Welcome to the Department of Justice, Iowa Attorney General Tom Miller

For immediate release: Monday, July 29, 2002.

Contact: John R. Perkins, Consumer Advocate,
515-281-5984

Consumer Advocate Seeks to Reduce Electric Rate by over $6.3 Million for Interstate Power Customers

DES MOINES. 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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