AARP Response to Iowa Utilities Board Staff Memo Analysis of Amended HF 561 PDF Print E-mail
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Written by Ann Black   
Monday, 23 January 2012 16:21

Des Moines — A recently released Iowa Utilities Board staff memo critically analyzes a proposed amended version of House File 561, a bill that would allow utilities to raise customers’ rates up front for a possible Iowa nuclear power plant before it is built.  This memo confirms many of AARP’s and other ratepayer concerns and reasons for opposing the proposed legislation.

 

In the memo, the IUB staff notes the various ways an amended HF 561 not only fails to protect consumer interests, but that the proposed changes to Iowa law would actually create incentives for utilities to behave in a manner contrary to the public interest.

 

Even with the last minute amendment, the IUB staff writes (on page 3, section 3) HF 561 “would shift nearly all of the construction, licensing and permitting risk associated with one or more nuclear plants from the company to its customers.” The legislation does this by pre-approving spending and guaranteeing utilities can recover pre-approved prudent costs, “including a profit on capital investments.”

 

The memo also notes that “some of these provisions could create incentives for the company to engage in behavior that could be contrary to the public interest in certain situations.” Among those provisions is a section that would permit the full recovery of all pre-approved expenditures, including profits, even if the utility does not complete the project.

 

Continuing on page 3, the memo presents one example of “the way the bill shifts risk form the company to its customers and creates undesirable incentives.” For example, what happens if the utility company makes a multi-million dollar construction mistake a few years and $1 billion into the project?  The changes HF 561 makes to Iowa law would “effectively create an incentive for the utility to walk away from the plant” because the utility is already guaranteed recovery and profit on all spending up to that point.

 

“This memo supports AARP concerns about shifting the high cost and risks to build an estimated multi-billion plant onto ratepayers before it is built,” said AARP State Director Kent Sovern.  “Besides highlighting the ways this bill incentivizes behavior contrary to the public interest, the memo also details ways this legislation would tie the hands of the Utility Board from protecting and advancing the public interest.”

 

Sovern also praised the Iowa Senate, which did not pass HF 561 last year. “The Senate demonstrated its leadership and its concern for consumers in its refusal last year to pass this legislation. This memo,” Sovern said, “confirms many of the ways this legislation is a raw deal for Iowa consumers.”

 

AARP is concerned about keeping utility rates affordable and accessible, which is particularly an issue for aging Iowans.  November 2011 data shows that despite the fact Iowa had a relatively mild winter, near record numbers of Iowans were still behind on their utility bills. Iowans can make their voices heard and contact their lawmakers on this issue by calling a statewide toll-free connection to the State Senate at 1-800-480-4075, or on line at www.action.aarp.org/ia.
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