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United States

MidAmerican freed to raise consumer rates

UNITED STATES: A long-running battle between two major players in the US wind market was settled last month when the Iowa Supreme Court ruled in favor of letting MidAmerican Energy, the state's largest utility, raise consumer rates to help pay for 1GW of new wind generation.

Warren Buffet's MidAmerican free to raise rates
Warren Buffet's MidAmerican free to raise rates

The court's 5-0 ruling upheld a 2009 decision by the Iowa Utilities Board, which was challenged by NextEra Energy, the nation's leading wind developer. NextEra claimed MidAmerican did not properly explore other options for adding new capacity, including the purchase of existing wind power and wind farms from competitors. In addition, NextEra argued that the board's decision gives MidAmerican an unfair advantage over wind developers that are forced to compete without a similar source of ratepayer funding.

Huge advantage

"It was a long shot for NextEra to begin with, to take it to the courts like that," said Robert Latham, an independent Iowa-based consultant. "But the real impact is tied to MidAmerican's ability to put their investments in those facilities into their own rate base, where a competitor like NextEra is not able to do so. It's a huge advantage."

MidAmerican, controlled by billionaire Warren Buffet's Berkshire Hathaway holding company, has used the time since the utility board's decision to move forward with its 1,001MW project, adding 594MW last year, with plans to build the remaining 407MW at four sites before the lucrative federal production tax credit expires in December. "We're obviously pleased to be continuing with our wind projects in Iowa," said MidAmerican spokeswoman Ann Thelen.

When finished, MidAmerican - already the nation's leader in wind generation among rate-regulated utilities - will maintain 2.28GW of wind power, which accounts for nearly 30% of its total generation capacity and represents a $4 billion overall investment.

In 2009, MidAmerican joined the Midwest Independent System Operator, which runs the transmission grid for a large portion of the country's midsection - facilitating the sale of excess wind generation outside its Iowa service territory. "There are times when we're generating more than our customers need and we do sell that into the wholesale market," Thelen said. "But with increasing environmental regulations and the future of coal obviously being uncertain, we feel that it's prudent to make sure that we have a diversified energy portfolio."

NextEra, which declined to comment, has built nearly 90 wind farms in 17 states and Canada, including more than 1GW in Iowa, much of which it sells into challenging merchant markets amid a struggling economy. It had hoped to induce MidAmerican to buy some of those assets or offer power purchase agreements that would provide a steadier stream of long-term income.

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