican’s latest proposed rate increase is further proof that the nuclear bill shouldn’t pass.

“One of the biggest arguments stated over and over is that MidAmerican has not seen a rate increase in the last 15 years,” Carroll said. “Here’s an application that changes just that. The idea of that being a reason why to pass this unfair deal on to consumers is changing right here … This will be another layer on top of this cost-shifting legislation.”

Iowa Senate Majority Leader Mike Gronstal, D-Council Bluffs, gave the nuclear bill equal chances of passing and failing.

“I’d say it’s 50-50,” Gronstal said. “Clearly, the version the House passed has essentially no protection for consumers whatsoever. On the Senate side, we’re working on it. Whether we get enough that we’ve got a consensus to pass it, remains to be seen … We’re looking for ways to make sure consumers don’t end up holding the bag.”