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.