Iowa green lights MidAmerican’s 1,050-MW wind expansion

The Iowa Utilities Board (IUB) has given a MidAmerican Energy Holdings (MEH) subsidiary the green light to develop up to 1,050 MW of additional wind power in the state by the end of 2015.

The IUB issued an order approving the MidAmerican plans Aug. 9. MidAmerican had asked sought IUB approval by Sept. 1 so that it could take advantage of current economic opportunities for wind turbines.

The company also wants to get the projects into construction by the end of the year in order to take advantage of construction tax credits. The IUB’s Aug. 9 order comes on the heels of a June settlement between the company and Iowa’s Consumer Advocate.

That settlement addressed issues such as the return on equity (ROE) and the return allowed on the allowance for funds used during construction (AFUDC) for MidAmerican Energy.

MidAmerican plans to develop the wind sites in Grundy, Madison, Marshall, O’Brien and Webster counties in Iowa. Construction is expected to begin in September 2013, and all projects are planned for completion prior to the end of 2015, the company said Aug. 12.

IUB sets out financial conditions

The settlement agreement provides for an ROE of 11.625%. In addition, the settlement agreement specifies an ROE of 10% for use in calculating the AFUDC rate. MidAmerican did not address this in its initial filing, but Consumer Advocate advocated for a separate AFUDC rate in its pre-filed testimony.

On May 8, 2013, MidAmerican Energy announced its plans to add up to 1,050 MW of new wind generation, consisting of up to 656 new wind turbines, in Iowa.

The company actually made its first big filing with the IUB on the wind project in May 2010. MidAmerican calls the project Wind VIII.

Landowner payments totaling $3.2m per year also are expected as a result of the expansion. MidAmerican said the expansion should help stabilize electric rates over the long term by providing a rate reduction totaling $10m per year by 2017, commencing with a $3.3m reduction in 2015.

The rate reduction will begin after MidAmerican Energy installs the first 350 MW of generation capacity. During construction, approximately 460 temporary jobs will be generated, and nearly 50 new permanent jobs will be added when the expansion is complete.

The company began building wind projects in 2004 and, to date, has installed 1,267 wind turbines in Iowa, making MidAmerican Energy the largest rate-regulated utility owner of wind generation in the country, The electric generation capability for MidAmerican Energy will comprise approximately 39% wind, 33% coal, 18% natural gas, 6% nuclear and 4% other by July 2016. The wind expansion will have no impact on the company’s current Iowa rate case, the company said.

MidAmerican demonstrated that Wind VIII was part of its continuing strategy to reduce its carbon footprint and would provide a partial offset to reduced energy production associated with the anticipated retirement of 540 MW of existing generation due to Environmental Protection Agency regulations.

The cost cap for Wind VIII is $1.825m per MW (including AFUDC) for completed sites. If actual capital costs of any given Wind VIII site are lower, the amount included in rate base will be equal to actual capital costs. If actual costs exceed the cap, MidAmerican will be required to establish the prudence and reasonableness of such excess costs before they can be included in rates.

MidAmerican has said that 1,050 MW is the maximum that can be built while still meeting PTC guidelines.

The wind case is IUB DOCKET NO. RPU-2013-0003.

MidAmerican is part of the Berkshire Hathaway (NYSE:BRK-A) corporate family.

 

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.