HomeMy WebLinkAbout2002-04-10 Correspondence Distributed by Council Member
Wilburn
Electric and Natural Gas Franchise Considerations [Presented at 9/24 Work Session] -
9/20/01 Info Packet
Latham & Associates, Inc.
Bob Latham & Lewis Irvin
319-365-6488
e-mail: Lathamrj@aol.com
e-mail: ervinLR@worldnet.att.net
MidAmerican Energy Power Point/Franchise Information [Presented at 11/26 Work Session]
- 11/20/01 Info Packet
Terry Smith
Mark Hewett - VP of Energy Trading
Greg Schaefer - Rates Department
Jim Wilson - Regulatory Relations
319-341-4466
Public Power Initiative [Presented at 12/10/01 Work Session] - 12/6/01 Info Packet
Public Power Initiative for Iowa City (PPI-lC) City of Ames
Co-Chairs Electric Services Director
Carol Spaziani & Saul Mekies Merlin C, Hove
e-mail: cspaz@inav.net 515-239-5171 (Office)
319-887-3617 515-296-1696 (Home)
319-379-0331 e-mail: mhove@city.ames.ua.us
Iowa Association of Municipal Utilities Jim Larew
Executive Director 319-337-7079
Bob Haug e-mail: larewlaw@aol.com
e-mail: bhaug@iamu.org
515-289-1999
City of Iowa City Website: www.icgov.org
Distributed by Board of Supr. Thompson
Comparison of Jail Intakes, 2000-2001
Difference Arrest DifferenceI Unique Difference
Referring Agency Charges 2_00_0-2001 Days/Intakes 2000-2001] Person~ 2000-2001
2000__- --
Coralville Pd 933 595 522
1418 898 830
County Sheriff i
District Court 1379i 01 .__ ~-098
iowa City PD : 4973i ___ 3605i _3117
Iowa State Patrol 188] 142' 146
North Libedy PD 221 15 16
University of Iowa -? 838] ---- 630 -- 605
University Heights 12 ~ 10 9
Unknown 13 , 5i 5
TOTAL* - 9776 --' 59001 63481 448
2001 i
Coralville Pd 889i_ -4.72% 555 -6.72% ~-11 -2.11%
County Sheriff 1423 0.35% 882 -1.78% 824 -0.72%
District Court 1251 -9.28%1 0 NA ~1036 -5.65~
Iow~ City PD 4559 -8.32% 3216 -10.79% 2730 -12.42%
Iowa State Patrol ~ 164 -12.77% 115 -19.01% 118 -19.18%
North Liberty PD i 72 227.27% 46 206.67% 44 175.00%
University of Iowa ~ 691 -17.54% 497 -21.11% 464! -23.31%
University Heights 11 ! -8.33% 8 -20.00% 71 -22.22~
Unknown 6i -53.85% ---- 4 ~20.00% --- 3 -40.00~/~
TOTAL* ~, 9066J -7~26% _ 5323 -9.78% 4807 -24.28%
* Tota!~unique persons not equal the sum of pads
i !(a person could be arrested in more than one agae~cy)
Distributed by Council Member Kanner
IOWA
ASSOCIATION OF MUNICIPAL
UTILITIES
Forming a New Municipal Electric Utility
A Proposal for a Joint Feasibility Study
Several Iowa communities have contacted IA_MU to find out more about what options
they have as their current electric or gas franchise agreements expire. Among the options
they want to consider is the possibility of forming a new municipal utility. The process
of"municipalization" typically starts with what is referred to as a feasibility study. The
preliminary feasibility study for a municipal electric utility attempts to determine the net
savings to the city and its citizens from the formation of a municipal electric utility. The
general approach is to estimate costs/rates under continued operation by the incumbent
utility and subtract the estimated costs/rates expected under operation by a municipal
utility to calculate the benefits.l
Estimates from consulting firms who do this kind of work range from $20 to $30
thousand on the low end to $50 to $75 thousand on the high end, depending on the scope
of the study and the size of the utility. For example, a feasibility study for the City of
Emmetsburg was completed in March 2002 at a cost of $20,000. This proposal is for a
group of cities to share the cost of a joint feasibility study. By doing so, we believe each
city can get a quality study on which they can rely at a substantial savings.
A joint feasibility study makes sense for a number of reasons. Deborah Penn of the
American Public Power Association provides information to cities interested in
municipalization. She made the following observation about a recent joint study: "Last
year two towns in Florida, Dunedin (,oop. 34,000) and Bellair (pop. C 4,000), had a joint
study done by Strategic Energy Ltd of Pennsylvania for about $50, O00. The study
reviews the cities' options, costs to acquire and maintain. It estimates savings. It is a
thorough job and the cities were pleased with it as a first step."
Recent studies conducted by IAMU on behalf of 126 Iowa and Minnesota municipal
electric utilities have put the Association in an excellent position to facilitate a joint
feasibility study. The studies include: (1) a forward pricing analysis (completed at the
end of December 2001) of the wholesale power market, with sensitivity to gas and coal
prices; (2) an in depth study of both jointly developed municipal generating facilities and
I The analysis includes projection of the cost of acquiring the incumbent utility's distribution system and
segregating it from the remaining facilities the incumbent utility would operate in the area. It includes an
analysis of expected power supply costs for the new utility and considers any relevant stranded cost issues,
It also projects ongoing costs of operating the utility.
1735 NE 70m AVENUE
ANKENY, IOWA 50021 50021-9353
Phone: 515/589-1999 Fax: 515-289-2499 Web: www]amu.org
joint ownership in power plants being developed by other utilities and independent power
producers; (3) analysis of renewable energy sources as part of a power supply portfolio;
and (4) study and reconmaendations regarding investments in energy efficiency as a way
to defer or displace investment in generation.' Taken together, these studies provide much
of the information that would be critical to a quality feasibility study and would be made
available as a way of avoiding the duplicative effort and cost by the selected consultant.
The process for selecting a consultant and overseeing a preliminary feasibility study
would be negotiated among the participating cities, but would likely follow these general
steps/tasks:
1. Each interested city would appoint a council member or staff person to serve on a
steering committee.
2. The joint committee would develop a consensus request for proposals (RFP) from
examples provided by IAMU and the American Public Power Association.
3. The RFP would be distributed to a list of potential bidders approved by the
committee. The list would be developed from among national and regional
service providers with experience in such work.
4. A division among participating cities would be made if there were significant
differences of opinion regarding the scope of service. Separate RFP processes
could be carried out to accommodate these differences.
5. The committee would also agree on a method of allocating costs. IAMU
facilitates joint financing among various sub-sets of IAMU members for such
purposes of joint training, legal activities, pumhases, and others. Typically, part
of the cost is allocated equally among participants; the balance is divided on some
other basis, such as local cost component, population, or economic impact.
6. The committee would review the proposals and select a consultant. With the
selection process was complete, each city would know the scope of the study, the
qualifications of the consultant, the timetable for completion, and the cost.
Commitment to participate could be obtained before distribution of the RFP by
setting acceptable cost ranges. Alternatively, each city's commitment to
participate could be made after responses were in hand. This later option would
require an iterative process, since each city's cost would depend on the number of
participants. The study would be conducted upon final approval of each city's
participation in the joint study.
For communities that desire to move forward with municipalization on the basis of the
preliminary feasibility, there would be still other economies from shared legal expenses,
expert witnesses, joint acquisition of power supply contracts or resources, personnel
recruitment, joint purchase of inventory equipment, andin many other areas. Byworking
together, communities could also take advantage of the recently formed Iowa Public
Power Agency, an intergovernmental entity with authority to issue revenue bonds on
behalf of groups of cities jointly financing electric facilities.
Contact IAMU Executive Director Bob Haug for more information at
800/810-4268 or by email at bhaug~iamu.org.
IOWA
ASSOCIATION OF MUNICIPAL
UTILITIES
Public Power - An Option for Iowa City
Bob Hang, Executive Director - March 2002
Iowa City's electric service franchise with MidAmerican Energy expired on November
15. It is appropriate that the community is considering whether the fi'anchise should be
renewed and, if so, for how long. It is also appropriate for the community and its elected
and appointed officials to look at all the options, including the option of forming a public
power system. The following are some questions that have been raised in recent
discussions of the franchise and the public power option, along with a response from the
Iowa Association of Municipal Utilities.
Table of Contents
1. What is a fi'anchise? ..................................................................................... 2
2. What options does the city have with regard to the franchise? ................ 2-3
3. Why consider forming a municipal utility? ................................................. 3
4. Why municipal.., if deregulation? ........................................................ 3-4
5. What steps are involved in establishing a municipal utility? ................... 4-5
6. Are other cities establishing municipal utilities? ......................................... 6
7. Why haven't there been more new municipal electric utilities.'? .................. 6
8. What would a feasibility study cost? ....................................................... 6-8
9. Would municipal electric harm city bond rating? ........................................ 8
10. Who would set rates? ................................................................................... 9
11. Would large power users be disadvantaged? ............................................... 9
12. How much would existing distribution system cost? ............................ 9-10
13. Does municipal have to produce its own energy? ..................................... 10
14. What would be the boundaries for the utility? ........................................... 10
15. How can a municipal utility restore service after a major outage? ............ 10
16. Would there be a loss in property tax revenues? ................................. 10-11
17. How do municipal utilities get qualified personnel? ................................. 11
18. What is meant by the muni lite option? ..................................................... 11
19. Why consider muni lite? ................................................................ : ........... 12
20. What about municipal gas'?. ........................................................................ 12
21. How many municipal utilities does Iowa have? ........................................ 12
22. What is the Iowa Association of Municipal Utilities ................................. 12
Attachment 1 -Public Power Facts ........................................................... 13-16
Attachment 2 - Rate Comparisons ............................................................ 17-18
Attachraent 3 Payments in Lieu of Taxes ............................................... 19-21
Attachment 4 - Municipal Utility Governing Bodies ...................................... 22
Attachment 5 - A Thumbnail History of the Electricity Industry ................... 23
1. What is a franchise?
A franchise grants to a utility the right to use the public streets and alleyways
and indirectly confers the right of eminent domain for acquisition of private
property for utility facilities and a~cess. Since passage of an exclusive
territory law in Iowa, a utility is obligated to provide electric service within its
assigned service area, whether or not a franchise agreement is in place.
For the utility, a franchise provides some liability protection for claims arising
from facilities ir~talled in public rights of way, though the obligation to serve
may offer similar protection. The franchise also ensures utility access to its
facilities on public rights of way. Perhaps the most valuable aspect ora
franchise to the utility is that it creates a presumption of continued service and
limits the risk that the franchise holder may be challenged by formation ora
municipal utility. A city cannot use its right of condemnation to acquire the
utility's facilities while a franchise is in effect. Unless the franchised utility
agreed to a transfer of property, the city therefore could not be assured of
acquiring the incumbent's local distribution facilities, even if the Iowa
Utilities Board certified the municipal utility and set a price for acquisition.
For the city, a franchise holds little value. In many other states, a franchise
agreement sets out obligations of the utility for payment of franchise fees or
for specific operating requirements. In Iowa, state regulators have required
that franchise fees be collected exclusively from consumers in the affected
city, rather than from utility shareholders or other ratepayers. Consequently,
franchise fees are rarely a part of franchise agreements in Iowa cities. No fees
are paid to Iowa City under the expired franchise agreement with
MidAmerican Energy.
n The franchise is not a tool for setting rates or regulating service. That is a
responsibility of the Iowa Utilities Board. It is not a competitive bidding
process among alternate providers. It is not even an agreement that
necessarily affects all residents, since some parts of the city could be in
another utility's service area.
n A municipal utility does not need a franchise; it has all the inherent authority
granted in a franchise to any other utility.
2. What options does Iowa City have with regard to the franchise?
a. The city could renew the agreement for another extended ,period, e.g., 15
to 20 years, with or without provisions for periodic reopening of the
agreement.
b. The city could renew the agreement for a specific period of time or extend
the current agreement. This would seem to be the best alternative in the
current circumstances, since MidAmerican has entered into an agreement
with the state that freezes revenue through 2005. Passage of Senate File
57, in the 2001 session of the Iowa General Assembly, gives the city the
ability to waive the election requirement for franchise renewal. The
authority to waive the election (subject to reverse referendum should
2
citizens petition for an election) provides flexibility to extend existing
franchises that cities did not have when the election was necessary for
renewal.
c. The city could go on without a' franchise (at least for a while - maybe up
to several years). Under the exclusive service territory law, nothing would
really change.
d. With either option b or c, the city could conduct a public power feasibility
study and could proceed to an election to establish a municipal utility.
3. Why consider form'mg a municipal utility?
A municipal utility provides local control over rates, policies, and generation
resources.
It provides local jobs and the service reliability that comes with local service
personnel.
a Municipal utilities operate on a not-for-profit basis, which generally means
lower rates for consumers, The average rate for residential customers of
MidAmerican Energy for 1999, based on data reported to the Department of
Energy as revenue per kWh, is 9 cents per kilowatt-hour. The average for all
Iowa municipal utilities is just under 6.4 cents/kWh. That means
MidAmeriean Rates are over 40% higher than the average rates of municipal
utilities. A new municipal utility would not likely achieve that rate spread in
the short run, but in the long run, Iowa City should be able to achieve the
same rate advantages that public power systems have enjoyed for 120 years.
~ Municipal utilities have been a part of the electricity industry since 1882. The
credible threat of new municipal utilities is important to all Iowans. Consider
this:...The threat of displacement by public enterprise has greatly improved
the performance of industry. The competition of public with private power
has probably been a much rnore powerful influence than regulation in this
respect... - Alfred Kahn (The Economics of Regulation).
4. Why establish a municipal utility if the industry is moving toward competition?
Won't competition bring us low rates and good service?
r~ There is nothing wrong with competitive markets or profit. But electricity is
an essential service - one that has characteristics of natural monopoly,
including substantial barriers to entry and low elasticity of demand. Because
of those characteristics, electricity has been a regulated servic~ for most of its
history. Increasingly, however, the industry is becoming deregulated.
Evidence from Califomia and elsewhere indicate that competition in
electricity does not serve to lower costs or improve service to consumers, that
the monopoly characteristics of the industry allow key players to exercise
market power, i.e., to collect monopoly rents for a sustained period of time.
Given the state of the industry and the direction it is moving, it is perfectly
reasonable for consumers in Iowa City to ask whether their individual and
community interests are better served by a community-owned, locally
controlled municipal utitity or by continuing service from a company whose
ultimate purpose is to maximize profits for Berkshire - Hathaway, its owner.
5. What steps are involved in establishing a municipal utility?
a. The first step in forming a municipal utility usually is to validate the
concept - to see if it is economically viable and that it has community
support. Viability can be tested through a preliminary feasibility study.
The study looks at both capital and operating costs for a new utility,
including alternatives for power supply. The study identifies fatal flaws,
estimates a range of expected savings, identifies risks and benefits, and
recommends next steps. A qualified engineering finn typically conducts a
preliminary assessment. IAMU can provide a list of qualified finns.
IAMU is also prepared to organize a joint feasibility study among two or
more cities considering this option. [The incumbent utility may offer to
do a study of alternatives, including municipalization. A study by the
incumbent utility should not be relied on in assessing municipalization or
other alternatives.]
b. Assuming the study is positive, an election should be set to authorize
establishment of a municipal utility. If there is a preference to establish an
independent board of trustees to govern the utility, the ballot issue is
"double-barreled," asking first, "should the city be authorized to establish
a municipal utility" and second, "should the utility be governed by a board
of trustees." A community group should be organized to promote the
ballot issue. The city is not allowed to spend money to influence the result
of the election, The city can present f'mdings and facts, but it cannot
recommend that voters vote for or against a ballot issue.
Alternative election options. The election may be scheduled before the
preliminary assessment. Cities that choose this option do so to test public
opinion before time and money are expended in studying the municipal
utility option. The vote does not obligate the city to move forward.
Another option is to schedule the election after completion of the full
study. A city exercising this option would likely have a preliminary
feasibility study with very encouraging prospects for savings or some
other compelling reason to provide the public more detailed analysis
before calling for a vote. Generally, it seems to make sense to defer costs
associated with a detailed business plan for financing, deb~: service,
staffing, and operation, until after citizens have voted. However, the
timing of the election is up to the City Council and, as noted, the election
does not create a binding obligation to proceed.
c. If not included in the preliminary feasibility study, a further study should
be made to determine the value of the distribution system. As with other
types of appraisal, multiple valuation methodologies may be employed,
including original cost less depreciation, replacement cost less
depreciation, and market value (sales of similar facilities between willing
4
buyers and sellers). The Iowa Utilities Board (1UB) ultimately determines
the price for facilities presently serving the customers. In setting the price,
the Board must consider - but not necessarily include in the price
determination - "... the cost of the facilities being acquired, any
necessary generating capacity and transmission capacity dedicated to the
customer, depreciation, loss of revenue and the cost of facilities necessary
to reintegrate the system of the utility after detaching the portion sold."
d. Also, to the extent not included in preliminary work, the feasibility study
should assess all costs of system acquisition, operation, and reintegration
as well as revenues. Sensitivity analysis should address likely scenarios
related to restructuring of the industry. Power supply options should be
firmed up.
e. In moving forward beyond the study and election, the City should develop
a negotiating strategy and make a formal inquiry of the incumbent utility
whether it would agree to negotiate a purchase price for its facilities. The
utility's stated position on selling the system should not be presumed to be
the same after a successful election as it was before. The IUB would
likely ratify a reasonable agreement. Also, restructuring of the electricity
industry may change the view of the incumbent regarding a sale of the
distribution system.
f. Regardless of the incumbent utility's response to a buyout offer by the
city, the next step is to petition the IUB. The 1UB must determine whether
establishment of the municipal utility is in the public interest. The city
would present expert testimony in the proceeding to support its position on
all issues considered by the ILrB. 1UB approval results in modification of
the service territory map by designating a service area for the city. The
IUB also determines the price io be paid for the incumbent's facilities and
for reintegrating the remaining system.
g. Final steps to bring the utility into operation include completion of power
supply arrangements, planning for severance of the system from the
incumbem's system, development of an organizational plan, and planning
for utility facilities, recruitment of management and staff, planning for
materials, equipment, inventory, and supplies and commencement of
operations.
h. Public information is an important step throughout the process. This
includes disseminating information and bringing public recommendations
into the planning process.
6. Are other cities establishing municipal utilities?
C~ Nationally. The American Public Power Association represents over 2,000
publicly owned electric utilities in the United States and its territories.
Information about efforts to establish new municipal utilities can be found on
the public side of their web site. Recent actions include the narrow defeat of a
municipalization proposal in San Francisco and the startup of a new municipal
system in Henniston, Oregon (pop. 13,000). Recent news articles on actions
in these two cities are attached. The web site also has information about
actions by several Florida cities, including the refusal of the Winter Park City
Commission to renew a franchise.with Florida Power. For additional
information visit the APPA web sites at www.APPAnet.org.
a Iowa. Current municipalization activity in Iowa includes Emmetsburg, where
a feasibility study has just been completed. Everly, in northwest Iowa, has
also begun a feasibility study. Several other cities that have informed IAMU
of their interest in looking at the municipal utility option.
7. If municipal utilities are such a good idea, why haven't there been more new
municipal electric utilities formed in recent years?
c~ The last municipal electric utility formed in Iowa was at Aurelia, in 1976.
Since then, the last serious attempt to establish a municipal electric utility was
that of Sheldon, Iowa. The Sheldon case effectively blocked further
municipalization efforts, due to the unchallenged ruling of the Iowa Utilities
Board. The Board accepted a high valuation figure for the distribution
facilities in Sheldon. It also found Sheldon responsible for compensating
Iowa Public Service for generating facilities the company built to serve the
community. Denying Sheldon a right to purchase the output from the IPS
facilities compounded the Board's damaging ruling on stranded costs. The
ruling placed the municipalization outside the range of feasibility.
MidAmerican Energy and other utilities in the region are planning new power
plants at this time, so it is hard to envision a case for stranded generation
costs. Arguably, if the IUB's previous ruling were to be followed, a new
municipal utility should be entitled to payments for "stranded benefits,"
because generation no longer needed for customers of the new municipal
utility would be available for remaining customers. That would defer the need
for more costly new generation.
As noted above (see #6), new municipal utilities have been formed in other
states, more are being formed now, especially in the aftermath of the
California market failure. Califomia municipal utilities, such as those in Los
Angeles, Sacramento, Anaheim, Burbank, Palo Alto, Pasadena, and others,
escaped much of the damage associated with that failed market.
8. What might Iowa City pay for a study of the feasibility ora new municipal
electric utility.'?
n It is difficult to predict the cost with certainty, but estimates from consulting
firms who do this kind of work range from $20 to $30 thousand on the Iow
end to $50 to $75 thousand on the high end. These costs do not include the
legal costs, such as the proceeding before the Iowa Utilities Board to establish
a municipal utility. Those costs should go down following a first case, in
which the IUB decision would likely narrow the issues for those cities that
followed. The strategy of the incumbent utility and their use of the legal
6
process to raise costs as a deterrent to further municipalization is a major
determinant of the city's costs.
The City of Emmetsburg has reported that their feasibility study has been
completed and that it supports fudher investigation of forming a municipal
electric utility. The Emmetsburg study included a valuation of the distribution
facilities. Personnel from a neighboring municipal utility conducted an
inventory of facilities. The city's consultant valued the inventory. A
substantial part of the feasibility study is a review of long-term power supply
options. They have at least one firm offer that could be exemised if the city is
successful in establishing the municipal utility.
The Emmetsburg study had a not-to-exceed cap of $20,000. Asked to
estimate the need and cost for additional studies, City Administrator John Bird
said he did not anticipate the need for an additional feasibility study per se,
but that there would be substantia[ costs associated with development of"a
business plan for financing, debt service, staffing, etc." He had no estimate
for the cost of legal proceedings before the IUB.
In response to the question of study costs, Deborah Penn of the American
Public Power Association noted that "Last year two towns in Florida,
Dunedin (pop. 34,000) and Bellair (pop. C. 4,000), had a joint study done by
Strategic Energy Ltd of Pennsylvania for about $50, O00. The study reviews
the cities' options, costs to acquire and maintain. It estimates savings. It is a
thorough job and the cities were pleased with it as a first step."
Recent studies conducted by IAMU on behalf of 126 Iowa and Minnesota
municipal electric utilities have put the Association in an excellent position to
facilitate a joint feasibility study. The studies include: (1) a forward pricing
analysis (completed at the end of December 2001) of the wholesale power
market, with sensitivity to gas and coal prices; (2) an in depth study of both
jointly developed municipal generating facilities and joint ownership in power
plants being developed by other utilities and independent power producers; (3)
analysis of renewable energy sources as part of a power supply portfolio; and
(4) study and recommendations regarding investments in energy efficiency as
a way to defer or displace investment in generation. Taken together, these
studies provide much of the information that would be critical to a quality
feasibility study. In addition, further economies would accrue to spreading
costs among several communities. As noted in the bullet point above, joint
action in preparation ora feasibility study is not new and has'proven
successful.
If a group of cities was interested in a joint feasibility study, the process might
include appointment by each city of a council member or staff person to serve
on a steering committee. The joint committee would review and refine an
RFP, based on existing models. It would also review and approve a list of
potential bidders from among national and regional service providers with
experience in such work. The committee would also agree on a method of
allocating costs? Finally, the committee would review proposals and select a
consultant. When the selection process was complete, each city would know
the scope of the study, the qualifications of the consultant, the timetable for
completion, and the cost. Commitment to participate could be obtained before
distribution of the RFP by setting acceptable cost ranges. Alternatively, each
city's commitment to participate could be made after responses were in hand.
This later option would require an iterative process, since each city's cost
would depend on the number of participants. The study would be conducted
upon final approval of each city's participation in the joint study.
For communities that desired to move forward toward municipalization, there
would be still other economies from shared legal expenses, expert witnesses,
joint acquisition of power supply contracts or resources, personnel
recruitment, joint purchase of inventory equipment, and in many other areas.
By working together, communities could also take advantage of the recently
formed Iowa Public Power Agency, an intergovernmental entity with
authority to issue revenue bonds on behalf of groups of cities jointly financing
electric facilities.
9. Would debt for existing distribution system harm the City's bond rating?
o There should be no negative effect on the city's bond rating or bonding capacity. Bonds issued for acquisition of MidAmerican's distribution
facilities would be backed by future utility revenues. Revenue bonds, unlike
general obligation bonds, are not backed by property taxes or the city's ability
to impose property taxes.
ra The Tax Act of 1986 restricted the use of tax-exempt bonds to acquire what
are called "output facilities" of investor-owned utilities. IAMU assumes that
acquisition of MidAmerican facilities by Iowa City would be accomplished
through use of taxable municipal revenue bonds or as part of a tax-exempt
issuance where the output facilities constituted a small part of the total
issuance and met the requirements of IRS private use rules. Taxable bonds
can be issued jointly and could be presented as a separate series within a
broader issuance that also included tax-exempt bonds.
l 0. Who would set the rates charged by a municipal electric utility?
a The City Council (or Board of Trustees for that form of utility governance)
sets municipal utility rates.
11. Would industrial users face rates that would be disadvantageous?
c~ Large power users are usually integral to the community's economic vitality.
Their needs would undoubtedly be heard in the local ratemaking process.
~ IAMU mintages joint financing of its own operation and many other activities that take place among sub-
sets of IAMU members, including joint training, legal activities, purchases, and others. Typically, a portion
of the costs are divided evenly among participants and the balance divided on some other basis, such as
population, use or sales, or economic impact.
a In the context of establishing a municipal utility, a city could offer incentives
to large power users that could promote expansion of existing business or
attract new businesses, while protecting residential and commercial
consumers. The concept would be to offer large power users a buy-through
for wholesale contracts. Some large power users advocate restructuring of the
electricity industry in order to directly access the growingly competitive
wholesale market. Under current Iowa law, they cannot do so. A municipal
utility could allow a large power user or potential new industry the
opportunity to go to the market to find the best deal they can. The utility
would then enter an agreement with the customer in which the utility would
accept the contract on the customer's behalf. Obviously, the agreement
between the customer and the utility would have to hold the city harmless, but
a model for such an agreement exists [Tacoma, WA]. The benefit to a new
municipal utility in this situation is that it limits the risk to other citizens that a
large power user would leave town and shift responsibility for debt associated
with power supplies onto the backs of remaining customers. This is generally
not a problem with purchased power contracts, but could represent a risk for
utility-owned generation.
12. How much would it cost to buy the existing distribution system?
c~ As noted in 5 above, multiple valuation methodologies may be employed in
determining the cost of the incumbent utility's distribution facilities. These
may include original cost less depreciation, replacement cost less
depreciation, and market value (sales of similar facilities between willing
buyers and sellers). The Board must consider - but not necessarily include in
the price determination - "... the cost of the facilities being acquired, any
necessary generating capacity and transmission capacity dedicated to the
customer, depreciation, loss of revenue and the cost of facilities necessary to
reintegrate the system of the utility after detaching the portion sold."
[] To some extent the cost of the facilities is less important than the cost of
capital. MidAmerican Energy and several other utilities have proposed
establishment of a for-profit transmission company, TRANSLink, to operate
within a broader regional transmission organization. Even though investment
in regulated transmission facilities carries with it virtually no risk,
MidAmerican is asking for a return on equity in excess of 13 percent annually.
The FERC is expected to role in the coming weeks on allowable returns on
equity for Regional Transmission Organizations (RTO) and for-profit
transmission companies operating within RTOs. Early signals indicate that
returns as high as t6 percent (perhaps with further adders) could be found
acceptable. The cost of capital for Iowa City would be the municipal rate for
taxable bonds for the distribution system and the tax-exempt rate for new
facilities. Those rates for capital would be substantially lower than the returns
paid to the incumbent utility.
9
13. Does a municipal electric utility have to produce its own energy?
r~ No. A majority of Iowa municipal utilities purchase electricity through long-
term power supply contracts with other utilities. Passage of Iowa House File
577 in the 2001 session of the Gerieml Assembly gives Iowa city many other
options, including joint purchase of generation and transmission facilities with
other cities. A new municipal joint power agency, the Iowa Public Power
Agency, was formed late last year for this purpose. Iowa City could also work
jointly with the University of Iowa. It should also be possible for Iowa City
and the U of I to jointly finance facilities.
14. What would be the boundaries for the utility? What happens as the city grows?
a The Iowa Utilities Board determines the service territory of the municipal
utility. It may extend beyond the cun'ent city limits or it may be less than that.
The [UB attempts to balance the process to limit costs to the city and costs to
remaining customers of the incumbent utility. The future boundaries of the
utility service area would not expand with the city's growth, just as the
franchised service area does not expand under current law. As noted above,
Iowa City could grow into the service area of another utility, whether it
establishes a municipal utility or continues service under franchise.
15. How can a municipal utility restore service in the event of a major outage?
[] The Iowa Association of Municipal Utilities coordinates a mutual aid program
among the state's municipal utilities. The program has been well-tested and
proven effective in tornados, ice storms, and other disasters over more than 30
years. Regional coordinators organize delivery of personnel, equipment, and
supplies, generally initiated with a single phone call from the affected utility.
Ice storms in recent years have provided an acid test of the effectiveness of
this program, as damage occurred over a broad area of the state. These
instances required utility crews to travel longer distances than is usual, but the
response was effective enough that municipal crews were also able to provide
assistance to investor-owned utilities and cooperatives. That kind of
cooperation has been common among the different types of utilities.
16. How would the loss of taxes paid by the investor-owned utility to the city be
made up if the city owned its own operation? Does the city-run company pay an
amount in lieu of taxes?
ca There would be no decrease in tax revenue to local taxing authorities. In
1999, the Iowa Legislature replaced the method by which utilities were
assessed property taxes. Under the so-called replacement tax, a new
municipal utility would pay the replacement tax rate applicable to the
incumbent utility. A change in the rate for the zone Iowa City is in would
require an act of the legislature.
[] Most, but not all Iowa municipal utilities, make payments in lieu of taxes
(PILOTs). PILOTs reach or exceed property tax payments of investor-owned
utilities on the average. P1LOTs would likely be lower than average for a new
municipal utility, because rates would already include the replacement of
l0
current taxes to local taxing authorities. PILOTs are set by the local
governing body of the municipal utility.
A 1996 survey of Iowa municipal utilities showed the median cash and net-
non-cash transfers of electric funds to other funds of the city was 6 percent of
total electric revenues. [SEE ATTACHMENT 3] This is consistent with a
1999 study of by the American Public Power Association that showed median
transfers of over 500 surveyed public power systems to be 5.8 percent.
17. How do municipal utilities get qualified personnel?
Ia Municipal utilities compete with investor-owned utilities and cooperatives for
qualified personnel. As with other utilities, municipal systems also provide
training opportunities for apprentice and journeyman line personnel. IAMU
currently sponsors two apprenticeship programs. Both have been approved by
the Department of Labor. In addition, the association conducts training at
member utility locations and at the IAMU training field in Ankeny. Larger
municipal utilities in Iowa often have their own training programs and staff
that augment IAMU training.
D Where new municipal utilities have formed in other states, or in the case of
gas and telecommunications utilities formed recently in Iowa, the new utility
typically offers employment to qualified personnel of the incumbent utility at
equivalent or better compensation.
18. What is meant by the tnunl lite option.'?
c~ As used in the earlier discussions, municipal lite or muni lite refers to the
concept of establish a municipal electric utility by election, but deferring the
feasibility study and acquisition of the incumbent utility's distribution
facilities (local poles, lines, transformers, lighting, etc.) for a later time.
A municipal utility without locai wires, would have the authority to pumhase
electricity in the wholesale market for its own utility uses, e.g., water and
wastewater operations. It could also sell its existing generation
(water/wastewater peaking generation) into the wholesale market. (Iowa City
has invested in backup generation for reliable operation of its water/waste
water utilities for emergencies when MidAmerican is unable to deliver
energy.) Whether the new utility actually made wholesale purchases and sales
or simply used the authority to leverage a better deal from MidAmerican,
there would likely be some savings to city residents through lower utility
operating costs. Savings could be used later to help fund a feasibility study
for acquiring local distribution, to conduct energy efficiency programs or
invest in renewable energy facilities, or simply to reduce water and
wastewater operating costs.
19. Why consider muni lite?
~ Establishment of a muni lite would position the city to become a load
aggregator in the event the legislature approves retail competition for energy
supply. A number of states have approved retail choice legislation and Iowa
11
eventually may follow suite. To date, residential consumers and small
businesses have not faired well in retail competition. Their hope lies in
aggregating their energy needs to get a reasonable price. The city is uniquely
situated to be the load aggregator for a community and in our view, could do
the best job of securing energy supplies. Community choice legislation has
been approved in other states, including Ohio. The restructuring legislation
proposed last year in Iowa also contained community choice provisions. The
web site www.communit¥.org contains a wealth of information on why
municipal aggregation is essential in nominally competitive retail elec~city
markets.
n Still another reason to consider muni lite is to acquire and operate distribution
facilities on the chance that MidAmerican decides to sell off those facilities.
MidAmerican Energy is now a privately held company, it's not shareholder
owned. It is reasonable to speculate that the current owners - some ofthe
richest people in the nation - may not be satisfied with regulated returns on
their distribution assets. With a municipal utility in place, the city would be in
an excellent position to acquire the facilities in the event of a voluntary sale.
20. What about municipal gas?
o Establishing a municipal natural gas utility is a less complicated process than
establishing a municipal electric utility. The Iowa Utilities Board is not
involved in the same way though it rules on the certification of the new
municipal utility. In the event the sale of distr/bution pipes is not agreed to,
the district court sets the price.
n Several new municipal gas systems have been established in recent years,
including those in Lake Park (1984), Rock Rapids (1985), Fairbank (1992),
Hartley (1993), Everly (1994), Lake View (2000), and Orange City (2001).
21. How many municipal utilities does Iowa have?
,~ Iowa has 137 municipal electric utilities and 49 municipal gas systems.
IAMU also represents 550 municipal water utilities as well as a growing
number of municipal telecommunications utilities.
n Municipal electric utilities serve about 382,000 citizens and provide about 13
percent of the electricity delivered in Iowa.
22. What is the Iowa Association of Municipal Utilities?
u IAMU is a nonprofit membership organization of 550 Iowa cities. We
represent municipal utility interests in the lowa legislature and before state
and federal regulatory agencies. Our 22 member staffand volunteer
committees als0 conduct both hands on and cl sr0om training for utility
workers, including OSHA compliance training and support. We also support
energy efficiency programs of our members and conduct research of interest
to our members. Check out our website at www.iamu.org.
12
ATTACHMENT 1
PUBLIC POWER FACTS
For Consideration by Iowa City Residents and their
Elected and Appointed Local Government Officials
Prepared by the Iowa Association of Municipal Utilities - March 2002
The following text is reprinted from the home page of the American Public Power
Association (www.~lPP.4net. ore). Bold text (other titan section headittg~) has been
added to provide additional infomnation about municipal utilities in
Public Power: An American Tradition that Works
More than 2,000 communities across the country have chosen to provide for their own
electricity services. They have created public power systems - not-for-profit electric
utilities that are owned by the communities and governed democratically. Public power
provides for the electric power needs of about 40 million Americans - or almost 15
percent of electricity consumers. Iowa has 137 municipal electric utilities, 49
municipal gas systems, and nearly 40 municipal telecommunications systems.
Every public power system is different due to its community's population, geography and
climate, natural resources, economic and social resources and challenges, and local
government structure and goals. However, all public power systems have in common
their purpose: to provide adequate, reliable, not-for-profit electricity at a reasonable price
with proper protection of the environment.
Public Power is Hometown iPower
Public power systems are operated primarily by municipalities, as well as by counties,
public utility districts, or other public bodies. A number of states also operate public
power systems.
Public power systems are rooted in the American tradition of local people providing for
their basic community needs. Public power systems provide a public service - electricity
- at a reasonable price. Most public power systems - especially the smaller ones - are
governed by a city council, while an independently elected or appointed board governs
others. Community ownership and governance provide wide latitude to make local
decisions that best suit local needs and values, as well as changing market conditions. In
Iowa, about half the municipal utilities are directly governed by city councils.
Independent boards of trustees govern the other half. Trustees are appointed by the
mayor and approved by the city council.
Citizens have a direct voice in utility decisions and policies about electric rates and
services, generating fuels, clean air and water, and other issues that affect them through
public meetings, the ballot box, and open policy board meetings,
"Customers First" is Public Power's Mission
Public power's first and only purpose is to provide excellent, efficient service to its
citizens. Unlike private power companies, public power utilities do not have to serve
stockholders as well as customers. Public power systems' measure of success is how
13
much money they can keep within their communities through Iow rates and contributions
to the city budget, not how much can be taken out to send to distant stockholders who are
not part of the community.
Hometown Connections Hold Down Costs '
Electricity prices drive local economies. Lower prices help residential customer better
manage household budgets. They also allow commemial and industrial customers to
grow and thrive, contributing to the overall prosperity of communities and the nation.
Public power has a proven track record of providing customers with lower-cost electric
rotes than private power companies on a national average. According to information
reported to the U.S. Department of Energy:
Private power company residential customers pay average electricity rates that
are about 18 percent more than those paid by public power customers (in
Iowa, MidAmeriean Energy residential customers pay over 41 percent
more than the average municipal utility rate);
[] Private power company commercial customers pay average electricity rates
that are about 9 percent more than those paid by public power customers;
[] There are only small differences in average rates paid by industrial customers
of public and private power companies
The rate differential is due primarily to public power's not-for-profit status, and efficient
management and operations.
Public Power Means Partnership
Public power systems work in partnership with their citizens and communities. Through
the public decision-making process, they create policies and services that are responsive
to and can anticipate citizen needs.
Hometown electric utilities are an integral part of their communities, with skilled
managerial and engineering staffs. They are often called upon to find innovative solutions
to community needs, working with other city and community institutions. They have
become leaders in supplying an array of infrastructure services that are related to the
provision of electricity and other essential public needs, such as telecommunications
services.
Public power systems also work in partnership with each other through more than 60
joint action agencies. These organizations are consortia of public power systems that own
or purchase power supplies, or take part in other activities in which they fian obtain
economies of scale through their partnership. The Iowa Public Power Agency was
formed in December 2001 to jointly finance generation and transmission facilities
for Iowa's 137 municipal electric utilities and their existing joint action agencies.
Public Power Boosts Local Economies
Public power's low electric rates are a magnet for community economic development. So
is its ability as a local government arm to provide streamlined "one-stop shop" customer
services that encourage existing business customers to maintain and expand their
operations, and attract new businesses. Strong, stable employers mean strong, stable jobs
14
for local citizens. Low electric rates also hold down consumer costs, stimulating the local
economy.
While public power utilities are "not-for-profit" organizations, they make major
economic contributions to their communities: Public power systems, on average, return to
state and local governments in-lieu-of tax payments and other contributions that are
equivalent to state and local taxes paid by private power companies.
Municipal Bonds Keep the Lights On
As not-for-profit state and local government entities, public power systems have a fight to
issue tax-exempt bonds for various infrastructure needs. These bonds carry a lower
interest rate than taxable bonds, which helps hold down the cost of developing and
maintaining a wide range of essential public services.
Public Power Thrives in the New Marketplace
Public power's hometown advantages - low rates, commitment to local communities,
not-for-profit operations, public accountability, local decision making, and a customer
service ethic - have become readily apparent as the electric utility industry restructures.
Public power has remained true to its fundamental obligation to its citizen-customers -
the obligation to serve.
Restructuring failures in some parts of the country have enhanced the benefits of
hometown power and made it an even more attractive option, both for those consumers it
currently serves as well as for many whose private power companies have not kept
promises made about competition, service, and rates.
Many communities across the country are now exploring the possibility of taking control
of their energy futures by creating municipal utilities.
Public power is an American tradition that works for local communities and consumers
across the country. It will continue to work well throughout this new century.
Public Power Facts
Public power systems provide electricity to about 40 million consumers - about
one in seven Americans.
There are more than 2,000 public power systems in the U.S. They are in every
state except Hawaii.
[] About two-thirds of public power systems do not generate their own electricity.
Instead, they buy it on the wholesale market for distribution to their customers.
Public power utilities, on average, return to state and local governments in-lieu-
of-tax payments and other contributions that are equivalent to state and local taxes
paid by private power companies.
o On a national average, private power company residential customers pay about
18% more for electricity than public power customers.
ca On a national average, private power company commercial customers pay about
9% more for electricity than public power customers, while public and private
power industrial rates are about the same.
15
The first municipal electric utility was established in 1882. By 1885, four of
today's largest public power utilities - in Anaheim, Jacksonville, Tacoma, and
Austin - were up and ming. By the end of the year 2005, about 500 public
power systems will have celebrated their centennials.
[] Public power is a pm-competitive and pro-consumer institution that helps to
protect all consumers- in public and private power communities - from private
company price and efficiency abuses.
[2 Public power is a big city and a small town phenomenon, although more than
1,200 public power systems serve 3,000 or fewer customers. Some of the larger
cities that operate their own electric utilities are Los Angeles, San Antonio,
Seattle, Phoenix, Austin, Memphis, Orlando, Omaha, Jacksonville, and
Sacramento
~ Public power systems are'governed democratically through the local government
structure. Most - especially the smaller ones - are governed by a city council,
while others are governed by an independently elected board.
Other Kinds of Electric Utilities
About 240 privately owned electric companies have franchise agreements to serve 74
percent of all consumers in the United States. The private power companies are generally
large and an ever-increasing number are controlled by holding companies with interests
in more than one state or even by overseas investors. While frequently referred to as
"public" utilities, and often using the word "public" in their corporate names, these
investor-owned companies are not owned by the public. They are owned by stockholders.
MidAmerican Energy is an exception to the rule of stock ownership. A private
investment group, Teton Acquisitions, acquired the company in March 2000. Its
largest owners include Berkshire-Hathaway, Warren Buffet, and Microsoft's Bill
Gates.
About 900 rural electric cooperatives serve the remaining 11 percent of electricity
consumers. They are private, member-owned, and primarily non-for profit.
16
Attachment 2
Utility Rate Comparison by State - 1999
With additional information about Iowa utilities
Cents per kilowatt-hour
Residential Commercial Industrial
State Public Private Co-op Public Private Co--oD Public Private Co-op
Alabama 6.2 7.3 7.2 6.2 6.6 7.4 4.6 3.8 4.2
Alaska 11.6 12.0 11.0 8.6 15.4 9.0 10.7 7.5 6.8
Arizona 7.6 9.2 9.7 6.4 8.2 8.8 4.2 5.6 3.8
Arkansas 6.4 7.8 7.2 6.3 5.6 6.6 4.3 4.4 3.3
California 9.7 11.0 9.2 9.8 10.1 9.5 7.6 7.0 6.1
Colorado 6.4 7,5 7.8 5.4 5.4 6.7 4.2 4.2 4.8
Connecticut 9.3 11.6 8.5 9.7 6.4 7.5
Delaware 9.1 9.3 8.7 9.0 7.2 7.6 5.4 4,6 6.4
Florida 7.6 7.8 7.6 6.4 6.2 6.8 4.9 4.7 5.6
Georgia 7.5 7.2 7.9 7.0 6,5 7.4 4.1 4.2 3.9
Hawaii 14.3 12.7 9.7
Idaho 4.4 5.2 6.0 4.7 4,1 5.3 3.6 2.7 3.3
Illinois 6.8 8.9 10.1 6.2 7,4 8.2 5.2 5.0 5.1
Indiana 6.2 7,0 6,9 5.6 6.1 6.0 4.5 3.8 4.4
Iowa (Ave.) 6.37 8.75 8.29 5,70 6.61 6,40 4.50 3.84 3.64
MidAmedcan 9.00 6.74 4.24
Alliant- lES 8.58 6.63 3.58
Alliant- I.P. 8.02 5.51 3.50
Ames 7.28 5.66 4.13
Atlantic 5.23 4.37
Cedar Fails 4.70 4.10 3.76
Denison 4.71 3.99 3.65
Indianola 5.42 5.32 3.02
Muscatine 6.69 5.60 4.10
Spencer 4.10 4.45
Waverly 8.02 7.32 5..16
Webster City 7.81 6.79 4.18
Kansas 7.5 7.3 9.7 6.3 6.0 9.0 4.2 4.4 5.3
Kentucky 5.7 5.1 6.2 5.7 4.9 6.4 4,1 2.9 3.1
Louisiana 7.0 7.1 7.1 6.6 6,6 6.8 5.6 4.2 5,4
Maine 6.8 13.2 13.4 6.2 10.5 11.9 5.6 6,5 6.6
Maryland 6.1 8.4 8.5 6.2 6.8 7.3 4'.8 4.2 6.1
Massachusetts 9.2 10.2 9,9 8.8 8~2 7.6
Michigan 7.0 8.8 9.3 6.8 7.9 8.1 5,4 5.0 5.8
Minnesota 6.5 7,9 7.1 6.0 6.5 6.0 4.7 4.6 4.3
Mississippi 6.3 6.7 6,8 6.4 5.8 7.2 , 5.0 4.0 4.9
Missouri 6.3 7.3 6.9 5.5 6.1 6,1 4.8 4.6 3~2
Montana 5.3 7,1 6.6 4.9 6,5 5.8 5.4 4.0 2.8
Nebraska 6.5 7.0 5.4 7.8 3.5 7,3
Nevada 5,0 7.2 6.5 4.8 6.8 6.0 1.5 5,1 3.7
New Hampshire 9.9 13.5 17.4 10.1 11.2 15.4 8.4 9.2 9.7
New Jersey 8.8 11.4 10.5 9.1 9.7 11.5 7.0 7.7 7,4
17
Resldent!.a! , Commercial Industrial
New Mexico 8,2 8.4 9.9 7.6 7.5 7.6 4.7 4.2 4.2
New York 11.9 13.8 8.5 10.4 11.4 8.1 2.0 5.6 5.4
North Cerolina 9.0 7.6 8.6 7.8 6.0 7.2 5.5 4.5 4.4
North Dakota 4.6 6.3 6.9 4,5 6.1 6.6 4.0 4.4 3,8
_Ohio 7.5 8.9 7.1 7.2 7,7 6.8 5.1 4.3 4,0
Oklahoma 7.0 6.3 7.2 6.5 5.3 6.8 4,0 3.5 3.9
(~re.cjon 4,6 6.0 5.9 4.3 5.1 4.9 2,8 3.8 4.0
Pennsylvania 8.1 9.2 10.4 7.8 7.9 9.1 6.2 5.2 8.1
Rhode Island 9.5 10.1 9.2 8.5 8.0 7.4
South Carolina 7.1 7.5 7.9 6.4 6.1 7,4 3.3 3.8 4.1
South Dakota 4.9 7.9 7.8 5.2 7.0 6.7 4.1 4.7 4.5
Tennessee 6.3 4.9 6.5 6.2 5.0 6.8 4.7 3.5 4.7
Texas 7.0 7,7 7.3 6.5 6.5 7.0 4.6 3.9 4.7
Utah 6.6 6.2 6.5 5.9 5.1 6.2 4.4 3.3 5.5
Vermont 9.9 12.5 12.8 10.2 10.7 12.7 9.3 7,1 8.7
Virginia 6.1 7.4 8.5 5.7 5.5 7.7 4.0 3.8 4.6
Washington 4.5 5,9 §.2 3.9 6.0 4.4 2.8 4.1 3.7
Washin,qton~ DC 8.0 7.5 4.6
West Virginia 6.7 6.3 8.8 6.2 5.5 9.1 5.5 3.8
Wisconsin 5.8 7.4 7.8 5.3 5.9 6.6 3.9 3.9 4.2
Wyoming 6.4 6,2 6.6 5.7 5.1 5.4 5.6 3.2 3.8
Source: Form EIA-86~I for 1999; Department of Energy, Energy Information Administration
Attachment 3
Municipal Elcctric Utility Taxes and Payments in Lieu of Taxes
From a 1996 AMI. I Surx, ey (cxcludes cilies that have both gas & electhc utilities)
~ft~D.~ityof $ 45,o00 , $ 45,000 $ 410,000 ~1%
[kro~C~t~f .... $ 229,173 _[~ 229,173~ $ 648,000 35%
~lgona C~Y of .... $ 202,457 $ 541,039 $ 743,496 $ 5,205,000 10%
~9 C~of $ 115,804 $ .115,804 $ 614,000 19%
~lta Vista city of ~ ~_ $ 5,740 $ 5,740 $ 133,000 4%
~ltpn city 0f ..... $ 25,500 $ 25,500 $ 403,000 6%
A~f i $ 1,146,418 $ 1,146,41~ S22,618,000 5%
~nita City of ...... i .... I $ "'~ ~ 38,867 $ 490,000 8%
IAn~'°nCit=qf ...... I S-- '(10IX 2~1 ~ 27.110 , 351.000 8%
~uburn City of ' $ 41,959 $ 41,959 $ 127,000 33%
~ur~lia City of ~ $ ~- $ 21.000 ~ 490.000 4%
~ancroft M~n~ Ulilities ~ 9.384 S 1~ $ 145.346 $ 660.000 21%
~Breda City.of i -~- $ ~7,~ $ ~' 57,785 $ 264,000 22%
Buffalo Cii~ 0f ..... ' ..... 10,000 $ 624,000
BudCi~yof ~ ¢ ~ 16,500 $ 16,500 $ 262,000 6%
~51[end~LCil~f ~[_~ '~-- 12,555 S 12,555 $129,000 10%
Car~sle City of _ $ 43,864 $ 43,864 S ~,168,000 4%
~ggn city pi ...... $ 100 $ 7,25~ $ 7,350 $ 368,000 2%
Co~ith ¢~ o.[ .... ~ ....... $ 43,340 $ 43,340 $ 193,000 22%
Dar~ll~ City of ~ $ _. ~8 ~- 14,915 $ 14,953 S 338,000 4%
Dayton~ity of ~ .... ~3,324 , $ ~5~ 3~4 $ 372,000 14%
[~Den~on City of ' ~ "-'941 $ 152,488 $ 153,429 $ 4,535,000 3%
enver Citx of $ 1,700 _[ .... ~0~.~_.$ _ 46,700 S 705,000 6%
~- ~ 9,000 $ 9,000 S 397,000 2%
Durant Ci~ of $ 7,709 $ 7,709 $ 911,000 1%
D~t~ ~ S 134,094 $ ~ 34,~94 $ 627,000 21%
[Bdridge City o1 S $ 20,000 $ 60,000 $ 1,838,000 1%
[~ll~worthCi~x0¢ ...... ';_ 40,ooo $ 9,100 ~ $ 9,100 $ 665,000 1%
Farnhamville City of ' J '~-- 6,00~ 6~
Fonda City of _~_~_. '- 70,'136 ['~- ~13~ $ 306,000 23%
iFootanetleCity~f ~ S 15,306 ] $ 15,306 $ 286,000 5%
~(orost CitxCi,yof ~}~'-' '186,51~7~. $ 186,519 S 3,308,000
[~l~;i~s~;~,Yg City of S 4,000 ~ $ 285,000 ' $ 289,000 $ 1.673,000 17%
:Glidden City of S 20~ [ ~ 79,20~ ~ $ ' .... 7~.~00 $ 410.000 ~9%
]0
~.~Cbfl~t~t~ r:~aVmeh~s~i~i~ Total PILOTS
~' P e~, ~. l~ ~ ~ :~ ~i: ~ ~-~ ~ Revenue as % of
....... ~ ,'~~ 1995 Total Rev.
!Gowrie City q( .... J $ · 6.000 $ 6.000 $ 5411000 1%
Gra~ton City of ..... ' t ~ ~0'~- $ 15.000 $ 109,000 14%
iGrand Junction C~t~9~. $ 26 $ 7,300 $ 7,326 $ 437,000 2%
Greenfield Ci[~ of $ 84,795 $ 84,795 $ 1,768.000 5%
~(g.O~Y Cen~i~ ._ $ 38,871 '~ 38,871 $ 1,601,000 2%
Gu enberg City of $ 610 $ 92,000 $ 92,610 $ 1,134,000 8%
,Hinton City of $ 69,750 $ 69,750 $ 347,000 20%
Hopkinton CL~yof ~ 60 $ __12,¢00 $. 12,06~ $ 465,000 3%
Hudson City of ........ $ 185,000 $ 185.000 $ 756,000 24%
jlnd~pendence Cit~ $ ~768 $ 279,768 $ 3,905,000 7%
Ind!~lD City of _ $ 278,250 $ 278,250 $ 4,465,000 6%
~psauqua C~Y. 0f $ 23,420 $ 23,420 $ 698,000 3%
IKimballton City of -' $ 6,451 -"S 6,451 $ 127,000 5%
~La ~9r~ Ci~ C~o~ ..... ~ ...... ~6,250 $ 16,250 $ 800,000 2%
~ke Mills City of $ 63,000 $ 63,000 $ 1,814,000 3%
Lake View Ci~..9f $ 6.400 $ 54,000 $ 60,400 $ 952,000 6%
Larchwog¢ City of ' $ 32,500 $ 32,500 $ 288.000 11%
ILaurens City of_ $ 27,915 --~- 39,192 --'$ 67,107 $ 1,415,000 3%
~Lawler City of _ $ ~,663 S 13,663 $ 168,000 8%
:Lehigh City of $ 24,000 $ 24,000 $ 197,000 12%
Liver~e City of ~ ~ $ 133,500 $ 133,500 S 233,000 57%
I~ong O%~e ~y of _ _ S . 6,9Q~_ $ 6,900 S 223,000 3%
~tor~ C~ of $ 30 $ 47,000 $ 47,030 S 771,000 6%
IM~qu~ Cily_~f $ 4,050 $ 120,99~ $ 125,047 $ 4,459,000 3%
]~a(~thon City of $ 55,000 $ 55,000 $ 218,000 25%
McGregor City o~ ..... $ 52 $ 19,686 $ 19,738 $ 510,000 4%
~.~fg.E~itYg( .. $ 13,596 $ 161,033 $ 174,629 $ 1,346,000 12%
Mt Pleasant C~of $ 130,463 $ 130,463 $ 3.743,000 3%
Mg~a~in~ ~ty of J~ ]0!~820 $ 805,909 $ ._~.7,729 $46,203,000 2%
Neola City of ~ $ 35,000 $ 35,000 $ 236,000 15%
~ew ~pton City~ ~ ~ "~,158 $ 161.937 $ 163,095 $ 2,692,000 6%
;~- ~;~don M~ .U~7' $ ~676 $ 22,115 $ 30.791 $ 999,000 2%
0gd~nC,ty0f ..... ~'---618 : $ 2.9,]Z1 $ 29,739 $ 840,000 3%
....... ~ ~ 83,771 '/ 84,972 $ 1,472,000
~n.9~a .City of _[_.~ !~201: 6%
0range~i~%~i~of. / _ ~ 192,000 ~$ 192,000 $ 3,298,000 6%
Orie~ City oL ...... $ 10,574 10,574 S 151.000 7%
~Panora city of S 4,400 .~ 31,500 35,900 $ 721,000 4%
Paton City of $ 35,652 ~ $ 35,652 $ 171,000 21%
P~gi(iD~i~'~"-~.~ ....... $ -~'~4 $ 33,6~- $ 512,000 7%
~2r?~i!~ of .... ~ $ 65,~ ']"'~- ~99 $ 1,099,000 6%
'.Primghar City of S 58,625 : $- 58,625_ $ 383,000 15%
Readlyr~C,tyof ~ ~2 ~ ..~5,812 $ 279,000 20%
R~wick Ci~ 0~- $ 33,000 $ 33,00~ $ 247,000 13%
Rock¢~Eit~of .......... S 1.,.~.~_.[ $ 1,5~_ $ 433,000 0%
2O
Vame ;~!.,:!?~ax:~¥~[l~,~axes~l~~,~.? 1995 Total Rev:_
3ergeant Bluff Cit~ o~f_. $ 205,000 $ 205,000 $ 1,463,000 14%
~,helby City of $ 35,000 $ 35,000 $ 226,000 15%
~ibley City of $ 301.908 $ 301,908 $ 1,746.000 17%
)encer City of $ 61,276 $ 343,331 $ 404,607 $ 5,752,000 6%
~tanhope City_c~f_ $ 65,252 $ 65,252 $ 245,000 27%
~tanton City of _ . $ 18,586 $ 18,586 $ 347,000 5%
~tate Center City 9f $ 3,494 $ 54,356 $ 57,850 $ 981,000 6%
3tory City City of ~ . 4,746_ $ . 2_8_,737 $ 33,483 $ 1,047,000 3%
.~tratford City of_ $ 140,000 $ 140,000 $ 409,000 34%
~trawberry Point City of ...... $ 69,500 $ 69,500 $ 684,000 10%
~.tuar!.Ci~y o! __. $ 32.446 $ 32,446 $ 960.000 3%
3umner City or $ 200 $ 56.000 $ 56,200 $ 911.000 6%
Fraer City ef $ 8.268 $ 126,8_1~_3 $ 135,081 $ 1.274,000 10%
~/illisca City of ~S._. 424 $ 17,164 $ 17,588 $ 467.000 4%
/in_tg_nCilyof $ 184,379 $ 184,379 $ 2,543,000 7%
Na~ycrly city of $ -~i;1~,d74 $ 535,777 $ 653,851 $ 61909,000 8%
Nebster City City 9f ..... S 163,586 $ 1,088,548 __$__ 1,252,134 $ 9,653,000 11%
Nest Liberty__City of $ 111,690 $ 111,690 $ 2,585,000 4%
Nest Point City o_f $ 1,250 $ 16,600 $ 17,850 $ 807,000 2%
Nestfield Town of S 16,000 $ 16,000 $ 67,000 24%
Nilton ..C. ity. of $ 30,805 $ 30,805 $ 1,549,000 2%
Ninterset City oi ..... ~ .... i,4~0 $ 263,738 $ 265,168 $ 2,651,000 10%
Noolstock City of $ 126,000 $ 126,000 $ 126,000 0% ....
Average 10%
Median 6%
Attaclunent 4
Municipal Utility Governing Bodies (City Council & Boards of Trustees)
58 Municipal Electric Otililies are Governed by Boards of Trustees:
Algona Grundy Center Ogden
Alta Harlan Osage
Anita Hopkinton Remsen
Atlantic Independence Rock Rapids
Aurelia Indianola Rockford
Bellevue Keosauqua Sanborn
Brooklyn La Porte City Spencer
Cascade Laurens Plant Story
Cedar Fall~ Lenox Stuart
Coggon Manilla Sumner
Coon Rapids Manning Traer
Corning Mapleton Villisca
Dayton Maquoketa Vinton
Denison McGregor Waverly
Durant Milford West Point
Eldridge Montezuma Wilton
Gowrie Mount Preasant Winterset
Graettinger Muscatine Woodbine
Grand Junction New Hampton
Greenfield New London
79 Municipal Electric Utilities are Governed Directly by City Councils:
Alton Forest City Pella
Akron Fredericksburg Pocahontas
A~ta Vista Glidden Preston
Alton Grafton Primghar
Ames Guttenberg Readlyn
Anthon Hadley Renwick
Aplington Hawarden Sabule
Auburn Hinton /Water Sergeant Bluff
Bancroft Hudson Shelby
Bloomfield Kimballton Sibley
Breda Lake Mills Sioux Center
Buffalo Lake Park Stanhope
Burl Lake View Stanton
Callender Larnoni State Cenler
Cadisle Larchwood Stratford
Corwith Lawler Strawberry Point
Danville Lehigh Tennant
Denver Livermore Tipton
Dike Long Grove Wall Lake
Dysart Marathon Webster City
Earlville Neola West Bend
EIIsworth Onawa West Liberty
Eslherville Orange City Westfield
Fairbank Orient Whiltemore
Farnhamville Panora Woolstock
Fonda Paton
Fontanelle Paullina
22
A Thumbnail History of the Electricity Industry Attachment 5
The beginning of the electricity business in this eount~ is usually associated with the opening of
the Edison Electric Illuminating Company's first power station in New York on September 4,
1882. Skxteen days after Edison's Pearl Street Station went into business, Fairfield, Iowa, began
operating one of the nation's first municipal electric utilities. From then until about 1907, private
companies fought to win local franchises among themselves and against public power systems.
By the turn of the century the number of public power utilities had begun to grow at twice the rate
of the private ones. Private companies responded to public power by calling for state regulation
of monopoly service territories. They also opened a period of rapid consolidation. There were
3,659 private electric utilities and 1,737 public power utilities in 19127 By the time of the 1928
stock market crash, 85 pement of the nation's power supply was controlled by 16 holding
companies, which also controlled much of the country's railroad, ice, water, banking, and real
estate business.
The New Deal saw the breakup of the power trust and a surge of municipal and rural electric
utilities and federal power projects, such as the Tennessee Valley Authority. This phase lasted
until 1961, with a subsidized nuclear energy program and with the federal call for a tripling of
power output by 1980, development of power pools, and interconnection of power plants.
Ia the aftermath of the Arab Oil Embargo and the related rolling blackouts in the eastern U.S.,
new independent power producers were brought into the wholesale market. Their impact was
limited, however, because a lot of new generation was coming on line and most of the country
would end up with excess generating capacity. The last investor-owned utility plant in Iowa
came on line in 19827
Congress passed the Energy Policy Act of 1992 (EPAct) with a goal of replacing regulation with
competition in the wholesale power market. This new threat of competition has led to another
round of consolidations that may surpass the concentration of business that occurred some 75
years ago. EPAct also led a number of states to take competition a step further, passing laws that
would allow retail customers to choose from among competing power suppliers. California has
led the way on retail competition and nearly half the states have followed that lead, though
implementation has begun in only a handful of states. To date, retail competition remains an
unfulfilled promise and the future of deregulation in the industry is uncertain.
The 1992 Energy Policy Act followed deregulation of trucking, railroads, the airlines, and the
1984 breakup of AT&T. If deregulation has generally fallen short of its promise, it has failed
miserably in rural parts of the country, like Iowa. There is little, if any competition for rail
service and many rural rail lines have been closed. Air service has al~o suffered. If your flight
schedule is flexible enough, you can sometimes get to Phoenix or New York or Washington D.C.
for between 200 and 300 dollars, but a business meeting at Chicago's O'Hare Airport means an
$800 ticket or more. Progress has been made in development of a competitive wholesale energy
market, but regional transmission organizations - an essential minimum for corn, petition - have
yet to be fully operational.
z These data and much of the historical information about the electricity industry came from Power
Struggle: The Hundred- Year War over Electricity by Richard Rudolph and Scott Ridley, Harper & Row,
NY, 1986, and from a shortened 1996 update by Scott Ridley, entitled Profile of Power.
~ The Louisa Generating Station located down river from Muscatine proved to be more than Iowa needed.
Without additional generation, Iowa has had enough reserves to carry it for 10 years. A generation deficit
is predicted by 1993.
23