House Study Bill 188 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON COWNIE) A BILL FOR An Act providing for the issuance of a ratemaking principles 1 order when a rate-regulated public utility enters into a 2 power purchase agreement under specified circumstances. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1717YC (2) 85 rn/nh

H.F. _____ Section 1. Section 476.53, subsection 3, Code 2013, is 1 amended to read as follows: 2 3. a. The board shall specify in advance, by order issued 3 after a contested case proceeding, the ratemaking principles 4 that will apply when the costs of the electric power generating 5 facility , or alternate energy production facility , or power 6 purchased pursuant to a power purchase agreement are included 7 in regulated electric rates whenever a rate-regulated public 8 utility does any of the following: 9 (1) Files an application pursuant to section 476A.3 to 10 construct in Iowa a baseload electric power generating facility 11 with a nameplate generating capacity equal to or greater 12 than three hundred megawatts or a combined-cycle electric 13 power generating facility, or an alternate energy production 14 facility as defined in section 476.42 , or to significantly 15 alter an existing generating facility. For purposes of 16 this subparagraph, a significant alteration of an existing 17 generating facility must, in order to qualify for establishment 18 of ratemaking principles, fall into one of the following 19 categories: 20 (a) Conversion of a coal fueled facility into a gas fueled 21 facility. 22 (b) Addition of carbon capture and storage facilities at a 23 coal fueled facility. 24 (c) Addition of gas fueled capability to a coal fueled 25 facility, in order to convert the facility to one that will 26 rely primarily on gas for future generation. 27 (d) Addition of a biomass fueled capability to a coal fueled 28 facility. 29 With respect to a significant alteration of an existing 30 generating facility, an original facility shall not be required 31 to be either a baseload or a combined-cycle facility. Only 32 the incremental investment undertaken by a utility under 33 subparagraph divisions (a), (b), (c), or (d) shall be eligible 34 to apply the ratemaking principles established by the order 35 -1- LSB 1717YC (2) 85 rn/nh 1/ 4

H.F. _____ issued pursuant to paragraph “e” . Facilities for which advanced 1 ratemaking principles are obtained pursuant to this section 2 shall not be subject to a subsequent board review pursuant to 3 section 476.6, subsection 21 to the extent that the investment 4 has been considered by the board under this section . To the 5 extent an eligible utility has been authorized to make capital 6 investments subject to section 476.6, subsection 21 , such 7 investments shall not be eligible for ratemaking principles 8 pursuant to this section . 9 (2) Leases or owns in Iowa, in whole or in part, a new 10 baseload electric power generating facility with a nameplate 11 generating capacity equal to or greater than three hundred 12 megawatts or a combined-cycle electric power generating 13 facility, or a new alternate energy production facility as 14 defined in section 476.42 . 15 (3) Enters into a power purchase agreement with a term 16 longer than seven years to purchase in excess of three hundred 17 megawatts of output from an electric power generating facility 18 in this state. 19 b. In determining the applicable ratemaking principles, 20 the board shall not be limited to traditional ratemaking 21 principles or traditional cost recovery mechanisms. Among the 22 principles and mechanisms the board may consider, the board 23 has the authority to approve ratemaking principles proposed by 24 a rate-regulated public utility that provide for reasonable 25 restrictions upon the ability of the public utility to seek 26 a general increase in electric rates under section 476.6 for 27 at least three years after the generating facility begins 28 providing service to Iowa customers. 29 c. In determining the applicable ratemaking principles, the 30 board shall make the following findings: 31 (1) The rate-regulated public utility has in effect a 32 board-approved energy efficiency plan as required under section 33 476.6, subsection 16 . 34 (2) The rate-regulated public utility has demonstrated 35 -2- LSB 1717YC (2) 85 rn/nh 2/ 4

H.F. _____ to the board that the public utility has considered other 1 sources for long-term electric supply and that the facility , 2 or lease , or power purchase agreement is reasonable when 3 compared to other feasible alternative sources of supply. The 4 rate-regulated public utility may satisfy the requirements of 5 this subparagraph through a competitive bidding process, under 6 rules adopted by the board, that demonstrate the facility , or 7 lease , or power purchase agreement is a reasonable alternative 8 to meet its electric supply needs. 9 d. The applicable ratemaking principles shall be determined 10 in a contested case proceeding, which proceeding may be 11 combined with the proceeding for issuance of a certificate 12 conducted pursuant to chapter 476A . 13 e. The order setting forth the applicable ratemaking 14 principles shall be issued prior to the commencement of 15 construction or lease of , or purchase of power by agreement 16 from, the facility. 17 f. Following issuance of the order, the rate-regulated 18 public utility shall have the option of proceeding according to 19 either of the following: 20 (1) Withdrawing its application for a certificate pursuant 21 to chapter 476A . 22 (2) Proceeding with the construction or lease of , or 23 purchase of power by agreement from, the facility. 24 g. Notwithstanding any provision of this chapter to the 25 contrary, the ratemaking principles established by the order 26 issued pursuant to paragraph “e” shall be binding with regard 27 to the specific electric power generating facility or power 28 purchase agreement in any subsequent rate proceeding. 29 EXPLANATION 30 This bill relates to the advance determination by the Iowa 31 utilities board of applicable ratemaking principles when 32 regulated electric rates are proposed to include the costs of 33 specified actions by a rate-regulated public utility. 34 Currently, Code section 476.53 provides that the board shall 35 -3- LSB 1717YC (2) 85 rn/nh 3/ 4

H.F. _____ issue a ratemaking principles order when a rate-regulated 1 public utility files an application to construct in Iowa a 2 baseload electric power generating facility with a nameplate 3 generating capacity equal to or greater than 300 megawatts 4 or a combined-cycle electric power generating facility, or 5 an alternate energy production facility; or to significantly 6 alter an existing generating facility; or leases or owns such 7 a facility. The bill additionally provides for the issuance 8 of a ratemaking principles order when a rate-regulated public 9 utility enters into a power purchase agreement with a term 10 longer than seven years to purchase in excess of 300 megawatts 11 of output from a generating facility in Iowa. The bill makes 12 conforming changes throughout the Code section consistent with 13 this addition. 14 -4- LSB 1717YC (2) 85 rn/nh 4/ 4