Reforming Iowa’s Grid: Why NOW Is the Right Time

Iowa’s antiquated approach to regulating its electric grid is already impacting many of Iowa’s communities and businesses.  Alliant’s average commercial rates are over 60% higher than the rates in MidAmerican Energy’s communities.

To reverse this troubling trend – Iowa needs to update its decades old regulatory approach for the realities of today.

How are electric utilities regulated today? While complicated, in a nutshell, investor-owned utilities are allowed to make profits based on how much they invest in capital improvements, 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.

The chart below displays how the grid is dramatically changing:

The most efficient future electric grid will leverage third-party generation and storage (i.e., not owned by utilities), the customers’ ability to control time-of-use and increasing energy efficiency.

Under the current regulatory approach, leveraging these resources, such as customer solar and storage, reduces the profits of the utilities. This creates a disincentive for a low-cost, clean energy grid. 

Having misaligned incentives for electric utilities to efficiently run the grid has huge future cost implications for Iowa businesses.

The key to avoid uncompetitive future electric rates is to change the utilities’ roles and incentive structure. What are the possibilities? Click Here