For immediate release: Monday, July 29, 2002.
John R. Perkins, Consumer Advocate,
Consumer Advocate Seeks to Reduce Electric Rate by over $6.3 Million for Interstate Power Customers
Iowa's Office of Consumer Advocate filed a petition today asking the Iowa
Utilities Board to reduce electric rates for Interstate Power & Light
Company by $6.3 million annually instead of permitting an increase of
$82 million annually as requested by the company.
The Utilities Board regulates public utility rates in Iowa, and the Office
of Consumer Advocate represents the interests of utility customers and
the public before the Utilities Board. The OCA is a division of the Iowa
Department of Justice. Interstate Power & Light is the operating utility
subsidiary in Iowa of Alliant Energy Corporation.
Interstate filed its $82 million rate increase request on March 29, 2002. The
Utilities Board has scheduled a hearing to begin on October 22, 2002,
and a decision is expected in January, 2003.
The OCA asked the Utilities Board to determine that the $6.3 million reduction
be used to reduce Interstate's north and southeast zone rates. Because
of previous mergers of utilities that created the current Interstate Power
and Light Company, Interstate has four different rate zones in Iowa. Rates
applicable in the north and southeast zones are among the highest in the
state; they are significantly higher than rates Interstate charges customers
in its other rate zones, which are among the lowest in the state.
Interstate is expected to file another case on July 31, 2002, addressing how
its rates will be designed and apportioned among its different classes
and zones of customers. The Utilities Board will ultimately determine
how, or if, equalization of rates will occur among the zones.
Consumer Advocate John R. Perkins said that one factor accounting for the difference
between the OCA's request for a decrease and Interstate's request for
an increase is the level of profit the regulated utility should be permitted
to earn by the Utilities Board. OCA recommends Interstate be allowed to
earn a profit of 9.6 percent. Interstate seeks to earn a profit of 12.25
percent. According to Perkins, the additional profit sought by Interstate
over that recommended by the OCA would cost customers in Iowa an additional
$29.3 million per year.
A second major factor in the difference between the requests of OCA and
Interstate comes from whether a large amount of projected, but not yet
incurred, costs should be included in calculating the requested increase.
The OCA noted in its filing that the Utilities Board in the past has allowed
only "known, measurable and verifiable" costs to be included in determining
rates. Those generally are costs the utility already has incurred or that
are specifically known and will be incurred shortly.
Interstate has acknowledged in its own filing that it is asking the Utilities
Board to abandon that traditional approach and allow the company to collect
a number of projected costs that have not yet definitely been incurred
by the utility.
Some of the communities located in Interstate's north and southeast rate zones
are Cedar Rapids, Marshalltown, Marion, Boone, Keokuk, and Fort Madison.
Communities located in Interstate's other zones include Burlington, Ottumwa,
Newton, Grinnell, Creston, Dubuque, Clinton, and Mason City.
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