How Was MidAmerican Energy Able To Go So Long Without Raising Rates?
MidAmerican Energy has not raised Iowa base electric rates since 1995. Currently, MidAmerican Energy’s retail electric rates are approximately 40 percent lower than the national average for investor-owned utilities. MidAmerican Energy has kept rates low through cost-control efforts. Revenue from selling energy into the wholesale market has helped MidAmerican Energy absorb increases in costs it could not mitigate, allowing rates to remain stable. In addition, during the rate stability period, MidAmerican Energy’s revenue-sharing agreement has considerably reduced the costs for new generation. Revenues from wholesale sales have decreased substantially in recent years, however, and that trend may continue.
What Prompted MidAmerican Energy to Request the Adjustment Clauses?
Several factors have caused MidAmerican Energy to evaluate its rates. During the more than 16 years of rate stability, MidAmerican Energy has made significant investments in environmental compliance, and the costs of compliance will continue to increase. At year-end 2010, the company’s environmental compliance costs had exceeded $425 million over the past decade in order to meet existing and expected U.S. Environmental Protection Agency regulations.
Several years ago, MidAmerican Energy entered into a long-term coal transportation contract, which has been of considerable benefit to customers. The contract expires at the end of 2012. Today’s market rates for transportation are significantly higher than what the company currently is paying. The cost of coal also has increased since 1995.
MidAmerican Energy has made substantial investments in generation assets. The company also absorbed the substantial costs that were incurred to protect facilities and address significant weather-related events, including the floods of 2008 and 2011.
The addition of significant wind generation resources has improved MidAmerican Energy’s balance among its generation resources and has effectively reduced its proportion of coal-fueled generating capacity from 70 percent in 2000 to 48 percent by year-end 2011; however, additional EPA regulations on coal-fueled generation are expected to be implemented.
When and by How Much Will Rates Go Up?
The new rates will go into effect on an interim basis in March 2012, subject to refund. The average annual increase in the electric portion of customers’ bills is expected to be approximately 3 to 5 percent in 2012, with an additional 2 to 3 percent increase expected in 2013. The adjustment clauses will not be displayed separately. They will be included in the energy charge on all customers’ bills. A portion of these adjustment clauses will also be included in the demand charge for some large industrial customers. On average, residential customers will pay approximately $2.33 more per month in 2012 and approximately $1.30 more per month in 2013.
What Will the Money Collected From the Rate Increase be Spent On?
MidAmerican Energy will only be able to recover costs specifically associated with environmental compliance and increased costs for coal and coal transportation. These costs will be capped at $38.7 million in 2012 and $76 million in 2013. MidAmerican Energy will be required to file an annual reconciliation with the Iowa Utilities Board identifying the costs included in the adjustment clauses.
What Is the Approval Process?
The Iowa Utilities Board
will complete a thorough review of MidAmerican Energy’s proposal to add the adjustment clauses. After a thorough investigation, the Iowa Utilities Board will determine whether the evidence supports MidAmerican Energy’s proposed new adjustment clauses, and if so, the amount of any increase, which could be different from what MidAmerican Energy requests.
Any change in the adjustment clause factors (cost per kWh) must be approved by the Iowa Utilities Board.
How Will I Be Notified of This Change?
A letter will be sent to every Iowa electric customer notifying them about the change and the dates of public meetings that will be held by the Iowa Utilities Board. Customers will receive the letter in February 2012, separate from their MidAmerican Energy bill.
The Iowa Utilities Board will hold six customer comment meetings throughout Iowa where the proposal will be explained and customers may provide their comments.
How Can I Offset the Cost?
MidAmerican Energy offers numerous energy efficiency programs for residential, commercial and industrial customers. Customers interested in reducing their energy usage should contact 800-894-9599. Energy efficiency specialists will provide information on the rebates customers may qualify for and the programs they may want to implement in their home or business to reduce energy usage. Customers also can find information about energy efficiency at www.midamericanenergy.com/ee