By Seth Boyes,
Alliant Energy recently celebrated the grand opening of the company’s new operations center on Park Street in Decorah. (Photo by Zach Jensen)
Officials with Alliant Energy released an updated preliminary feasibility study last week, estimating costs related to the city of Decorah’s latest proposal to establish a municipal electric utility.
Alliant Energy currently provides electrical services to most of Decorah, and the new study was released less than four weeks before Decorah voters will head to the polls to decide whether the city may establish its own electric utility.
The updated study estimates the city of Decorah would need to spend approximately $72.1 million to acquire Alliant’s existing local systems in addition to about $13.5 million in startup costs and other expenses — for a total cost of about $85.6 million. Alliant’s updated study was conducted by Concentric Energy Advisors, which produced a similar study on behalf of Alliant in 2018 ahead of a similar referendum. That study had estimated the acquisition costs at about $38.7 million with another $12.3 million in other costs for at total of about $51 million.
“The utility industry in particular has seen some extraordinary price escalation, so that is partly driving some of the cost increases,” said, Briana Adams, a senior project manager with Concentric, later noting the price for a specific type of transformer rose by 79 percent in 2022 alone.
The firm also added a disclaimer to the updated study, saying its findings are based on public and non-public information provided by Alliant Energy and that Concentric “did not independently validate such information and does not provide an opinion on its accuracy.”
Concentric says MEU would result in net cost to Decorah
Concentric noted the projected $85.6 million cost of municipalization is several times larger than the city of Decorah’s budget for the current fiscal year. Concentric estimates the proposed electric utility would serve about 3,900 customers in Decorah — which had a total population of almost 7,600 people in 2023, according to data from the U.S. Census Bureau — and Concentric said those customers would ultimately pay for the cost of establishing the city’s utility in some form or another.
In addition, he said Concentric expects increased energy costs under the city’s proposed MEU could result in low income customers spending an additional 3 percent of their income to cover energy costs.
“This is potentially very costly thing for the city to move forward with and it will have a disproportionate impact on low income customers,” Concentric Project Manager Michael Buckley said last week.
Concentric personnel said the updated study also factored for Alliant assets which would be lost or stranded if municipalization ultimately takes place — such as Alliant’s operations center in Decorah or the company’s $4 million battery near Vennehjem Park in northern Decorah. The firm also noted the transition process to a city-owned utility could take years and would require the involvement of the Iowa Utilities Commission in setting specific costs.
The firm estimated, if Decorah establishes an MEU, the city would see a net cost of about $30 million over 10 years and possibly $43 million over 20 years, and Concentric said the city would need to set its rates at a level capable of recouping such loses. Concentric used what Adams called a conservative estimate when calculating Decorah’s future capital expenditures, and the city’s projected energy rates could potentially become approximately equal to Alliant’s rates at some point beyond 2050, according to projections the firm presented last week. However, Adams stressed such projections become less accurate as time goes on, and the intersection of the two rates would be pushed further out if the city encounters unexpected major expenses in the future.
“A lot of the municipal utilities that are out there now have been out there for a long time. They don’t have to absorb the debt costs that a new municipal utility would have to,” Adams said. “That highlights why municipalization is so difficult to do these days, and a big hurdle is the high cost involved.”
Adams went on to reiterate several points previously made by officials with Alliant, saying the most recent MEU formed in the state of Iowa was established in 1974 by the city of Aurelia. A handful of other cities in the state have attempted to do the same since that time, with a group of five cities petitioning the state utilities commission around 2008 — all of which were denied. Adams said, in each case, the cities underestimated the cost of municipalization and, while each of the five estimates from utility providers like Alliant were higher than the figures ultimately calculated by state officials, she said the state numbers averaged out to about 76 percent of the utilities’ estimates. She specifically highlighted the city of Sheldon’s attempt to municipalize around 1990, saying that city had estimated a cost of about $5-6 million, while the utility had estimated a cost of about $14 million — the Iowa Utilities Commission found the cost to be approximately $13 million.
Study also examined financial affects of solar in Decorah
Both Adams and Buckley said a previous effort to municipalize Decorah’s electric service in 2018 seemed to largely be focused on pursuing a greater emphasis on local renewable energy. But Buckley said affordability seems to be a major factor behind this year’s referendum — Alliant has sought at least two rate increases since the 2018 referendum failed, and city officials previously indicated they aim to explore alternatives for providing electricity to Decorah residents, should Alliant’s rates become cost prohibitive for locals.
However, Buckley said the prevalence of renewable energy in Decorah would also be a factor when considering the financial impact of establishing a municipal electric utility. He explained, when customers take advantage of net metering options — offsetting their electric rates by generating energy through solar panels or other renewable energy — other customers under the same electrical provider make up what he called the resulting revenue shortfall.
“The reason this is important for Decorah is because it’s a much smaller population of customers that would be paying that revenue shortfall,” Buckley said. “So this cost-shift, instead of being spread out across hundreds of thousands of Alliant’s customers in Iowa, it would be spread out over the roughly 3,900 customers in the city of Decorah. Every Decorah resident that does not have solar would therefore have to pay more to make up that revenue shortfall.”
Buckley went on to say about 3.6 percent of Decorah’s electric customers took advantage of net metering in 2018. That figure was close to 8.5 percent as of 2023, he said. He also noted Alliant has been investing in more renewables, saying renewable energy made up about 16 percent of the company’s portfolio in 2014 and stood at about 46 percent as of 2023 — Wagner confirmed the company at times purchases energy generated by Luther College’s wind turbine west of campus across off Highway 52.
Randy Bauer, director of operations with Alliant Energy, previous estimated only five municipal electric utilities in the state of Iowa offer net metering. Company officials said last week that, if the city of Decorah does not offer net metering under its proposed utility, residents who currently offset their energy costs by generating solar energy may see a decrease in financial benefits.
“”I think they would still be able to use their solar to cover their energy when they need it — they could potentially in stall batteries in their house to absorb that excess energy,” Buckley said. “But basically, at night and when it’s not sunny, they would have to purchase electricity from the utility, so they would lose a big benefit of what they have right now under the net energy metering contract.”
Officials with Alliant said the company has hosted at least five small-group informational sessions since mid-December of 2024 to discuss the city’s proposed utility, and will continue to host them through this month — those interested in potentially attending an informational session are asked to email decorah@alliantenergy.com. Cindy Tomlinson, director of operational resources with Alliant, said as of Feb. 5, the company was still evaluating whether to hold a broader public forum before Decorah residents head to the ballot box on March 4.
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How much is Alliant spending on this Campaign to sink a simple Study?