The need for Iowa to reform its approach to regulating our electric grid has never been more urgent.

A few weeks ago, we highlighted an academic report that gave Iowa a “D” for the competitiveness of its electric grid, while giving Illinois an “A”. After digging through the U.S. Energy Information Office’s data, we also discovered that in 2010, Iowa’s average commercial electric rate was over 10% lower than Illinois' average rate, but in 2020, Iowa’s average rate was 14.4% higher than Illinois, a 25% swing in just 10 short years!

WEST DES MOINES, Iowa – A University of Texas study that gave Iowa a “D” for its electric competition raises questions about the state’s need for more free market forces in its electric utility market, the executive director of the business group for clean energy said today.

“ While we typically don’t think of Illinois as a model, our neighbor to the east was awarded an “A” while Iowa received its ‘D,” said Bob Rafferty of Iowa Business for Clean Energy. “Iowa’s average commercial rates are 14.4% higher than Illinois’ rates[i], so that should really get our attention, too. It is a wake-up call for Iowa to start questioning the status quo.”

[i] https://www.eia.gov/electricity/monthly/. (see Electric Power Monthly, Previous Issues, February, 2021 Table 5.6.B for Year-To-Date State Averages through December 2020). This version contains full calendar year data for 2020. By using a full year’s data, seasonal fluctuations in pricing and weather that impacts monthly comparisons are avoided for more accurate comparisons.

While electric utility regulation may put you to sleep, the impact on your businesses’ future energy costs may end up keeping you up at night. Given its importance, let us explain in layperson terms, why reform is critical for Iowa’s future energy competitiveness.

While complicated, in a nutshell, investor-owned utilities are allowed to make profits based on how much capital they invest, not necessarily on how efficiently the system operates. While this structure was well suited for yesterday’s power grid, it fails to address the needs of the electric grid of the future.

Iowa’s farmers reap a large bounty from growing corn for ethanol and soybeans for biodiesel. And as the future market for liquid fuels shrinks and as electric vehicle adoption increases, some voices are suggesting support for electric cars is counter to Iowa’s interests.

Whether or not one likes electric cars – for Iowa’s economic future – it will be critical that Iowa embraces both biofuels and electric vehicles. One might ask: But aren’t those interests diametrically opposed?

What started as a complaint to the Iowa Utility Board in July 2018, culminated this past week with the Iowa Utility Board finalizing the rules on publicly accessible electric vehicle chargers. The Iowa Utility Board made clear that a utility cannot regulate EV charging services, including the ability to charge by the kWh, if the EV charger is supplied electricity by the incumbent electric utility provider. See the full order here.

A report issued this week by the U.S. Energy Information Administration (EIA), shows Iowa had the 24th highest electric commercial electric rate in the nation and the 18th highest residential rate for the 2020 calendar year.

The EIA is the statistical and analytical agency within the U.S. Department of Energy. The February 2021 Electric Power Monthly report contains the full 2020 average per kWh price for each state, which shows Iowa’s average kWh rate of 10.24 for commercial customers for the full 2020 calendar year. The report can be downloaded at the following link: https://www.eia.gov/electricity/monthly/. (see Table 5.6.B for Year-To-Date State Averages through December 2020).

Determining Iowa's energy future requires leadership from Iowa business and industry. Bob Rafferty is executive director of Iowa Business for Clean Energy and discussed his group's work with Jeff Stein of the Iowa Business Report via ZOOM on December 30, 2020. More can be found at iowacleanenergy.org.

Iowa’s tax credits for businesses and homeowners who install solar panels could disappear next year unless state lawmakers approve legislation extending them.House File 221 would extend state tax credits on 15% of project costs for 10 years. It also would clear a backlog of tax credit applications totaling approximately $9 million and double the annual credits available in the future, to $10 million per year. The tax credits in the bill would expire in 2031, lawmakers voted to extend them. As it is, the state credits expire next year.