Community Engagement

Customers could reap big savings from Iowa city municipalization: study

The long-held dream by some of forming a municipal electric utility in Decorah, Iowa, remains alive and well after a recently released feasibility study released this week found such a move could save money for the city's nearly 8,000 residents.

Backed by the study by NewGen Strategies & Solutions, the 13-member Decorah Power board of directors soon could vote to ask the city council to hold a referendum this year on the municipalization question, Andy Johnson, a local leader in the movement and director of the Winneshiek Energy District, said Thursday. Decorah Power was formed about a year ago to pursue a possible municipally-owned utility.

"If the city votes yes in a referendum, it would authorize city government to create a utility board," he said. "Then, the city would file an application with the Iowa Utilities Board" to officially establish the muni.

The IUB would have the final say in the matter. It rejected a municipalization effort several years ago by a consortium of several Iowa communities.

The NewGen study estimated a local municipal utility could save customers as much as $7.5 million annually over what they are paying now to Interstate Power & Light, a subsidiary of investor-owned Alliant Energy.

"The results of the analysis conducted for this feasibility study suggest that a Decorah municipal utility could provide service to its customers for a lower average cost while providing reliable power with increased emphasis on renewable energy and local energy management systems," NewGen said.

Alliant opposes a local public power utility, however.

If the Decorah Power board votes to seek a citywide referendum, as expected, the formal request probably would be made in a couple of months, Johnson said. The NewGen team presented its findings to the city council Tuesday night.

Johnson stressed advocates are not waging an "anti-Alliant campaign. We're a pro-community campaign."

According to city manager Chad Bird, the state provides for four dates in 2018 when a referendum could be held - in March, May, August and November. The latter is the regularly scheduled general election.

"The Decorah Power board is probably going to recommend that May 1 date," surmised Bird, who is staying neutral in the debate.

Most likely, the county auditor would ask the city to pay for the special election, whose cost has not yet been determined.

If voters approve a municipal utility in a referendum, the council would be authorized to officially explore the formation of a public power utility. But it would not be legally required to establish the utility, Bird said.

Johnson and other supporters believe the argument clearly is in their favor.

Aside from potentially lowering the electric bills of Decorah residents, a public power utility would give the city local control over its energy future, they say. It also could offer relief from long-term generation commitments that can cause unnecessary and expensive overhead for customers to absorb, they add.

NewGen examined three possible scenarios, including the municipal utility buying power from the market. That option produced the greatest potential savings -- $7.5 million a year.

"It looks to us like we could prioritize affordable power by keeping rates stable for quite some time," Johnson said. "We could make very significant investments in the grid to improve reliability and resilience for storms that many of our peers are making."

Decorah also could move more quickly to clean energy such as wind and/or solar power, he suggested.

The study estimated Decorah would need to spend about $2 million on startup costs for the municipal utility. That does not include the purchase of the local electric distribution system from IPL/Alliant.

Therein lies a potential rub. NextGen said an electric distribution system buyout could cost the city around $5 million. Alliant says the figure would be much higher. Wagner said a Concentric Energy Advisors feasibility study of the utility's Decorah network places the value at about $50 million.

Another issue involves several hundred rural residents who currently are served by the existing electric system in Decorah but are not city residents. NewGen suggested a public power utility could extend service to them as well.