Apples, oranges, MEUs

I wish to add some extra context to Dan Baldwin’s letter in the Jan. 2 Leader, regarding his opposition to Decorah’s March 4 vote to authorize continued exploration of the feasibility of a Municipal Electric Utility.

I appreciate Dan’s numbers and research, pointing out that the city property tax levy has risen by 41.94 percent vs. the US cumulative inflation rate during that time of 25.44 percent. The problem comes with the conclusions drawn by extending that difference into an expectation of a Decorah MEU Board’s (mis)behavior when setting rates. This is an apples-to-oranges comparison. Both are fruit, but not equivalent.

Dan addressed three basic items: local taxes, investor-owned benefits for public services and sustainability. First, the numbers, as Dan said, then some observation.

The simple answer about the increase in the local property tax levy by 41.9 percent is because total property assessed values have increased by that much. The state legislature sets the rules the county assessor must follow in establishing assessed values, taxable values, and the tax rate per $1,000 of value. Each entity that receives its legally limited share of this property tax pie — like counties, cities, schools, community colleges, hospitals, ag extension and others — typically relies on this as a primary funding source to provide high quality services we expect. Local boards have few options except to accept their entire share and do their best with it. Personally, I served on a school board for 12 years. Neither then nor since have I seen evidence that our friends and neighbors who serve on these boards are irresponsible stewards of those revenues and who just want to raise our taxes relentlessly.

So about that 41.9 percent levy increase: taxes tied to real estate increase with its value. Don’t like it? That’s a legislature problem, not a city council’s. According to a web-based housing inflation calculator, the national housing value increase since 2017 is 33 percent. Decorah is 48 percent. Question: Has your home value increased since 2017? Ask a real estate agent or try buying a house in Decorah.

Why do these numbers matter? Because of what I feel is an unfair extension of logic in Dan’s letter. The really telling observation and conclusion he makes is toward the end. He states, “My opposition to the MEU initiative is not based in ideology or partisanship. My opposition stems not from any paucity of community spirit, or civic disloyalty, or contempt or distrust of our elected officials.” I applaud and do not question that comment.

However, the next sentence betrays that spirit by applying an inappropriate extension of his primary observation about local property tax levies vs. US inflation into a fear about future local officials ultimate behavior. He continues, “I trust that our city mothers and fathers would, if given the opportunity, do with our electricity rates what they have done with our property taxes, which is to say hike them relentlessly.” Apples-to-oranges. Property taxes based on your property’s valuation is not equivalent to establishing your electrical rates based on a utility’s actual costs.

The other apples vs. oranges point is that, when it comes to electrical service, all costs are paid by the consumer of the service. Whether investor-owned — like Alliant — member-owned — like a rural electric cooperative — or municipal-owned, electrical rates pay for it all. If Decorah approves and, ultimately, the Iowa Utilities Commission determines that it is the best option for Decorah, the revenue bonds needed to purchase the infrastructure and all the operational costs will be paid for through our electrical rates, like they are now, not through taxes. We rate-payers pay for all of Alliant’s costs, including all their corporate overhead and the limited but guaranteed profits to their investors in exchange for being a regulated monopoly.

There are basically three components to electrical service: power generation, power transmission through high-voltage lines and power distribution to customers. Investor-owned utilities typically provide all three. This is called vertical integration. In 2008, Alliant sold their transmission lines to ITC-Midwest, but they still produce and sell electrons mostly into the grid. If the utility is a producer, it is not in their interest to promote lower usage because they need to sell what they produce. It could be argued that this as an inherent conflict of interest in comparison to the interest of the public to reduce excessive usage, expense and environmental impact. Thus, the need for regulation to offset the monopoly position they have been granted. And, thus the three-person governor-appointed Iowa Utility Commission’s need to approve rates that balance the public interest and the demands for shareholder profits.

RECs and MEUs are typically just locally led electrical distributors. This gives them an inherent interest in emphasizing good distribution service and operating in a manner that matches the needs and desires of the public they serve. Energy efficiency is the friend of a distributor because the cost of power that you only buy in order to resell is just a pass-through expense. However, joint ownership of older power plants can complicate these goals. RECs and MEUs are not regulated for the public interest by the IUC because they both answer directly to their customers through representative boards. In other words, in a consumer-owned business, the interests of the owners are inherently served by representatives they select themselves. Personally, I have greater trust that local utility leaders understand our local public interest better than a multi-state utility and a regulator in Des Moines.

And this difference – the inherent ability of a locally owned utility to be a positive force that reflects local values and reduces the outflow of dollars from the community – provides great potential for sustainability issues, both environmental and social. Personally, I’d like to see us be innovators and leaders in “greening” our local power, but doing so in a way that also provides the benefits of affordable green power to those who are not able to put solar on their roof like we did. And the technology to do really exciting things is just getting started. An MEU can give us this option.

But remember, if we vote no, we are saying we don’t even want the facts needed to know if becoming our own electrical distributor is feasible.