Under new Iowa law, MidAmerican proposes to cut efficiency spending by 60%

Source: By Robert Walton, Utility Dive • Posted: Wednesday, September 12, 2018

  • Proposals filed by Iowa’s largest investor-owned utilities represent a significant cut in their investment in energy efficiency, a shift authorized by lawmakers this summer when they passed Senate File 2311, capping utility efficiency spending at 2% of retail revenues.
  • Stakeholders are now reviewing the proposals and are developing comments, due soon to the Iowa Utilities Board (IUB). Despite the limits imposed by the new law, efficiency advocates maintain the investor-owned utilities could have done more in their proposals.
  • MidAmerican Energy customers could see the biggest change. The utility says they will save $84 million as a result of the efficiency cap and could see annual bill decreases of more than $80 for a customer with both gas and electric service.

Iowa customers of MidAmerican Energy and Alliant Energy could see their monthly bills drop next year, and the state’s Republicans have made a bet that some of those savings will go towards energy efficiency projects in the home.

The Senate vote on SF 2311 was along party lines, with Republicans arguing customers would keep more of their money and make the best spending decisions for themselves. Efficiency advocates called the decision a “huge step backward” for a state that has been an efficiency leader in the region.

“Iowa’s longstanding position as an energy efficiency leader in the Midwest has come to an end,” Martin Kushler, senior fellow at the American Council for an Energy-Efficient Economy (ACEEE), wrote earlier this year.

Iowa tied for 19th place in ACEEE’s 2017 State Energy Efficiency Scorecard. “The state’s utilities continue to achieve electric and gas savings well above the national average, thanks to strong efficiency programs and clear energy-savings targets,” the group wrote in an entry that will likely change within a few weeks.

ACEEE’s 2017 and 2016 scorecards were issued in September during the same year, making a 2018 scorecard imminent.

Intervenor testimony is due later this week, and MidAmerican officials say they have heard the criticism of its program cuts. The budget is in line with state law, they argue, and will reduce bills while still offering a robust portfolio of more than a dozen programs.

“We feel like this is a robust plan,” MidAmerican director of corporate communications, Tina Hoffman, told Utility Dive. “We have 14 programs designed to achieve significant energy savings.”

But the new efficiency proposal will be a significant change. The 2019 proposed efficiency budget is $48.7 million, versus about $130 million in 2018 — a reduction of more than 60%. The utility was spending about 7% of retail revenues on efficiency before the 2% cap.

Matt Ohloff, senior campaign organizer for Iowa Citizens for Community Improvement, told Utility Dive that his organization had pressed the utilities to include a Pay As You Save (PAYS) financing option for energy efficiency. PAYS is a voluntary on-bill tariff that funds efficiency upgrades through immediate savings and abandons the debt financing model.

Hoffman said nothing like that is in the current or proposed plans, but in the past, MidAmerican has worked to offer alternative methods of paying for efficiency upgrades, including partnering with third parties to provide financing to customers.

MidAmerican’s lack of interest in a PAYS program does not surprise Ohloff, however. “We’re still advocating for them to include PAYS in their plans,” he said. “We see the IOU’s largely as hostile to robust and effective energy efficiency programs: they are a for-profit monopoly utility, and we see there is a conflict of interests.”

MidAmerican’s proposed efficiency programs include online home energy assessments, incentives to replace older HVAC equipment, appliance recycling and rebates on smart thermostats. Retail lighting and residential new construction programs got the axe.

The IUB will make a decision on MidAmerican’s plan by March 31, 2019.

Alliant Energy has also filed an updated efficiency proposal, but electric customers are unlikely to see such dramatic changes. Most of Alliant’s cuts will come on the natural gas side, Corridor Business Journal reports. The utility was also not spending as much as MidAmerican on efficiency — only about 3% of retail revenues.

Intervenor testimony in Alliant’s case is due to the IUB in early October.