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Iowa restructuring with potential -- Pro-renewables lobbyists well armed in fight for inclusion of RPS

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Iowa renewables advocates are much better positioned this year to get market restructuring legislation passed that could result in 1200 MW of new wind and savings to state electricity customers of more than $300 million. Last year's restructuring bill was defeated by environmental groups and the Iowa Department of Natural Resources (DNR) because it lacked provisions to protect consumers and the environment (Windpower Monthly, June 1999).

The Iowa DNR is proposing four amendments to the current bill and seeks a compromise with business and industry. The pro-renewables measures -- similar to those used in a handful of states that have deregulated their markets -- include a Renewables Portfolio Standard (RPS) for 10% of clean power in the Iowa supply portfolio by 2015; a public benefits fund of $100 million a year for energy efficiency and renewable programs; a disclosure on consumer power bills showing a utility's mix of resources; and a policy allowing for net metering, where ratepayers can offset the electricity they use with their own generation. The American Wind Energy Association (AWEA) and a coalition called Responsible Electric Deregulation for Iowa (REDI) are supporting the proposal.

Late last month, however, Republicans who make up the majority on the first legislative committee to consider the bill voted against the proposal on grounds of cost. This was as Lisa Davis Cook of Iowa Sustainable Energy for Economic Development, a member of REDI, had anticipated. "I'm almost positive it will pass through the first committee, but not necessarily amended to our satisfaction. After that, we will keep working on it," Cook said before the committee met.

Saved in the long run

The proposal suggests an RPS that would grow from 4% in 2005 to 7.5% in 2008 and to at least 10%, or 1200 MW, by 2015. AWEA and REDI are using a recent study to show how such an RPS would save $327 million off customer bills over 25 years -- using wind as the sole resource. Although a typical residential bill would rise about $3.60 a year for the first ten years, it would drop by $7.92 a year over the following 15 years, more than offsetting losses for customers in the start phase.

The initial cost increase, according to the study's author, Tom Wind, an Iowa wind consultant, is due to the up-front costs of wind development, which requires capital to get started, but once running the energy source is free. Furthermore, Wind predicts that the cost of wind will decline 30% over the next ten years. In northern Iowa it costs about $44/MWh, levelised over 25 years. By 2009, it will fall to about $31/MWh, or $25/MWh adjusted for inflation in 1998 dollars, says Wind.

His study assumes the Federal Production Tax credit -- about $0.017/kWh for the first ten years of a wind plant's life -- will remain for the 25 year period. If it expires at the end of 2001 as scheduled, a 10% RPS using wind alone could cost consumers an additional $6.84 a year; the lobby groups argue that this is still cheaper than the premium payment required in many US green pricing programs.

The net metering amendment is an attempt to circumvent current hang-ups during restructuring in the state, which has had a net metering statute for about 15 years. The utility, Mid-American Energy, challenged the policy several years ago. The case now waits in the Iowa Supreme Court for decision. "Net metering is in flux right now, but we're trying to keep it alive by including it in this bill," says Cook.

Overall, according to the DNR's Paul Johnson, the amendments would encourage local investments in wind generation, improving the state's balance of trade. Iowa spends about $2 billion a year on electricity. Of this 60% is used on power generated with fossil fuels bought outside the state, according to Johnson.

AWEA has found the lobby opportunity to be timely. "Right now, only Iowa has restructuring on its legislative calendar," says AWEA's Christine Real de Azua. "AWEA puts quite a few resources into federal legislation, but because utility restructuring is happening at the state level, our local members think it's important to be involved."

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