I've been reading Matt Stoller for information on Monopolies, market concentration, and anti trust.
As a farmer, many of the challenges our operation faces are monopoly related. Matt has been calling attention to health care concentration lately. Our family recently had a health care experience that once again shows the challenges monopolies pose for we rural Iowans.
But I'm an energy blogger, so I'll take Matt's advice here and apply it to the utility industry.
As you can see from my previous post, I don't think MEC's opinion piece or their ads on TV are very truthful .
I produced some evidence in the previous post that shows customer owned solar does indeed provide a benefit to customers who don't own solar. I believe that's more than MEC has done so far to back up their claim. In fact, I would translate MEC's messaging so far on the legislation they helped write as "Just give us all the solar like you did with wind energy , you rubes!"
Legislators should ask MEC to prove their claim is accurate. Will elected officials do that ?
Matt Stoller hasn't commented on utility monopolies much yet. but his comments do seem to apply.
The "net metering bill" was amended to exclude co generation facilities producing combined heat and power; renewable fuel producers registered with the U.S. Environmental Protection Agency as manufacturers; facilities that use less than 10 percent biomass; and private generators with a capacity greater than one megawatt, as noted by bleedingheartland, whose post covers the political players on this bill. I'd be surprised if any of these types of facilities have solar installations that are net metered, though there are probably distributed generation installations on the type of facilities mentioned here.
The Iowa Utilities board lists net metering size limits at 1 megawatt. Net metered or not, private owned solar distributed generation. still has ROI concerns with the tax implications I noted in part one.
Demand charges are still assessed to these facilities, net metered or not. Larger facilities also pay much less for electricity than residential and small businesses. Let's look at an example. Here is a an industrial electric bill from a MidAmerican customer.
If this customer installs a solar array that offsets the businesses electric usage, the user will still pay over $20,000 per month in demand charges, even though in part one, I noted that this customer would be providing significant peak electric savings for MidAmerican. Also, this user is paying less than 4 cents for electricity during peak periods, and less than 3 cents for off peak (this bill is a few years old). Adding solar to facilities like these, probably would yield a poor ROI, more reasons that I favor tariff payments to private renewable energy owners over net metering.
So, exempting these types of facilities from the legislation is probably not opening up MidAmerican to much risk. Exempting them does, however, further raise questions with MidAmerican's claim that solar owners "don't pay their fair share", as numerous other groups have picked up on.
In order to better understand the current effort to monopolize solar in Iowa...(well not just Iowa, It looks like similar bills are pending elsewhere) , let's look at a few of MidAmerican's previous legislative efforts.
Not in any particular order, but starting with Midamerican's effort that enabled it to corner the wind energy market from the 2003 time frame, I believe. Earlier, the legislature passed a renewable portfolio standard requiring 2% of Iowa's electricity to come from renewables (wind). Iowa utilities were not allowed to own wind energy because policy makers at the time envisioned lots of locally owned wind farms, and also because Iowa utilities fought the RPS hard. Instead, we got one wind project owned by Enron.
In 2003 the legislature was considering a proposal to increase the RPS, which called for a percentage to come from distributed generation.
Just like the current effort to monopolize solar dangles a MidAmerican solar project to legislators, MidAmerican instead promised to build a wind project if legislators would change the law in 2003 to allow it to own wind energy. Identical bills appeared in the House (led at the time by Chris Rants) and the Senate (Stew Iversen). A group of Senators attempted to amend the bill by requiring some of the wind energy to come from farmers -locally. The amendment was heavily opposed by the unions and the utilities, and failed. So, unions and business groups teaming up against farmers, small business, and home owners just like the current solar effort. Democrat Mike Gronstal was senate minority leader at the time, and currently is working as a lobbyist for one of the unions supporting the MidAmerican solar bill. Chris Rants is now a lobbyist working for the Iowa solar trade association.
Then governor Democrat Tom Vilsack signed the legislation, and soon became a paid wind consultant for MidAmerican after the session ended. Evidently this passed ethics scrutiny, but really? So, the current solar effort by MEC , looks nearly identical to the wind legislation of years ago to me.
Here we should shift to the Iowa utility effort to push deregulation in the 2000 time frame.
The 2003 wind bill essentially deregulated the wholesale side of electricity in Iowa but no one called it deregulation. It was wind legislation. Now, when I say deregulate the wholesale side, MidAmerican was allowed to build excess generation funded by the ratepayers, with the option of moving that generation into the rate base for a guaranteed rate of of return. Independent wind producers interconnecting to MidAmerican would only get the utility's avoided cost estimate. See how that works? Deregulation just for Iowa investor owned utilities. It's been awhile , but I think my memory is pretty close. The 2000 effort also would have deregulated the retail side. Tax laws were changed (replacement excise tax) in the late 90s to lower utility property taxes to prepare them to compete in a deregulated environment.
A pretty weird coalition formed to oppose deregulation - municipal utilities, the rural electric coops, the unions, and the environmental community. Complete deregulation failed in Iowa, most likely because the Enron scandal broke while Iowa legislators were considering it. I'll note that my understanding of the 2003 Iowa wind bill is that it recreated California legislation that caused the Enron scandal, but folks sharper that I are encouraged to weigh in. Friends tell me the utilities made some interesting offers to split the coalition above, but to no avail.
The 2003 wind bill only deregulated the wholesale side of electricity, evidently easing the fears of the unions, RECs, and Munis. The environmental groups, who were supporting the expanded RPS, were suddenly in a funny position, and many of them split to support the MEC wind effort. Years later, in an example of comic reversal, environmental groups, losing at the utilities board, went to the state supreme court to fight for the ability of a solar installer to act as a third party monthly solar lease entity to homeowners (enviros are for deregulation now?). The utilities opposed (against deregulation?) and lost. 3rd party solar leasing likely would have been possible under deregulation, With perfect hind sight, The 2000 deregulation bill would have been terrible for MidAmerican, but the utility wanted it badly (legislators still jump to accommodate the utility today though), The monopoly now prefers to hide behind regulators these days. MEC achieved lower taxes (replacement tax), while retail customers still can't choose their electric providers. The environmental community is now in danger of losing net metering, their effort from decades ago, after losing the energy efficiency programs they also advocated for years ago in the last legislative session.If retail customers could choose their provider, maybe the utility with the best efficiency programs and KWH price would be at an advantage.
MidAmerican also proposed building a nuclear plant a few years back. Nuclear legislation once again appeared in both the state senate and the house that not only let MidAmerican start charging rate payers while MEC decided if they actually wanted to build the plant, but also made ratepayers liable for costs even if the plant never was built for some reason. I haven't read that legislation for a long time. If memory serves, ratepayers were also liable for accidents that might occur at the plant.
If you'll pardon the joke, MEC wanted "all of the fun and none of the fallout". movie buffs will probably recognize that line. Now with nuclear plants putting terrible burdens on ratepayers around the country, this would have been a pretty stupid idea for Iowa.
Sadly, legislators tried their darnedest to pass this bill. The only thing that stopped it was the Fukushima nuclear melt down happening while the legislature debated this.
So, just because MEC wants legislation, doesn't mean its a necessarily a good idea for the utility or Iowa. Even the wind legislation from years ago, while good for utility shareholders, had the following consequences for Iowa .
Virtually eliminated competition from other wind projects, arguably a bad deal for ratepayers.
Wind energy has mainly developed in Iowa as an extraction industry. Wind leases paid to landowners are still probably less than 2% of wind turbine gross revenue. So count the number of turbines in Iowa, and it quickly becomes apparent that $billions of dollars are extracted from rural Iowa annually to be deposited in Berkshire Hathaway's bank account. Also consider that about half of Iowa's farmland is absentee owned (the last time I checked). So wind lease money doesn't necessarily stay in Iowa either. It kind of maters if the wind turbines are owned by rural Iowans.
Yes, I know some counties have received a "wind fall" of property tax revenue from these projects.
But I've posted ample evidence on this blog that county assessors are leaving wind property tax revenue on table. I'm a reasonable guy. Please explain to me, anyone, why I'm finding all the tax discrepancies listed on this blog. Plus, look at the counties who have seen no benefit from wind because the legislature favored MidAmerican. How many independent wind projects were never built because of the 2003 legislation? A robust local owned wind policy would spread property tax dollars more evenly around the state.
These days there is substantially more resistance to wind projects in the state. Don't take my word for it. A quick internet search will provide plenty of articles. MidAmerican has the most wind turbines in Iowa, so it seems reasonable that the utility might share some of the responsibility for that. For example, the MidAmerican project near me received a bunch of complaints. Don't take my word for it. Spend some time in the neighborhood. For comparison, a non utility wind project next to the MidAmerican project has generated no criticism to my knowledge. The projects look vastly different when you drive through here. The private project is also more accurately reporting their wind valuations IMO. In my area, it comes down to the what the Europeans have discovered. Maybe we should learn from them.
There are many other issues. Full disclosure - A MidAmerican turbine sits on my farm. I could write extensively about that experience,. For now, lets just say I wouldn't lease them a spot for that turbine if I had it to do over again.
So will legislators do the same with solar that they did with wind energy? It looks that way, judging from the last election cycle. Candidates in Iowa argued who was most responsible for what can be described as the least imaginative outcome for wind energy in Iowa. Even though, as noted above, the Political decisions on wind were made before their time. Still, if I had a buck for every politician that was photographed in front of a wind turbine...used turbines in their campaign ads...
I think pols would gather more support in rural Iowa if they instead talked about how future energy development in Iowa could be improved, not trying to take credit for what we have now.
I hope legislators do better with the solar opportunity in front of us than they did with wind energy. heck, its probably not even too late for Iowa to adopt a decent locally owned wind policy...
Are any politicians talking about that?
More to come in the next post.
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