Iowa consumer advocate investigating co-op’s fixed charge

A rural electric cooperative in Iowa has until Wednesday to provide the state’s Office of Consumer Advocate (OCA) with documents justifying its proposal to impose an $85 monthly fee on electricity customers who generate some of their own power with solar panels or another technology.

(Update: The OCA granted Pella a two-week extension to produce the documents.)

The monthly fee, which would be three times what Pella charges customers who don’t generate any of their own power, appears to be one of the highest such fees in the nation – as well as, possibly, a violation of Iowa law. Iowa code 476.21 declares it illegal to treat customers with distributed generation differently from customers without their own source of generation.

The cooperative did a cost-of-service study a few months ago, and concluded that self-generating customers were not paying their share of the fixed costs of maintaining transmission and distribution systems, and other infrastructure.

Although he said he intends to share the study with the OCA, Pella’s chief executive officer, John Smith, said he plans to continue withholding it from anyone else. At least one customer – as well as Midwest Energy News – has asked to review the study, which Smith says is “not subject to distribution.”

The OCA allows him to request that the study, and any other information he might share, be kept confidential.

The issue came to light on June 18, when the cooperative sent a letter to its approximately 3,000 customers, letting them know of the plans to hike the “facilities fee” for those with distributed generation. Only about a dozen of the co-op’s customers have their own generation systems at present, although Smith said he anticipates that number will grow significantly.

The fee hike would take effect immediately for customers who install generation facilities after August 15, systems installed prior to that would have a five-year grace period.

The news caused one customer to change his mind for now about installing solar panels. Another customer, who’s had panels since 2012 in two hog barns and one farmhouse, said it will be cheaper for him to remove them when the monthly fee spikes in five years.

Jennifer Easler, an attorney with OCA, said her office will consider “whether there’s a cost justification” for Pella’s intention to levy a higher monthly fee on distributed-generation customers. If her office concludes there’s not a sufficient basis, it will turn the issue over to the Iowa Utilities Board for a hearing on the matter.

“Even though RECs and consumer-owned utilities are not rate-regulated,” she said, “Iowa law does prohibit any utility from discriminating against a renewable-energy user. We are just trying to make sure the proposal would not be resulting in discrimination.”

3 thoughts on “Iowa consumer advocate investigating co-op’s fixed charge

  1. For too many years, electric utilities have relied on the variable kWh charge component to recover the lion’s share of its’ revenue. Unfortunately, as sales have been reduced (i.e. home weatherization, economic downturn, self-production by members/consumers of power, and net metering) the business sales units (both collectively and by each service point) have dwindled and become more volatile.

    On the cost side, many expenses are fixed in nature beginning with depreciation of the infrastructure, interest expense, administration, accounting, customer service, billing department, and line maintenance. Although some of these costs may be borne at a higher degree by the larger users, some of these costs will still be incurred by the utility when the user has low (or even negative as in the case of some net metering customers) usage.

    Further, as this DG power generation is sporadic, the demand on the system that these occasional users cause/need has to be identified and paid by that user or all of the other users will subsidize them with higher-than-necessary rates.

  2. After being in the solar industry in California for over 7 years I have now traveled to Iowa because of the near perfect incentives for farmers to benefit from electricity cost reduction of a solar facility . Only one caviat !! The small REC’S / electric cooperatives scattered throughout Iowa are blatantly stunting solar growth . They do this within their net metering agreements limiting how large one may build their solar facility . If you read the fine print ( and I don’t think it is legal ) most cooperatives reduce the amount it pays a farmer from net metering rates (which is what a farmer pays the utility retail ) down to wholesale rates even before the farmer can generate what it uses in electricity in A year This of course kills the ROI for the farmer and is the financial platform of what makes solar work. Again I don’t think it’s legal but they do it anyway ..

    Example: a farmer Using 100000 kwh a year paying 11 cents a kwh would need a 90kw solar facility to off set most of the electricity used in that year .

    Simplified,
    The cooperative only let’s the farmer off set 20% at 11 cents a kwh and the other 80% at around 3.5 cents a kwh.
    As opposed to true net metering which is to pay the farmer .11 cents a kwh for 100% of what he buys in a year . The farmer paid for the solar facility so should reap the entire benefit . How can we let this happen as the farmers supply the food we eat .. Did you eat today? Thank a farmer ..

    Nice days

  3. This type of arrangement is very close to what most of the Rural Electric Cooperatives are doing this in Illinois also. It appears that these cooperatives all seem to forget that they receives special treatment when it was needed. Now that they have been paid many times over for the installation of the infrastructure with interest, which is why they were subsidized originally. That doesn’t just allow them to completely disregard the original intent and hold all of their customers hostage with old technology and avoid progress by the people who have supported them over the years. They are mostly controlled by a few members of the Cooperative and generally make a much bigger return on the investment than today’s Public Utilities.
    Farmers are not guaranteed pricing on the crops that they grow to feed the world. why should Coop’s be allowed to be guaranteed a profit over and above what is reasonable and fair. They are considered a to be a Non Profit, and taxed as such.