The Iowa Utilities Board earlier this month said that it has approved MidAmerican Energy Company’s estimated $922m Wind XII project that will allow the company to build up to 591 MW of new wind electric generation in Iowa.
The Dec. 4 order states that MidAmerican has satisfied conditions in Iowa Code and is therefore eligible for advance ratemaking principles associated with the project, the board said.
According to the order, MidAmerican in May filed an application for determination of ratemaking principles for the project.
The board said that in order to grant ratemaking principles, it must find that MidAmerican has demonstrated that it has considered Wind XII against other feasible sources of long-term supply and that Wind XII is reasonable as compared to those other sources. The board said that it finds that MidAmerican has satisfactorily demonstrated that Wind XII, as proposed, is reasonable when compared to other sources of long-term electric supply.
Noting that Mid-American evaluated wind generation against other reasonable generation sources that are currently available to utilities, the board said that the parties in the proceeding seem to agree that coal, based on such current factors as future regulatory uncertainty, is not a feasible long-term source of supply. Similarly, the board said, biomass and hydroelectric generation are not feasible based on the economics of those generation sources. That means that natural gas, wind, and solar PV are the only reasonable options available at this time for MidAmerican’s evaluation, the board said.
The board noted that it finds that MidAmerican has demonstrated that it has considered the reasonableness of Wind XII as compared to other feasible sources of long-term supply and that Wind XII is reasonable.
As part of its application for ratemaking principles, MidAmerican proposed nine ratemaking principles, the board said, adding that during the settlement process, MidAmerican and the other settling parties in the proceeding agreed to four of the principles without modification, amended the remaining five principles, and added a new ratemaking principle.
As noted in the order, MidAmerican; Office of Consumer Advocate; Google LLC and Facebook Inc., collectively referred to as the Tech Customers; and the Iowa Business Energy Coalition filed a stipulation and agreement – referred to as the settlement – in September.
The settlement contained 10 proposed principles, including one that calls for a cost cap of $1.560m per MW – including AFUDC – on a project-wide basis. The board added that that settlement principle also reads: “In the event that actual capital costs are lower than the projected capital costs, rate base shall consist of actual costs. In the event actual capital costs exceed the cost cap, MidAmerican shall be required to establish the prudence and reasonableness of such excess costs before such excess costs can be included in rates.”
In the settlement, the parties proposed a principle that notes: “The allowed return on the common equity portion of Wind XII, constructed pursuant to this ratemaking principles application, that is included in Iowa electric rate base, shall be 11.00%. An AFUDC rate that recognizes a return on common equity rate of 10.0% shall be applied to construction work in progress.”
The board added that MidAmerican’s original proposed principle is nearly identical to the settlement principle but would allow for a return on equity (ROE) of 11.25%.
Among other things, the board said that to the extent the settled principles deviate from the original proposed principles and those approved in Wind XII, the settling parties introduced sufficient evidence to indicate why a modification is appropriate. In particular, the board said, the settled ROE of 11.00% is within the range of values proposed by the parties in their initial testimony and is the same rate previously approved by the board in a number of similar wind generation cases.
Noting that it finds that the settlement and proposed principles are in the public interest, the board said that the settlement as a whole will help ensure that MidAmerican’s current and future customers will continue to enjoy adequate service and facilities at reasonable rates while reducing the company’s reliance on fossil fuels and exposure to fluctuating energy market prices.
By depreciating MidAmerican’s generation assets, the settlement would reduce the rates paid by customers once those assets are put into rate base in MidAmerican’s next general rate case, the board said.