Wind turbines along west-bound Interstate 80 on March 29, 2025. (Photo by Cami Koons/Iowa Capital Dispatch)
A slew of business organizations, as well as AARP and several former members of the Iowa Utilities Commission, are opposing an energy bill proposed by the governor, because they say it would negatively affect Iowa ratepayers.
In addition to granting existing utilities the right of first refusal to new transmission projects, House File 834 and Senate File 585 expand the projects that can pursue ratemaking principles and set rules for utility resource planning.
Opponents argue these elements of the bills would give big utilities a “carte-blanche” to add more capital investments in the state regardless of impact to ratepaying Iowans.
Utility companies MidAmerican Energy and Alliant Energy are in favor of the bill and disagreed with the assertions that it would not benefit ratepayers.
“The policies in the bill allow us to deliver on our promise to provide safe, reliable and affordable energy when our customers need it,” a spokesperson for MidAmerican said in a statement.
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Five former members of the Iowa Utilities Commission, or the Iowa Utilities Board as it was formerly titled, penned a letter to lawmakers and urged them to pause the current legislation.
The letter said the bill has potential to “shift the risk/benefit ratemaking balance away from ratepayers and towards investors.”
Ratemaking
In the early 2000s, Iowa authorized ratemaking principles to account for the added risk of investments into alternative energy sources, like wind and solar, which were new at the time. Under advance ratemaking principles, the IUC pre-authorizes the costs that can be recovered from eligible facilities to address uncertainty from rate-regulated utilities towards certain generation facilities.
These principles, according to the letter from former IUC members, “freed” regulators from traditional ratemaking principles and granted them “premium” returns on equity at levels that ranged between 1% to 2% above the national average.
The bill would expand the projects eligible for these ratemaking principles with the intent of attracting energy storage and nuclear electric power generation facilities in the state.
“With these changes, Iowa ratepayers could be paying some of the highest (return on equities) in the country for another round of very large utility investments,” the letter read.
The former IUC members cited a report completed by an outside firm in 2023, per requests of the Iowa Legislature, to review Iowa utility ratemaking laws and procedures.
The study found that rate-regulated utilities can receive advanced ratemaking approval with “relative ease” and that the IUC had limited ability to “determine whether an asset would truly benefit the electric system and the ratepayers that pay for it.”
It also said precedent around advanced ratemaking “facilitates infrastructure build-up without thorough assessment by the IU(C)”
The former IUC members said they “commend legislators for taking ratemaking reform seriously” but they recommend “pausing the current legislation” or amending the bill, to better address the issue in a way that “protects ratepayers.”
Geoff Greenwood, media relations manager for MidAmerican, said the letter “ignores” that the returns can “only be approved if they are found to be in the public’s interest.”
“MidAmerican’s track record over the past two decades proves that the policies in the bill allow us to deliver on our promise to provide safe, reliable and affordable energy when our customers need it,” Greenwood said in a statement.
He said returns on equity are approved “after a robust process” in the IUC with input from the Office of the Consumer Advocate and customers. Greenwoods said the returns are “not ‘premium’” because they “reflect the cost and risk of long-term investments” as they are applied to the 30- to 40-year lifespan of a facility.
Latest figures from MidAmerican point to average utility rates in Iowa that are 44% below the national average.
“The use of ‘non-traditional’ advance ratemaking principles is exactly what has made Iowa exceptional and resulted in some of the lowest electricity rates in the country,” Greenwood said.
He said MidAmerican additionally uses a method of revenue sharing that allows the company to use revenue, beyond a certain level of return, to “pay off company generating facilities so that customers won’t bear those costs in the future.”
“This customer-first mechanism incentivizes MidAmerican to better manage its operations and, when that happens, customers benefit,” Greenwood said in the statement.
The bill would also remove the requirement that projects are a baseload electric power generating facility, or one that essentially operates at all times, and lowers the generating capacity of the facility from at least 300 megawatts to 40 megawatts.
Bob Rafferty, with Iowa Businesses for Clean Energy which is one of the groups opposed to the bill, said these changes would allow companies to seek higher ratemaking principles on projects like gas peaker plants.
Per MidAmerican documents, a newly proposed $600 million peaker plant project would operate when demand is high, or peaking, and is expected to operate less than 10% of the year.
A fact sheet on the plants say they are a “key addition” to the company’s “all-of-the-above generation strategy” to meet the expected increased demand of the next 20 years.
But Rafferty said utility companies have an incentive to build more capital assets, like generating stations and transmission lines, because they can profit from them.
He said it’s “important” to make sure the system doesn’t allow a company to determine how many capital assets they need to build, as he alleges the bill would do.
Resource planning
Opponents are also worried about a line in the bill that says utilities should submit resource plans to the IUC that “reflect the circumstances and management judgment of an electric utility.” Rafferty said this means an investor-owned utility would have to create its resource plans in line with what would benefit its shareholders, rather than ratepayers.
Iowa is currently one of a handful of states that does not require an integrated resource plan, defined by Midwest Energy Efficiency Alliance as an examination of energy supply, demand and potential risks to meeting demand at a reasonable cost.
Gov. Kim Reynolds gave her 2025 Condition of the State Address at the Iowa State Capitol in Des Moines Jan. 14, 2025. (Photo by Robin Opsahl/Iowa Capital Dispatch)
Gov. Kim Reynolds’ energy plan for the state, on which the bill is based, notes the need for integrated resource planning, or IRP, to comprehensively look at what energy sources will be needed for further growth in the state.
Current law requires utilities to submit energy efficiency plans every five years, with five- or 20-year energy needs forecasts.
Rafferty said when a utility proposes an investment be considered for ratemaking principles, the utilities commission doesn’t get the “big picture” of the project’s impact on the state without an IRP.
“What the IRP should do is require it to be in the ratepayers’ best interest, and the Iowa Utility Commission needs to be empowered to make sure that that is, in fact, the case,” he said.
ROE Letter 4-24-25
Former members of the Iowa Utilities Commission, Richard Lozier, Jr., Geri Huser, Sheila Tipton, Darrell Hanson and John Norris wrote a letter to legislators opposing the bill.
Under the bill, the Iowa Utilities Commission may make recommendations to the utilities on the resource plan, and the company must “make a good faith effort” to inform and include suggestions from the commissioners, consumer advocate and stakeholders.
“The legislation, as it’s currently constructed … would give the utilities a carte blanche to make any investment that they want and to earn a premium return on equity,” Rafferty said.
Rafferty as part of Iowa Businesses for Clean Energy, has banded with lobbyists from Iowa Business Energy Coalition, AARP, Iowa Economic Alliance, National Federation of Independent Business, Iowa Retail Federation and LSPower in opposition of the bill and to suggest lawmakers either “fix it or forget it.”
An amendment suggested by the bill opponents would make it so that facilities outlined in resource plans are “in customers’ best interests.”
The proposed amendment would also allow the IUC to approve, reject or modify a resource plan and would greatly expand the ability of stakeholders to participate and weigh in on the plans.
The bill, as is, stipulates a resource plan should “consider all reasonable resources” and should include “adequate, cost-effective, and reliable energy service considering costs, fuel diversity, and probable future demand for energy.”
Rafferty said legislators need to think of utility rates like they think about taxes for Iowans.
“Their vote will determine whether taxes go up, or taxes don’t go up,” he said.
A spokesperson from Alliant Energy said the bill will “strengthen and help grow Iowa communities to meet the state’s future energy needs.”
“We commend Governor Reynolds for leading on energy policy that promotes an all-the-above energy strategy, enhances customer transparency and participation for generation planning and is focused on driving economic development in this state,” the spokesperson said in an email.
Greenwood with MidAmerican said the bill is important in updating Iowa’s policies that “have been effective for customers for decades” and will keep the state from “falling behind other states.”
“Simply put, Iowa’s energy policy – as it is currently as well as the bill’s proposed updates – works for Iowans,” Greenwood said.
Lawmakers noted during House hearings in early February the bill would have some amendments before it would be ready for floor debate. As legislators close out the 110th day of session, the bill remains stuck in a Senate appropriations committee and a House subcommittee.
House Speaker Pat Grassley said Thursday to reporters that the caucus is focusing on the budget before “taking up significant pieces of policy.” When asked specifically about ROFR and the energy bill as a whole, the Republican leader said “it’s still pretty divided” among representatives.
