Sunday, January 24, 2016

MidAmerican wind propery tax update


 Here are a couple slides from the property tax filings submitted by MidAmerican (MEC) to the Webster county property tax assessor. See the previous post for a MEC presentation showing higher installed wind project costs than the utility reported to the county. The hand written math calculations were on the document when I received it. 








 There was also a filing in regard to a substation that MEC classified as wind property  in 2013.  Its called the enXco substation, as I think enXco was involved  in the wind project development at this site. MEC does a walk back in this filing, and now asserts the substation is not wind property and will be taxed under the Iowa utility replacement tax, presumably at a lower rate. If this substation was built in order to bring wind electricity onto an area transmission line, it seems like its wind conversion property. If it's an existing substation that was upgraded to accommodate the wind energy, the upgrades should be wind conversion property, as should the small  transmission line and smaller substation listed in the letter. There might be a clause in the Iowa Utility Replacement Tax code that supersedes  427B.26 SPECIAL VALUATION OF WIND ENERGY CONVERSION PROPERTY, but I haven't been able to find it yet.

MEC seems to be telling the county how it is, even though wind energy conversion property is assessed locally. The wording in Iowa code 427B.26 seems to make this a local government choice, not the utilities. The memo to assessors from the department of revenue in the previous post would also seem to suggest this substation should be wind property.   






Since the utility has 20 some wind projects in Iowa, I'm concerned that there may be multiple potential errors in property tax assessments around the state.
More to come.






Wednesday, January 13, 2016

Why Does MidAmerican list higher costs for their wind projects than the utility reported to county assessors?




Here’s an update on the MidAmerican wind property tax issue. Numerous posts can be found here on this subject.
 I was asked to review the Webster county wind property tax documents, filed by MidAmerican, by some of the local government folks in that county, and met with county supervisors in the summer.  Following the meeting, I checked the Iowa Utilities Board (IUB) website to see if the board listed an exact per kilowatt cost for the MEC Lundgren (Webster county) wind project, as the board has done for previous MidAmerican projects. I came up empty handed, and a letter sent to the Iowa Utilities Board requesting information on the installed costs of MidAmerican wind projects in my area of Iowa generated a response inviting us to search for the information online, noting that some of the projects we inquired about were not in the electronic filing system. We were invited to visit the Utilities board office during regular business hours to review those files. Considering the IUB provided MEC wind project cost information over the phone to the Calhoun County assessor, the board’s lack of assistance was puzzling, and a little disappointing. The board staff member did mention some of the information requested might be confidential. This would make it very hard to use in a public property tax discovery process.  However, the utilities board filings on project cost would seem to be necessary in order to follow Department of Revenues instructions to county assessors to be sure that all project costs are accounted for. An excerpt of the Departments memo to county assessors is included below.
    



MidAmerican has even been saying their wind projects cost more than they are reporting to counties. While looking for information online, my document search results turned up a MEC presentation that contained cost information about Lundgren.





$1.9 billion divided by 448 total turbines = a value of $4,241,071 per turbine. The utility reported a value of $3,493,871 for each turbine to Webster County. Some of the total project costs will be substation and transmission upgrades, but the utility board document excerpt below clearly states that they are wind related, and assets in in each county should be taxed as such, not taxed under the Iowa utility replacement tax. Webster County document filings indicate MEC has classified wind assets under the Iowa Utility Replacement tax.
“Once the analysis is complete, MISO will identify transmission facilities required to interconnect each Wind VIII site. These facilities include interconnection facilities, new transmission lines, substation facilities and miscellaneous facilities. Most of the facilities are expected to be located on property owned by MidAmerican or another transmission owner which means that no easements will be required. However, there may be some facilities that will not be located on property owned by MidAmerican or another transmission owner in Iowa. All easements required for these facilities will be obtained in accordance with Chapter 478 of Iowa Code and 199 IAC 11. This is consistent with some of MidAmerican’s past wind projects. All MidAmerican transmission facilities other than facilities located entirely on MidAmerican property will be addressed in separate Board dockets focused on those facilities.”

The project cost numbers here are substantially higher than the utility is reporting to counties. It also appears the utility has also listed wind transmission and substation upgrades under the Iowa Utility Replacement tax, instead of 427B.26, which I believe contains a higher tax rate.     
427B.26 excerpt -  "Wind energy conversion property" means the entire
      wind plant including, but not limited to, a wind charger, windmill,
      wind turbine, tower and electrical equipment, pad mount transformers,
      power lines, and substation. 

So, there you are. I’ve checked 3 counties so far, and It appears the MEC wind property tax rates might be too low. It would be nice if assessors, utility, and the iowa Utilities Board would be more helpful in sorting this out. Webster County is currently in the process of replacing their assessor.

Stay Tuned.

Monday, October 13, 2014

Iowa Renewables Update For October 2014




I’m still working on a tax and regulatory post to explain why current state and federal policy discourages farmer owned renewables (it also discourages business and individual renewable systems). That will be posted sometime after harvest. Is there a tax professional out there interested in co-authoring a piece?  Here are some “around the interweb” items and thoughts about farmers and climate policy in the meantime.  

 Nathanael Johnson @grist.org called on farmers to march at the recent climate rally , and spent some time discussing Iowa farmers. Grist is a great source for energy and climate writing. However, this post was particularly interesting to this farmer. Johnson correctly points out the disconnect between Greens and Farmers. Asking farmers to attend a climate rally scheduled in the middle of harvest is an excellent example of this (Sorry Nathanael, just couldn’t resist). 
His closing statement also caught my eye -  “In the past greens have largely dismissed conventional farmers because we’ve thought they were opposed to our goals. But if agriculture emerges as a true political power against global warming, greens will be ready to listen when farmers say, “Hey, you should be giving us some credit for our environmental efforts.”  I’ve found state and federal level green groups have indeed been dismissive of farmer owned renewables in the past as well (with at least 1 exception). I know quite a few of them, and have found them mainly enamored with  controlling emission levels, energy efficiency, utility scale wind – transmission lines, and lately solar leasing…but not focused on the barriers to farmer renewables.  These positions haven’t built much public support in the voting booth for climate policy and renewables.   
 Ag groups haven't had farmer renewables on their priorities list either, but that might finally be changing now that some farmers are starting to push them. , So, maybe Greens and Agriculture might have an issue they could agree on. I’m guessing German Farmers did march in this rally calling for moving Germany to 100% renewables. After all, farmers are major players in renewables there. In the Midwest, not so much.  




Who knows, if Greens and Ag could actually agree on this issue , maybe these groups could start to find consensus on the tougher climate policy goals we need. A lot of farmers are ready to do their part, Sadly, public policy isn't ready for them.    

Elsewhere, a utility funded study says their customers with solar installations help – not harm utility ratepayers.  

The Iowa Utilities Board is currently conducting a review of state Distributed Generation policy, and it appears they will do little to help farmer owned renewables in this docket. Feed in Tariffs, and statewide net metering will be not be taken up, and there’s no guarantee they will standardize interconnection procedures either.   In the past, the board has suggested the legislature take up some of these issues. Look for a full post on this.

There seems to be a lot of misinformation circulating in U.S. media on the German renewable revolution. This blog by Craig Morris is a good place to get the facts.

Iowa could only manage a number 30 rating on this “best state to locate your clean energy company” list. Sigh.

Iowa farmer opposition to a new transmission line continues. 

The positive uplifting link in this post, if you’re checking such things, is the above link on Marching German farmers. Thanks for stopping by the blog.  

Wednesday, August 6, 2014

Does MidAmerican pay the correct wind property taxes in Iowa? August 2014 update




I found the following article by Loren Hough, for the Chronicle Times in northwest Iowa. It assembles a lot of good information about wind project property taxes in NW Iowa. Of interest was the following -    “According to Mike Prior at the Iowa Wind Energy Association (IWEA), the estimated cost of new wind energy is generally pegged at $1.8 million per MW in 2014. That wind energy cost estimate figure was at $2 million per MW in 2012.”  

My last post on this topic concentrated on one small part of the MidAmerican (MEC) project in Pocahontas and Calhoun counties, using 2.3 megawatt turbines. In that post, I noted the current assessment of $3,631,990 per 2.3 megawatt turbine, installed in 2012, at MEC’s Pomeroy project. If we use Mike’s above figures, It appears that IWEA (MEC is a member) thinks it should cost almost $1 million additional dollars to install a 2.3 megawatt turbine.  

2012 costs - $2 million per MW x 2.3 megawatt = $4,600,000. 

The article also notes that O’Brien county estimates the value of MEC’s 500 megawatt project there (214 turbines, 2.3 megawatts each) at $900,000,000, installed in 2014.

$900,000,000 divided by 214 = $4,205,607.   IWEA’s 2014 cost estimate is $1.8 Million per megawatt. 

$1,800,000 per MW x 2.3 megawatt = $4,140,000.

 Much closer to IWEA’s estimate. What exactly is going on in Pocahontas and Calhoun County?  I haven’t been to determine the reason for this huge difference in assessed value by examining the MEC filings in these 2 counties.   

I want to clarify that I’m a huge wind energy supporter (you won’t find a bigger supporter). I’m just trying to determine if MEC is paying the correct property taxes on their wind assets. I also tend to prefer locally owned wind turbines over the absentee owned projects. So, let’s take a look at that.   

The article correctly points out that current wind development has been a “windfall” for the counties that land a wind project. The O’Brien county assessor notes that the MEC project will net a $6,480,000 annual property tax payment when assessments are fully in. So, nothing to sneeze at, but what would happen if this project were locally owned? The property tax amount would be the same, but gross revenue for electric sales would also stay in the county.  

The Iowa Energy Center has a nifty calculator for estimating wind turbine potential. The calculator did not have a 2.3 MW turbine choice, so I used a 1.6 MW turbine instead, and selected a town in O’Brien County . Here is the estimate. 


A 1.6 megawatt turbine will produce approximately 6,725,742 kilowatt hours annually. It takes 312 of 1.6 megawatt turbines to = the projects 500 megawatt size.   Iowa Utilities Board 2009 Docket RPU-09-0003 contains an estimate that MEC is paid 7 to 9 cents per kilowatt hour for wind production. 



6,725,742 x .07 cents per kWh = $470,801. That figure x 312 turbines =   a much bigger annual revenue number than the annual property tax number. $146,890,205 annually for the county in gross turbine revenue!  

Does anyone else think it’s time for state policy that encourages local ownership of wind energy? That policy would spread wind energy all around the state, letting more counties benefit than the select few that hit the home run by landing a big project. And Iowa sure isn’t keeping much wind profits in the local economy.  This post was originally going to be about why Tax and regulatory policy is preventing farmer owned wind energy, but this seems to be a good Segway into that topic. 

Thanks for stopping by. 

Here’s a positive story about renewables, as promised. What happens when you design a successful locally owned energy program? Quite a bit!     

Saturday, July 26, 2014

The Clean Line Transmission Controversy In Iowa



Regular visitors to this blog can probably guess that I’m more interested in writing about farmer owned distributed generation (DG) than utility scale renewable energy projects. To clarify, I’m not really opposed to the big wind thing, but I’m opposed to large wind projects as the only business model for developing wind resources. I’m also of the opinion that small scale energy projects are more cost effective than centralized generation supported by transmission lines. Current U.S. tax policy and regulations discourage farmer owned DG, but that’s really a topic for an upcoming post. So, with that out of the way, let’s look into the Clean Line controversy a little more thoroughly, as it has generated a fair amount of media coverage in Iowa. 

Clean Line is a is a proposed transmission project that bills itself as a vehicle for carrying wind energy from O’Brien County in Northwest Iowa to markets in Illinois.  Farmers and landowners along the proposed transmission line route are quite upset at the prospect of a private company possibly using eminent domain to seize farm land for that companies own use. This has resulted in what I think is really the first organized opposition to renewables in Iowa. Several Farm publications have covered this story.  It was on the front page of a recent Wallace’s Farmer issue. The Iowa Farmer Today (IFT) also covered it, noting that over 1000 oppositions to the project have been filed at the Iowa Utilities Board.  IFT also noted that “Roger McEowen, director of Iowa State University’s Center for Agricultural Law and Taxation, said the first thing landowners need to realize is the agreement as it stands favors Clean Line Energy.”  Also, it appears that the transmission line compensation is a one-time payment, while wind projects generally compensate landowners annually. So, it’s easy to see why farmers are peeved.

While I’m very concerned about potential abuse of eminent domain in Iowa, I think it’s unfair for the opposition group to single out Clean Line on this issue. Eminent domain is typically used for projects that serve a public need, and Clean Line opponents don’t seem to believe the company has passed that test. Then they should also be concerned with other company’s eminent domain use in the state. In the Iowa Utilities Board 2009 Docket RPU-09-0003,


 Micheal O’Sullivan with Nextera Energy testified that “MidAmerican had non-requirement sales for resale in 2008, according to its FERC Form 1 filings, of approximately 38% of its total sales of electricity, and approximately 42% of its total MWh sold”. 


So, it looks like a portion of MidAmerican’s (MEC) wind is sold on the wholesale market. Therefore, Clean Line opponents should also be concerned with MEC having eminent domain at its disposal to expand their AC transmission in Iowa for excess generation.
  
The Iowa Legislature introduced a bill in 2014 to tighten requirements for use of eminent domain for this type of project. Early versions of the bill would have also affected AC transmission lines. Later changes were proposed so the bill would only pertain to DC transmission lines, the type proposed by Clean Line, giving the state’s other utilities a pass. The bill didn’t advance, but why would legislators write an eminent domain bill that only affects one company, and not a bill that helps all landowners approached by developers.  The bill was almost certainly lobbied on by utility interests. It was also opposed by some environmental groups, who want the Clean Line project. It will be interesting to see if some of those same enviro groups will now oppose eminent domain use by a Texas company that has proposed an oil pipeline in Iowa. Some of them are already citing concerns about the pipelines potential impacts on farmers. It seems that the Clean Line opposition group might also oppose eminent domain use to acquire land for the pipeline. 

A number of groups do support the Clean Line project, so let’s examine the “for” position as well. Supporters like the potential additional clean wind energy the transmission project could bring online, and wind developers have secured easements where the Clean Line Substation has been proposed.  I’m not convinced that the new transmission line will just carry wind energy, as federal guidelines try to give equal transmission access to all forms of generation. Wind generation in that section of Northwest Iowa would have a very good capacity factor, probably close to 45%. But that still means that quite often, it could carry coal power from the Dakotas. Wind is currently without subsidies, as the federal production tax credit has expired, while coal still enjoys federal assistance (see my past post, or try Google). So, coal power could have an advantage over wind for electric power purchasers. That may balance out somewhat with the proposed EPA regulations for power plants, but you get the picture.  This study by Capx2020, while from back in 2007, seems to think Regional Transmission Projects may help import coal power to areas of the Midwest (page 15 – PDF file). 

I found the above link in the comment section of an article discussing the nebulous sounding idea of a “Special Purpose Development Corporation — created for the sole purpose of acquiring properties for a transmission project and then selling the bundled parcels to the developer. The number of shares granted would depend on assessed value.” The concept was pitched by the Center for Rural affairs, to help decrease landowner opposition to transmission projects. While the think tank’s attempt to “think outside the box” is somewhat refreshing to me, Clean Line opponents didn’t seem to care for it, as a “small riot” erupted in the comment section of the article. 

So, how do we go about encouraging more renewable energy development in the Midwest? I’m going quite a bit further out of the box. Annual payments to landowners for wind projects have worked well to date, so it seems annual transmission line easement payments might work better to secure rights for new power lines. It’s pretty clear that eminent domain use by renewable projects pisses people off. It’s an old business model tool that doesn’t seem suited to modern clean energy development. Letting affected landowners have actual ownership in the wind project and transmission line might work a lot better. Even wind energy trade magazines have noticed that the current model for wind development might be in need of improvement. Mark Del Franco at North American Windpower notes that “Times have changed, and so must the actions of wind developers. It’s the new reality.”   

However, I’ve noted before that I think it’s high time for a robust distributed generation policy to encourage more local ownership of wind and solar. It will build more public support for renewable energy policy. It might also help larger projects as the public will become better educated about wind and solar when they can own it. The public might start ignoring misinformation about renewables. It will also help regulators plan and watch for ratepayer interests, given that some are projecting that as many as half of the countries electric customers might generate their own power by 2028.  Some of the many projects planned around the country just won’t be needed under that scenario. Having a stable DG policy in the country would help regulators decide which of those projects will be warranted. Until that happens, at least some forward thinking areas of the company have decided not to wait. I’ll close with a link to a positive example of rethinking our plan for modernizing the countries electric grid.         


Update 
I found an additional link for this post. It is a Fort Dodge Messenger story about Clean Line meeting with local economic development officials in northwest Iowa. It contains the following quote "Because of the federal regulations that require line owners to allow interconnecting, Detweiler said there is the likelihood of additional revenue by other entities moving power along the system."   So it looks likely this project will carry some coal power. Mr. Detweiler is an employee of Clean Line.