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

RPU-2009-0003: MidAmerican Energy Company Advanced Ratemaking Principles

On March 25, 2009, MidAmerican Energy Company (MEC) requested an Iowa Utilities Board (IUB) review to establish advance ratemaking principles for up to 1,001 megawatts of proposed new wind generation to be built in Iowa between 2009 and 2012. At the same time, MEC and the Office of Consumer Advocate filed a negotiated advance ratemaking principles settlement agreement for the Board’s approval. The proposed project is called the Wind VII Iowa Project. Final determination of site locations for the project was not yet completed.

On April 9, 2009, the Board issued an order docketing the case. The Board established a procedural schedule in an order dated April 22, 2009. A hearing was held, beginning on August 10, 2009. Intervenors in the case, NextEra Energy Resources, LLC and Iberdrola Rewewable, Inc., claimed that awarding MEC advance ratemaking principles would give MEC a competitive advantage in the wholesale market for wind generation. As they are not rate-regulated utilities, NextEra and Iberdrola are not eligible to receive advance ratemaking principles under the Iowa statute. As a rate-regulated utility providing retail service, MEC is subject to limits on its return on equity; NextEra and Iberdrola, as independent power producers are not. MEC stated that the project would benefit its retail customers by helping it fulfill environmental compliance needs, energy needs, capacity needs, customer pricing needs, fuel diversity needs, economic development needs, and Iowa energy policy needs.

The determination of ratemaking principles has no immediate or direct impact on customer rates. The proposed wind generation project in this case must first be built and placed into service, and cost recovery sought in a future rate case. A rate-regulated utility such as MEC cannot change its rates until the completion of the future rate case.

The IUB has had authority to establish advance ratemaking principles for proposed Iowa-based generating facilities since 2001 when the Iowa Legislature approved a statute that encourages the development of new electric generation by rate-regulated utilities in the state. In addition to being set in advance, advance ratemaking principles will be effective for the regulated life of the project. Prior to 2001, utility companies were required to await decisions in rate cases brought to the IUB after new generation sources were actually in service before learning how regulators would treat certain aspects of their investment. Those rate treatments were subject to change over the life of the facility, but advance ratemaking principles are not.

Board orders issued and public documents filed in this case are available for review or download from the IUB Electronic Filing System Web site.