Utilities Competition Not Happening

    HARLAN – A Change.org petition signed by more than 600 individuals requesting electric utility competition in Harlan has no legal standing in Iowa, while gas utility competition is deemed unnecessary duplication and financially unfeasible, according to attorneys who addressed the Harlan City Council this week.
    While Harlan residents continue to reel from high energy purchase adjustments on their most recent utility bills due to February’s unprecedented extreme cold, local officials are vowing to work through the financial impact with residents in hopes that something like this weather event won’t ever repeat itself.
    “This is really a one-time type of event,” said Alex Cutchey, Director of Government Affairs, Iowa Association of Municipal Utilities (IAMU).  
    The extreme anomaly was a “once in a 100 year/85 year type of problem that we’ve never seen and we never even contemplated.”
    Cutchey and Steven Nadel, counsel with Ahlers & Cooney, Des Moines, joined Harlan Municipal Utilities Chief Executive Officer Ken Weber at the Tuesday, March 16 council meeting.
    They addressed questions about the weather event, energy purchase adjustments due to high gas and electric supply costs last month, and the petition requesting utilities competition in Harlan.

No Legal Impact
    The online petition requested that a company such as MidAmerican Energy be allowed to provide services in town as utility competition for the Harlan Municipal Utilities, and was in response to a history of what have been deemed higher than average utility bills, exacerbated recently by bills double and triple the norm due to last month’s unprecedented cold weather.
    Nadel said fundamentally, the critical point is that the petition has no legal impact or effectiveness whatsoever.
    “It is not a lawful process for a petition, nor does the Iowa Code provide for what that the petition is asking for,” Nadel said.  “There’s nothing about that that would have any legal impact on the utility or its operations.”
    He said for electric energy, Iowa has exclusive service territories developed back in the 1970s, which means there is only one electric utility operating in each territory.  “There is no competition within the territories,” he said.
    “Iowa does not provide for competition.”
    Benefits of this territorial system include no duplication of costly infrastructure, such as substations, distribution or transmission of power.
    Territories are under the jurisdiction of and regulated by the Iowa Utilities Board.
    So “the petition itself is not a lawful process,” explained Nadel.  “What it’s asking for is not allowed or in existence under Iowa law.”

Gas Utility
    As for competition for natural gas energy, it’s just not financially feasible, said Cutchey.  There isn’t the same exclusive service territory that exists with Iowa law for gas utilities, but practically speaking there’s never a duplication of that infrastructure because of the cost and the length of useful life.
    On the transmission side, there are only three lines that come out of Texas and serve the entire Midwest.
    “Transmission lines have to go through approval process,” Cutchey said.  “That also is very difficult and time consuming.
    “So it’s not like it’s something that you can specifically attract a transmission line into Harlan to provide an alternate source of natural gas supply.”

Polar Vortex
    Weber said from an overall view, HMU has traditionally provided utility credits due to favorable energy purchases for its ratepayers on a monthly basis.  
    For the last 11 years, customers have received credits, he said, because HMU has been able to buy gas cheaper than what’s spelled out in its long-term contracts.
    From February 12-17, however, spot gas prices skyrocketed due to demand and other unforeseeable occurrences, such as wellheads freezing down south.
    Unprecedented utility costs blanketed the entire Midwest.
    While utilities are handling the increased costs in different ways, eventually ratepayers, including customers of investor-owned utilities as well, will feel the effects, said Cutchey.  “All utilities are facing those costs,” he said.
    HMU decided to bite the bullet and pay its bills all at once, which amount to an additional $1.6-$1.7 million in unexpected increases.   HMU will recoup the costs from its ratepayers, but likely will do so over a longer period of time.
    Weber said they are working with ratepayers, offering no fees or service penalties for late payments.  And if customers call, they will work with them to spread out the effects of the purchase adjustments through June of this year.
    “You can’t anticipate wellheads freezing up,” Weber said.  “It was like a perfect storm of everything hitting at one time.  It was just an extreme event.  It’s a very broad impact.  It’s not just HMU.
    “A lot of municipal utilities are still dealing with how they’re going to pay for this, and haven’t even gotten to how they’re going to recover it yet.”
    Some relief could be on the way, which would be passed back to ratepayers, Weber said, in the form of credits or a rebate check.  Hearings are planned, and the governor and legislators at the state and federal levels have been contacted seeking financial relief and investigations.  (see accompanying article on front page)