An Iowa Attorney Responds to the Nuclear Power Bill
by Wally Taylor
[Editor's Note: Wally Taylor is counsel to the Iowa Chapter of the Sierra Club and he presented this analysis to the Iowa Senate Commerce Subcommittee Meeting on SF 390, Monday, March 28.]
ADVANCED COST RECOVERY FOR NUCLEAR GENERATION FACILITIES
SF390 is a bill initiated by MidAmerican Energy to obtain preferential ratemaking and regulatory procedure. The Iowa Chapter of the Sierra Club has several concerns about SF390. The primary concern is that the bill is not fair to ratepayers and usurps the authority of the Iowa Utilities Board.
At the outset, it will be helpful to explain how the IUB process works. A public utility files an application with the Board. In this case, for example, it would be an application for advanced ratemaking principles. The utility is required to support its application with facts, data, and testimony. The Office of Consumer Advocate then submits its facts, data, and testimony on behalf of the ratepayers. Other parties can intervene to support the utility or the ratepayers or present a different perspective, but the intervenors must also support their positions with facts, data and testimony.
The IUB then holds a formal hearing where the evidence is presented and challenged and explored. The Board’s professional staff also evaluates the evidence. The Board then issues a decision based on the evidence and what is in the best interests of the ratepayers and the public interest. SF 390 undercuts that process.
Following is an analysis of specific provisions of the bill:
Section 1 adds a new paragraph to Sec. 476.6 of the Iowa Code. This section authorizes an application for ratemaking principles for construction of a new nuclear plant. The section is couched in terms of any utility that has a revenue sharing settlement agreement. MidAmerican is the only utility fitting that description. This is special interest legislation for one company and should not be disguised as a general provision.
Section 2 amends Sec. 476.53 of the Iowa Code in several respects.
The new paragraph 2 talks about encouraging baseload nuclear electric power generation. Baseload is an outmoded concept. What we are really talking about is energy and capacity. That does not necessarily require a big stationary plant. What it requires is an adequate transmission and distribution grid. With an adequate grid, renewable energy sources could be tied together to provide sufficient power when it is needed. The utilities argue that renewable sources are intermittent and cannot meet our needs without fossil fuel or nuclear power. But conventional energy sources are intermittent, too. They are shut down for repairs or they malfunction. For example, the Duane Arnold Energy Center over the years has often been shut down for extended periods of time for repairs or because of a malfunction. During those times the utilities turn to the grid and obtain energy from another source. Renewables would do just the same. So the implication in the bill that nuclear is needed to provide sufficient baseload is unfounded.
Paragraph 2 then makes findings that:
Nuclear generation has a long-term proven record of providing a safe, reliable, and secure source of electricity in the United States and offers the potential for significant job creation, substantial economic development benefits, and the production of electricity at significantly reduced levels of regulated air emissions when compared to output from other thermal generation sources.
We ask that the legislature make available to the public the evidence upon which these findings were made. There certainly is a lot of evidence to the contrary. There should be a full and open discussion of the alleged costs and benefits of nuclear power before any incentives or regulatory advantages are provided.
Next, paragraph 2 describes the financial, regulatory and environmental problems with nuclear power as burdens on customers. This alone demonstrates why nuclear power is not an economically and environmentally efficient power source. Furthermore, if the problems with nuclear power are a burden on customers, there is no excuse for placing even more burden on customers as the rest of this bill does.
The main problem with this bill begins on page 4 of the bill. The IUB is being told what must be in the Board’s order on ratemaking principles. The bill even goes so far as to tell the Board how to determine what are prudent costs. This is significant because prudence depends on the level of risk. It is clear that the proposed development of nuclear power is a risky proposition or all of this special legislation would not be needed. But more importantly, the IUB has rules and experience in advanced ratemaking principles that should be equally and fairly applied to all sources of power. Moreover, the Board’s decision would be based on facts and evidence, not a directive from the legislature. MidAmerican has asserted that this bill simply gives the IUB the tools to address advanced ratemaking for nuclear facilities.
But the IUB already has the tools with the present ratemaking statute and the Board’s experience and expertise that have been applied to other proceedings for advanced ratemaking.
Then the bill goes into detail telling the IUB exactly how to calculate the allowed debt and equity return on the construction of a nuclear plant. This is a determination that should be made by the IUB after hearing evidence from all parties, allowing the Board to make an informed decision.
Next the bill allows MidAmerican to collect increased rates before they even start to construct a nuclear plant and the ratepayers are stuck with the increased rates even if the project is canceled. In addition, the bill does not require MidAmerican to make refunds to ratepayers if the costs are miscalculated.
Finally, the bill exempts nuclear power from the requirement applicable to all other electric generation plants that the utility has considered other sources for long-term electric supply and that the proposed plant is reasonable when compared to other feasible alternative sources of supply. Again, this clearly demonstrates that nuclear power is not efficient, cost-effective or a good alternative. Otherwise, it could compete fairly with other alternatives. The IUB should be allowed to make this determination.
All of this points to the fact that MidAmerican cannot build a nuclear power plant in Iowa without special incentives and skirting the existing regulatory framework for power plants. MidAmerican is doing everything it can to make sure the nuclear plant is guaranteed a profitable rate and pays no penalty if the plant is not successful. The high cost of MidAmerican’s nuclear power will be borne by the customer and the taxpayer. MidAmerican is privatizing the profits and socializing the costs.
This bill amounts to a preemptive bailout for MidAmerican.
~ Wally Taylor is a Cedar Rapids attorney who is also a board member of the Iowa Chapter of the Sierra Club.
Blog For Iowa 