The Iowa Utilities Board today approved a rate of return for the proposed new coal-fired power plant in Marshalltown — the last board approval standing in the way of the plant. The board approved a 10.1% rate of return on investment for the plant that’s proposed by Alliant Energy’s Iowa Power and Light subsidiary.
Boardmembers talked about a slightly higher rate of return based on the one other previous rate case, but chair John Norris says all agreed this rate is a good one. Norris says this rate is lower than the previous case, but still in the midpoint of the range the board set. “And I think that’s reflective of current economic conditions…the reduced risks today than in the past for building generation plants, because we don’t have the risks now of deregulation.”
Boardmember Krista Tanner expressed some concern that a rate lower than the past case might be viewed as a negative by investors who wouldn’t look deeper into the background of the plant. But Norris says they decided this rate would give the company assurance to move ahead. Norris says it assures them a 10.1% return on the investment for the life of the plant and he says they believe that’s a long-term investment that will attract capital to build the plant in this economic climate.
The Utilities Board also set a cap on the cost to build the major portion of the plant at just over $985-million. Norris says it’s important to know that the cost cap is set as a target for the company based on a 10-point-one percent return on the investment, but if the plant costs more to build, the company would have to come back to the board to request an increase.
The board also discussed a requirement made earlier in the process that the company had to create 10% of its energy from burning bio-mass or renewable resources. Norris says the board has given the company more flexibility on that requirement. Norris says the company has said they don’t know if they can continuously meet the 10% bio-mass requirement, and he says future boards will have to decide if it is worth the cost to consumers to hold the company to that figure.
Norris says there’s some doubt now as to whether it will be possible for the board to meet the requirement. The process of setting rates ahead of time for new power plants was created in 2001 by the Iowa Legislature in an attempt to spur more investment in plants by giving companies a guarantee on their return. The plant could be completed and up and running by 2013 if everything moves forward.