A municipal electric utility (MEU) would result in higher costs, a less reliable system and less renewable energy for Decorah than continued service by Alliant Energy, according to a feasibility study commissioned by Alliant.
The results of the study conducted by Concentric Energy Advisors, which has offices in Marlborough, Mass. and Washington, D.C., were presented to the Decorah City Council Monday night.
The citizens group Decorah Power has been exploring the possibility of establishing a MEU that would provide electricity services the same way the city provides water and sewer services. Last March, the Council approved a moratorium on renegotiating a franchise agreement renewal with Alliant Energy while the idea of a MEU is studied. The current franchise agreement with Alliant expires in May.
The results of a Decorah Power feasibility study were reported during the Council’s last meeting in January. The study was compiled by NewGen Strategies and Solutions of Denver, Colo., Dave Berg Consulting of Rosemount, Minn. and Exponential Engineering of Fort Collins, Colo.
The Decorah Power study concluded a MEU could provide electricity to the city of Decorah for about $5 million less a year than Alliant.

$50 million
However, Alliant’s study concluded by 2027, a MEU would be costing Decorah residents an extra $1.7 million per year.
Ann Bulkley, senior vice president of Concentric, who analyzed Alliant Energy’s Decorah energy grid, also outlined why it would cost $50 million to start a city-owned electric utility.
The first step toward exploring a MEU was the completion of the feasibility study. Decorah Power and/or the Council can decide whether or not to bring the idea of forming a MEU to a citywide vote. The Council could call for a vote, or citizens could petition to have the issue placed on a ballot.
If the public votes to approve it, the city would file a MEU application with the Iowa Utilities Board (IUB). If the IUB gives its approval, the city would buy out Alliant’s electrical infrastructure and service the customer base. A Council work session has been scheduled for Tuesday, Feb. 13, at 5:45 p.m. to continue discussions of a MEU.

Costs underestimated
In the first year of a MEU, a Decorah MEU customer would pay $69 more than an Alliant customer and by 2027, Decorah MEU customers would pay $226 more per year than Alliant customers, the Concentric report stated.
“Concentric’s study shows that Decorah Power dramatically underestimated the cost to acquire Alliant Energy’s network, underestimated start-up costs and overestimated actual energy use in Decorah. When those numbers were corrected, it explains why a city-owned electric utility would need to raise rates 30 percent higher than Alliant Energy’s in order to afford the same level of service,” Alliant Communications Partner Mike Wagner said after Monday night’s meeting.
“Perhaps the most telling statistic in Concentric’s presentation centered around the reliability of the Decorah energy grid as operated by Alliant Energy. Our Decorah customers experience an outage once every six years with an average outage of 17 minutes as compared to 120 minutes for the average municipal utility,” he said.
“Bulkley is a licensed-certified general appraiser who has testified before the Iowa Utilities Board. The Board has accepted her methods and forms of analysis in other municipalization cases.”

Assets
While Decorah Power’s feasibility study estimated acquisition and startup costs of establishing a MEU at $7.6 million, Concentric estimated them at $51 million.
One of the major differences between the two studies is the cost of establishing a MEU is the value of Alliant’s assets. The Concentric study estimated the cost of purchasing Alliant’s assets and property, less depreciation, at $19,981,630, while the Decorah Power study estimated the cost at $5,087,775.
“Decorah Power will need to take on more debt than the Decorah Power study assumes. Decorah Power rates will have to go up to pay for this increased debt,” the Concentric report said.
The Concentric study also concluded the Decorah Power’s feasibility study underestimated expected startup costs of a MEU. Decorah Power estimated them at $1,993,355 and Concentric estimated them at $12,283,806.
According to Bulkley, Decorah Power’s plan to municipalize outside city limits where Alliant currently provides service is not consistent with Iowa Utilities Board rulings in six prior cases.
“The IUB has previously determined that a new municipal utility would have to pay for the infrastructure needed to separate Alliant Energy’s customers outside the city from the new municipal system. Decorah Power has not included any costs for this process, Concentric is estimating this cost at $11 million,” Bulkley said.
The Concentric study also said Decorah Power has estimated energy sales in Decorah are about 50 percent higher than actual energy sales.
“Lower actual sales mean higher rates for a Decorah municipal,” the Concentric report stated.
Alliant’s feasibility study also said Decorah Power’s proposed 30 percent renewable energy in year one of operation is less than Alliant’s plan for 40 percent of renewable energy by 2021.

Last municipal
The city of Aurelia was the last new electric municipal created in the state of Iowa. It was established in 1974, the Concentric report said.
Six Iowa communities have unsuccessfully attempted to create MEUs since then – Sheldon, 1998; and Everly, Kalona, Rolfe, Terril and Wellman, 2006. In conducting its feasibility study, Bulkley said Concentric used the same methodologies that have been used and approved in prior electric municipalization cases that came before the IUB in 1998 and 2006.
The benefits of having Alliant Energy service in the future was summarized in the Concentric report: “Lower cost, better reliability, a safer system, successful and aggressive sustainability initiatives and less risk. We believe that is what our customers want and that is what we intend to continue to deliver to our Decorah customers.”