1. Non-Utility Costs in Utility Bills M. Sarafolean J. Kaman Iowa Industrial Energy Group Meeting April 9, 2013

2. Utility Bills Special Riders, Surcharges Above Market PPAs Cross Class Subsidies Taxes City Franchise Fees

3. Bill Markup More to come…

4. Riders Renewable development funds Energy efficiency charges Special pollution surcharges - externalities Carbon surcharges System/Public Benefits Funds

5. Administrative Code - Riders Specifies criteria for whether a rider could apply [e.g. electric rates 199 IAC 20.9(1)] –Incurred in supplying energy –Beyond direct control of management –Subject to sudden important change in level –Important factor in total cost to serve –Segregated in utility accounts Recent Iowa examples –Alliant’s electric Energy Adjustment Clause (EAC), electric utility AEPs –Electric (and Gas) EECRs, 199 IAC 35.12 –Capital Infrastructure, e.g. 199 IAC 19.18 (gas)

6. Tariff Cities Served - Electric Service territory map http://www.iowadot.gov/maps/msp/electrical/electrical.html Riders Franchise Fees imposed

7. System Benefit Costs Low income subsidies –Cash fuel assistance payments –Crisis intervention funding –Energy efficiency funding –Cross class subsidies Energy efficiency, DSM, renewable programs http://liheap.ncat.org/workbook/questions.htm

8. Above Market PPAs Wind power mandates Solar power mandates Other PPA embedded cost risk

9. Cross Class Subsidies Built into IOU cost of service allocations Tiered kWh purchases Allocation of variable costs to demand charges Increased CP events

10. Taxes Phantom income taxes –State and Federal taxes included in base rates but never paid to States and the Feds. Local taxes on utility assets State and local sales taxes on utility revenues

11. Fees Municipal fees Low income assessments Meter charges Customer charges City franchise fees

12. Utility Franchise Fees By the CITY In lieu of municipalization? Des Moines franchise fee lawsuit Iowa Code 480A (local option) and 364.2 (franchise fees) – mutually exclusive Now (since 2009): –Up to 5% without proving costs are for “inspecting, supervising, and otherwise regulating…” the franchise –Can use excess for property tax relief, public improvements, low- income energy conservation, public safety, public works and transportation, streets, economic development….

13. A Story About Waterloo… Cities need revenue, property tax concerns in Iowa Energy bill taxes are disproportionate to industry/employers Appears can: –Modify for different customer classes –Apply to Electric, Nat Gas, Telecom, (etc.) any combination or none –Apply a cap per customer

14. Non-Utility Costs in Utility Bills M. Sarafolean J. Kaman Iowa Industrial Energy Group Meeting April 9, 2013