Consumer Information Energy Telecommunications
Elizabeth S. Jacobs
Chair
Nick Wagner
Board Member
Sheila K. Tipton
Board Member

History of the Iowa Utilities Board

The Iowa Board of Railroad Commissioners, one of the oldest agencies in Iowa state government, was established in 1878. The three elected commissioners were charged with the duty to regulate railroad passenger and freight rates and operations. This oversight of the network that transported Iowans and their products was critical to pioneer farmers and businesses.

In 1911 the Iowa Legislature established the Office of Commerce Counsel, one of the nation’s first public defender’s offices, within the Railroad Commission. With the growing use of electricity, the Board was authorized to regulate the location of electric transmission lines in Iowa. A rate department was added at that time, followed by statistics and engineering departments a short time later. The agency began licensing grain warehouses in Iowa in 1921 and was authorized to regulate passenger and freight rates for intrastate motor truck transportation in 1923. Authority to regulate natural gas pipeline construction was granted in the early 1930s. Because of its expanded authority, the agency was renamed the Iowa State Commerce Commission in 1937.

After World War II ended, sentiment grew for centralized regulation of public utilities. The governing bodies of the cities and towns had jurisdiction over electric and gas rates and services. The major investor-owned electric and gas companies had to deal individually with more than 200 town and city councils for each rate change. There was no provision for the regulation of communication services at either the state or municipal level. By 1953, Iowa was one of only two states that lacked a public utility commission. In 1963 the Iowa Legislature added the regulation of the rates and service of public utility companies to the Commission’s responsibilities. Also in 1963 the commission terms were extended from two years to six years and the positions became appointed rather than elected.

The additional responsibility of regulating 923 public utilities (702 telephone companies) began to overshadow the Commission’s other duties. In 1975 the industry passed the $1 billion threshold in intrastate operating revenues and regulation of motor and rail transportation was transferred to the Iowa Department of Transportation. Exclusive service areas for electric utilities were initiated in 1976, as well as authority to issue certificates of public convenience, use, and necessity for constructing electric generating facilities.

As the price of energy rose in the late 1970s conservation and alternative sources of energy became important issues. In 1980 the Commission was authorized to engage in several energy-saving strategies and pilot projects.

After the Iowa Legislature adjourned in 1981 only five telephone companies remained under rate regulation. Those with fewer than 15,000 customers were required only to meet the agency’s service standards.

In 1983 the nation’s first telephone deregulation statute was included in an omnibus utility reform bill that also replaced the Office of Commerce Counsel.  A state Office of Consumer Advocate (OCA) was established to represent the public interest in rate cases and the Office of General Counsel was created to provide legal support to the Commission.

State government reorganization in 1986 renamed the Iowa State Commerce Commission and included the agency in an umbrella regulatory agency, the Department of Commerce. The new name, the Iowa Utilities Board (IUB), reflected the absence of the grain warehouse function that was transferred to the Department of Agriculture. Also that year, rate regulation ended for rural electric cooperatives and service regulation of municipal utilities was severely limited. The OCA was made a division of the Department of Justice.

In 1989 the Iowa Legislature abolished the practice of the IUB and the OCA utilizing shared technical staff. The Board was also given authority to oversee mergers and acquisitions of utility companies. The 1990 Iowa Legislature, at the Board’s urging, gave the Board authority to oversee gas and electric utilities’ energy efficiency activity.

The 1980s saw the beginning of a move away from regulation in the gas and electric industries.  In the mid-1980s the Federal Energy Regulatory Commission (FERC) began opening interstate natural gas pipelines to competitive gas suppliers. Congress fully deregulated sales of natural gas, but the interstate transportation of natural gas was still regulated by the FERC. As a result, gas could be obtained competitively at hundreds of delivery points in Iowa. Since the late 1980s, industrial customers in Iowa have been purchasing gas in the open competitive market, but small volume customers faced continued barriers. In August 2000 the Board required each rate-regulated natural gas utility to file draft tariffs to implement transportation to small volume end-users.

In April 2001 the Board implemented new rules establishing the criteria for certification of competitive natural gas providers. The rules allowed certified competitive natural gas providers to pool transportation service to Iowa small-volume business and residential customers for the first time. The large-volume competitive natural gas providers that served Iowa industrial customers previously continued providing service but became certified under the new rules.

The electric industry was also changing.  The Federal Energy Policy Act of 1992 (EPACT) permitted independent power producers to enter the wholesale power market where they could sell electric capacity and energy to utilities at unregulated market rates. EPACT also authorized the FERC to require electric utilities to open their transmission systems for wholesale transactions. The apparent success of competition in the wholesale electric market led to growing pressure to allow retail competition as well.  The Legislature considered electric competition proposals in 1998, 1999, and 2000 but nothing was enacted. In September 2000, after the California energy crisis, the Governor announced the formation of a task force to take a comprehensive look at Iowa’s energy needs.  Also in 2000 the Board initiated an inquiry into electric delivery reliability and an investigation into generation resource planning, which continued in 2001.  In December 2001 the IUB released a report entitled “Report on Electric Delivery Reliability Inquiry, A Staff Analysis, Docket No. NOI-2000-0004.”

In 2001 the Iowa Legislature adopted House File 577 to attract the development of electric power generating and transmission facilities in the state. The new legislation streamlined the statutory generation siting requirements and allowed advance ratemaking principles for the construction of certain generation plants built by rate-regulated utilities. It required the Board to establish ratemaking principles that will apply when new plant costs are included in electric rates. Utility companies were previously required to wait until new plants actually went on line before learning how regulators would treat their investment.

Telephone price regulation was authorized in 1995 along with laws encouraging the development of local telephone competition. The Federal Telecommunications Act of 1996 opened the local telecommunications market to competition and gave state commissions the authority to determine prices for the use of the telephone network.

With Executive Order Eight in 1999 the Governor asked all state agencies to review their rules for need, clarity, intent and statutory authority, cost, and fairness. In February 2000 the Board issued its plan for regulatory review. After receipt of public comments, staff teams developed recommended changes to the Board's rules. During 2001, the Board submitted its recommended rule changes to the Governor in its assessment report.

In 2002 the Board was given discretion to reduce the filing requirements to streamline petitions for extension of electric franchises.  Also in 2002 the state’s Interagency Missouri River Authority was established to represent Iowa interests regarding membership in the Missouri River Basin Association. The IUB was named a member agency. The interagency group is charged with promoting the management of the Missouri River in a manner that does not negatively impact landowners along the river or the state’s economy.

In 2003 the IUB became a founding member of the Organization of MISO States (OMS).  The OMS is a non-profit, self-governing organization of representatives from each state with regulatory jurisdiction over entities participating in the Midwest Independent Transmission System Operator, Inc. (MISO), a regional transmission organization as defined by the FERC. The purpose of the OMS is to coordinate regulatory oversight among the states, including recommendations to MISO, the MISO Board of Directors, the FERC, other relevant government entities, and state commissions as appropriate.

In 2004 and 2005 the Board deregulated the rates for local telephone service in a total of 40 Iowa exchanges where it made a finding of effective competition. The Board will continue to regulate service quality in these exchanges and monitor the markets. The Board initiated the rate deregulation proceeding after conducting a statewide local telecommunications competition survey, which indicated specific geographic areas or certain customer groups had a choice of service providers.

In 2005 legislation removed price controls from all local telephone service in Iowa but the most basic single line residential and business services of Iowa’s large incumbent local exchange carriers. Previously, these carriers had been fully price regulated. The Board continued to price regulate the incumbent carriers’ basic services during a projected three- to five-year phase-out period. A portion of the proceeds from any single line increases during the transition period must be used to install high-speed Internet service in rural areas. The law also enabled local exchange carriers to file complaints with the Board against other local exchange carriers they believe have engaged in anti-trust activities. The Board could order a local exchange carrier to adjust its retail rates and assess a civil penalty.

In 2005 Iowa enacted legislation creating two separate production tax credits for electricity generated by eligible renewable-energy facilities. The credits are subject to approval by the Board. Iowa Code Chapter 476C created a production tax credit of 1.5 cents per kilowatt-hour for electricity generated by and purchased from eligible wind and other renewable-energy facilities, including biomass and solar. Iowa Code Chapter 476B created a production tax credit of one cent per kilowatt-hour for electricity generated by and purchased from eligible wind-energy facilities. The Board adopted final rules on the facility eligibility process in Docket No. RMU-2005-0008. The tax credits are issued and tracked by the Iowa Department of Revenue.

In April 2006 the Board approved more uniform Interstate Power and Light Company (IPL) class rate structures and rate changes, moving closer to equalizing electric rates across IPL’s four electric service territories in Iowa. Rate disparities resulted from past mergers and acquisitions of utilities that had varying rate structures. In deciding the company’s previous rate case (Docket No. RPU-2004-0001), the Board established a flexible target for equalizing rates over a five-year period for residential and commercial customer classes and a three-year timeframe for large commercial and lighting customer classes.

In July 2006 the Board commenced a multi-layered energy efficiency initiative in Iowa. A component of this was the Iowa Weatherization Challenge in which the IUB works with local community organizations across Iowa to recruit volunteers and solicit donations to help weatherize homes for Iowa’s low-income families, elderly, and disabled individuals. The Board also began investigation and reassessment of various policies, rules, legislation, and utility energy efficiency programs as well as evaluation of the use of new and emerging technologies.

The energy efficiency push extended to the national level. In 2006 a National Action Plan for Energy Efficiency was unveiled. Iowa was instrumental in forming this national energy-saving plan under the leadership of the IUB Members. Its numerous recommendations elevated the importance of energy efficiency as part of the work of utility regulatory bodies. The recommendations build upon the best existing practices from successful efficiency programs to remove barriers that had traditionally limited utilities and customers from pursuing cost-effective energy efficiency resources.

Legislation passed in 2007 required that providers of cable or video service acquire a franchise either from the Board or a municipality.  The new statute and rules did not give the Board regulatory authority over cable service.

Pursuant to Iowa Code, on June 27, 2008, the Board issued a decision order finding that sufficient market forces existed throughout Iowa to constrain the price of single line flat-rated residential and business rates in general. The record also showed that competitive offerings from competitive local exchange carriers, wireless carriers, and cable providers were available in much of the state and most Iowa consumers had a choice of telecommunications service providers. Therefore, effective July 1, 2008, the Board no longer held retail rate jurisdiction over single line flat-rated residential and business service rates of local exchange telecommunications carriers in Iowa.

In January 2009 the IUB implemented its new Internet Electronic Filing System (EFS).  The new paperless filing process enables the public to view most case documents filed in Board proceedings from the EFS Website, http://efs.iowa.gov. This new system came after many months of preparation.  Working with a vendor, Board staff designed and tested the EFS and trained internal and external users in how to use the EFS. An EFS Help Desk was also established:

On January 18, 2011, the IUB and OCA moved into a new model energy efficiency office building located on the State Capitol Complex at the corner of East 14th Street and Court Avenue.  The building demonstrates cost saving, energy reduction, and environmentally friendly features and ideas.  Architects for the project were BNIM Architects of Des Moines.  The contractor was J. P. Cullen of Janesville, Wisconsin.  The State will seek the highest certification, LEED Platinum, from the U.S. Green Building Council. 

On April 28, 2011, a building open house ceremony and public tours were held. Governor Terry E. Branstad spoke at the event.  IUB Chair Rob Berntsen said it was a proud day in the history of the IUB and the OCA.  Iowa’s Consumer Advocate Mark Schuling said the building demonstrates the benefits of cost-effective energy efficiency programs.
 
The 44,460 square foot building was anticipated to use about 63 percent less energy than a typical office building of the same size, saving about $36,000 a year.  Geo-thermal heating and cooling technology would account for the largest share of the energy savings.  Other energy efficient features include super-efficient precast concrete wall panels with integrated edge-to-edge rigid insulation, daylight harvesting solar screens and a V-shaped design to make maximum use of daylight, lighting and occupancy sensors, special plug outlet controls, and operable windows for use on temperate days.   Roof-mounted solar energy panels were projected to provide about 12.5 percent of the total energy used. An energy information kiosk for use by visitors and employees was installed in the building’s entrance lobby in 2011. The kiosk provides updated energy efficiency facts as well as detailed solar generation and energy consumption data pertaining to the energy-saving State office building.

The IUB and OCA conducted, and will continue to conduct, many public tours focusing on the energy efficiency aspects of the office building.  Participants have included individuals from utilities, utility industry groups, colleges and universities, and other interested organizations.