Sunday, May 5, 2013

MidAmerican Wind Project Property Tax Update

It’s time for an update on my efforts to determine if MidAmerican Energy Company is paying the correct amount of property taxes in Pocahontas County. I sent the following request to MEC employee Dean Crist.

Thanks for sending the property tax information that MEC submitted to the county on the Pomeroy project in Pocahontas County.  We already have this information, as it was available through the Pocahontas county assessor’s office.  
I wanted to clarify that we are looking for additional supporting documentation from MEC to compare with your property tax submissions to the Pocahontas assessor.  We were disappointed to hear that MEC was not willing to make any of the confidential utilities board filings available for review to help us determine if MEC has been assessed the correct amount of property tax for your wind project in Pocahontas county.  I did find an IUB document (attached) that helps explain why we wish to examine these IUB filings. The 2009 Nextera testimony (page21) estimated MidAmerican’s installed cost for wind as high as $2685 per kilowatt. That would give a 1.5 megawatt wind turbine a total installed cost of close to $4 million.  By contrast, the first phase of your wind project installed in Pocahontas county in 2007 is assessed at (I believe) $2.58 million, or slightly over $1700 per KW.  Though wind turbine prices do fluctuate, this seems like a pretty wide difference for a couple of years timeframe, and has several of us here wishing we had access to more information as to how MEC determines property tax in order to estimate if school districts and county are receiving the correct amounts. 

Also note that Nextera (one of the largest wind developers in the country) values its wind assets constructed in that timeframe (page18) higher than MEC, $2150 per kilowatt ( $3.2million) for a 1.5 megawatt turbine.  I have not checked what Nexteras wind assets have been assessed by the counties those properties are located in. 

I appreciate the information MEC has sent so far, and your assurances that all relevant costs in the project were taken into account for your county filings,   but we would like additional information.  We would like information that clearly details what soft costs and construction costs were capitalized and depreciated by this project, potentially adding to the assessed value. Also, a breakdown of turbine costs by foundation, tower and nacelle, transportation to site, and pad transformers.  Your submission to the county does not include an assessment for wire – cable  running between turbines back to the substation, only substation , met tower, land, and turbines.

If we can access this information, we should be better prepared for a call that you offered to set up with the MEC tax department.

Thank you,

I received the following reply from Mr. Crist. The IUB document referenced in my request can be found at the link below

“I was able to spend a little time on your request today.

As communicated before, the cost cap is not what projects were built for; the cap is the approved level we can spend under an IUB order without further prudence review. We have always completed projects at or below the cost caps. NextEra had little clue what our construction costs would be. Remember their interest in that proceeding, in my opinion, was to kill all further wind expansion in Iowa.

I did find some cost caps for the IUB proceedings we mentioned earlier:

  1. The first phase of Pomeroy (123 MW in 2007) was constructed under a Board-approved cost cap of $1,811 per kW.
  2. The second and third phase of the Pomeroy project (75 MW in 2007and 51 MW in 2008, respectively) was constructed under an economic test approved by the Board which resulted in cap caps ranging from $2,230 per kW to $2,480 per kW.
  3. The fourth phase of the Pomeroy project (7.5 MW in 2008) was added with a Board-approved cost cap of $2,300 per kW.
  4. The fifth phase was an addition of 30 MW in the last ratemaking proceeding. At this moment I cannot find what year it was added as projects were added in 2009 – 2012. Cost caps for these projects were $2,050 per kW in 2009, $2,200 per kW for 2010 and $2,300 per kW for 2011-2012.

I also include the actual costs by wind farm (not cost caps) on pages 410 and 411 of FERC Form 1.  See attached for cost as of 12/31/2012. I have highlighted the Pomeroy project.

I can find nothing more to supply at this point. “

I’m reviewing the FERC document, but really, this just raises additional issues to the ones listed in other posts on this subject.  My understanding is that the Pomeroy Project has only three different property tax rates, but Dean mentions the utilities board cost cap for this project was adjusted 5 different times.

I didn’t get any of the itemized costs I asked for yet.

As for Deans comments that Nextera was trying to kill all future wind development in Iowa, WOW!
My understanding of IUB DOCKET NO. RPU-09-0003 was that it was an argument between Nextera and MEC over who got to build a wind expansion project in Iowa, MEC won. Only these two companies know the inside details of this big wind fight.  

Two things seem certain however.
1-      MEC recently opposed further expansion of wind in Iowa when they registered against SF372, the farmer owned energy bill that did not advance at the legislature this year. Nextera only monitored it.
2-      I still haven’t gotten to the bottom of this property tax issue.  

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