From the Archive: Ballot Initiative Shapes Iowa Town’s Fight for Local Power — Episode 157 of Local Energy Rules

John Farrell:

This week, we go into the Local Energy Rules archives in anticipation of our forthcoming series on public power. Over the summer, we’ll be sharing six episodes focused on the growing interest in city-owned utilities: what they are, how cities get them, and what they have or haven’t been able to achieve in the pursuit of renewable energy. Key to the conversation, municipalization remains, as it has since the time of Franklin Roosevelt, a quote “birch rod in the cupboard” that provides leverage against a poorly performing private utility company. One community that has been using that leverage is Decorah, Iowa. This episode, recorded in 2018 just before a city-wide referendum aimed at creating a city-owned electric utility, explains the towns reason for pursuing a city-owned utility and it previews the uphill struggle to succeed. The measure failed by just three votes, but the effort for local self-reliance hasn’t flagged. In the run-up to the election, the utility had conducted a study showing that a city-owned utility would not be cost effective, but withholding data from the city that would have allowed it to contest the figures. The year after the failed ballot initiative, the utility proposed a 24 percent rate hike – eight times what its bogus study had suggested was forthcoming. The city continues to fight to have access to utility system data that would let it contest the utility’s findings, a request that is now under consideration by the state’s utility board. Enjoy this show from the archives. We hope it whets your appetite for the forthcoming public power series of Local Energy Rules.

John Farrell:

In 30 states, communities and individuals have no choice for their electricity provider. Instead, states have granted monopolies to electric companies in exchange for sometimes inadequate oversight of public regulatory commissions. As a final accountability check, however, cities have often retained the power to take over the utility and run it as a public service. Andy Johnson and Joel Zook with Decorah Power, an effort in the small town of Decorah, Iowa to put the public back in public utility. On May 1st, they’re asking Decorah residents to support a ballot measure to move ahead with forming a city owned company. Johnson and Zook recently spoke with me about the feasibility study showing Decorah electric customers could save 30% on their bills, the advantages of local control, and the uphill fight against a company using their utility bill payments to finance the opposition. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance and this is Local Energy Rules, a podcast sharing powerful stories about local, renewable energy, Joel and Andy, welcome to the program.

Andy Johnson:

Thanks.

Joel Zook:

Hey, thanks for having us.

John Farrell:

So Joel, I’d like to start off really quick and first ask, you know, you had this feasibility study in the field looking at basically whether it makes sense for Decorah, Iowa to take over and be its own electric company. What did you learn?

Joel Zook:

Oh, we found that it was very favorable. Um, you know, we were hopeful that we would have some positive economic benefits of the feasibility study, just looking at what our rates are currently and compared to what other municipal electric utilities around Iowa are. But we were a little overwhelmed, I think, honestly, how good that the rates looked. The study projected that the city could basically offer the same reliable service at about 30% less cost. And so, so sort of the bottom line that it would need to charge for power. And so that turns into lot of savings of about 5 million a year. And then the question would be, you know, what is it that the city would do with that savings? Is that something that you can offer the customers rate relief? Is it something that you wanna pay down your debt more quickly from that acquisition or more investment in local infrastructure, you know, other things like that? So it’s pretty exciting.

John Farrell:

So what would be the difference between power provided by Alliant Energy, who’s your current utility company and Decorah Iowa’s municipal utility department? That’s 5 million dollars less- I mean, is there anything different about the energy that people would receive?

Joel Zook:

Well, you know, maybe in terms of the actual electrons coming through, I don’t think that there would be a difference. The difference is in the ownership structure and how the utility is managed and the fact that it’d be managed locally, not part of a big investor owned utility and that there would be no payments to investors or, you know, dividends at the end of each year. I think that you’d have a little bit smaller overhead too, without having to pay millions of dollars to big executives. Andy, do you wanna jump in there too?

Andy Johnson:

Yeah, there, I think there are at least a couple of major categories. One of the categories of savings obviously is, is the profit, investor-owned utilities are guaranteed a very significant rate of return, which is why they’re attractive investments across the country. And of course we’re all paying that. And when you’re a publicly owned, consumer owned utility, there is no profit being siphoned off out of state investors. The other side of it though, is that large companies, typically people think about as being possibly more efficient and having economies of scale. But that only works when there’s a competitive marketplace. And distribution of electricity, retail electricity in many states, including Iowa is not a competitive marketplace. So the investor owned utilities, including our current incumbent has had no competitive pressures to be leaner and more efficient. And so they’re very big and possibly quite bloated. And that’s what I think the studies that look at municipal utilities, ours and others, find many of our peer municipal utilities in Iowa function actually much more efficiently than they any of the investor utilities.

John Farrell:

So Andy, I’d love to follow up on that notion of competition because what you have coming up May 1st is in fact, one way to inject a little competition into your electricity market, which is to say that the city has this option then to take over. Tell me a little bit about what’s involved in this vote. You’re gonna have something on the ballot, is it a special election for just this issue? And you know, how many people do you expect to turn out for this out of the voting population?

Andy Johnson:

Well, turnout is the $64 million question. Uh it’s you know, we don’t know, it is a special election, yes. And so in Iowa, and this process varies by state because electric regulation varies by state, but in Iowa, it’s the two part process. Iowa code says, if a community wants to pursue this, first, they have to hold a community referendum. And if the referendum vote is positive at a 50% level plus one, then the community can take an application to the Iowa utilities board, which is the state regulator and apply essentially for the exclusive service territory and the right to serve customers within that territory. So if there’s a yes vote on May one, then the city of Decorah could spend probably a little bit of time further developing that application and eventually apply to the Iowa utilities board. And at that point, see if the economics still hold up and the utility board can rule, essentially rules in the public interest. And so are not required to rule in favor of a community. They can rule either way. And then eventually whoever comes out in the losing the end of that could go to the courts or not, but that’s the process.

John Farrell:

So I’m curious, you know, with the feasibility study that was completed that showed some significant potential benefits for electric customers in Decorah, is that kind of information the stuff that you’ll share with the utilities board, should the vote go your way and folks agree that you should move toward a municipal utility, or are they gonna be looking for a lot of different information?

Andy Johnson:

They would be, look, we would certainly share, the city would share that feasibility study and probably flesh it out even further, with some additional analysis and would need some legal counsel to present all that to the utility board. Now the incumbent utility Alliant of course would object and would then be sharing their own competing information saying it’s not in the public interest. And probably challenging some of the city figures at that point and the utility board and their staff of course would have to do a great deal of analysis to sort out where the truth lies and where the public interest lies.

John Farrell:

One of the things that I think Joel mentioned in the implications, or maybe it was you, Andy, was this notion about local management and then kind of the decision making power the city would have about what to do with the savings that come from being a municipal utility. Are there things that the utility board is not gonna consider, but that people who are voting on May 1st may actually want to take into account in having a municipally run utility?

Andy Johnson:

This is one of the challenges, and I’ll be brief and let Joel jump in on this too, because it’s an unknown really. There was only been one case this century in Iowa, and that was a 2006 to 2008 case where communities applied. And in that case, the utility board said no. It was a, it was a set of five very small communities combined. They’re smaller than our relatively small community of Decorah. And the board said no, but they said, really this is not an absolute no, it’s just that you didn’t dot your I’s and cross all your T’s when it comes to the study, when it comes to economics, when it comes to reasoning, you’re welcome to return here. But also they essentially were saying here’s a roadmap in the future for communities. Here’s what we’d like to see. And they actually opened it up to a wide variety of reasons that they will seriously consider, one of which is economic viability, for sure. But also their understanding of the ability of a community to actually manage utility, their interpretation of community’s motivations beyond just economics and cheaper energy, for example, stewardship and whatnot. So they said they would look at all of those things. Now this is a different utility board. And so it’s an open question. What exactly they’re looking for?

John Farrell:

Joel, did you have anything you wanted to add?

Joel Zook:

No, I don’t think, I mean, other than just to say that, you know, the community has been really engaged on all of those issues and that everybody is asking about, you know, not just rates, not just reliability, not just where the energy is coming from and what kind of energy efficiency programs a new utility would have. All of that gets asked, I think by everybody. And of course other people are gonna have different priorities than each other. But everybody’s interested in the big picture. So it has been, I will say this it’s been really interesting to watch the community start to get engaged in energy issues. And I think that Decorah is probably one of the most energy literate small towns in America.

John Farrell:

And if not before this, then certainly through this process. So, Joel, tell me a little bit more about what opposition Alliant has put up to this because as you know, as Andy alluded to, this has not been a competitive market. And in fact, there are some pretty interesting stories over the past couple of years in Iowa about just how far utilities would go to defend their turf with regards to solar installations, for example, a very significant Supreme court case in Iowa around whether or not folks could lease solar on their rooftops. What is Alliant done to oppose this, presuming that they oppose it? And what, you know, what has that meant for the local efforts to inform people about what this choice means?

Joel Zook:

Well, we expected all along that they would not be exactly happy about this initiative. And they’ve got a right to defend their own business interest, which of course they are doing. But you know, I mean, I think that we’ve been told at the beginning that this is, there’s an industry playbook for dealing with municipalization effort and, you know, you’ve only gotta get 51% of the people to vote no. And if you can scare half the community off, that’s successful strategy. And I think that seems to be the basic strategy that they’re using. There’s a lot of numbers that they’ve thrown out there that are wildly inflated. And I think that they’re inflated beyond even what’s reasonable, but, you know, to someone who doesn’t wanna look at the numbers, doesn’t really know how to dig in to the numbers and to access what do these numbers really mean? Your first instinct is just to kind of just split the difference. And if, you know, if we say 10 and they say a million, it must be somewhere halfway in between there, even though it’s not quite the case.

John Farrell:

Do you find it difficult then in order to kind of give people straight answers when the utility is exaggerating to such a degree and is that a problem for the city itself in terms of what it’s able to say? You know, obviously I’m sure the municipal government is kind of a trusted entity. Can they play any role in helping to mitigate the kinds of things that the utility is saying in order to defend its ownership of the grid system?

Joel Zook:

Sure. Well, you know, I mean, it is easy to talk to people. I think one of the great things about being in a small town is that you know a lot of folks and so being able to talk to people and present ’em with facts and to back up the numbers, that’s certainly something where I think that we, as a, you know, this group of citizens, have the advantage, but the tough place is, how do you distill that to a sound bite? And, you know, none of us are marketers, and it is a big issue and it’s hard to maybe get that onto the back of a postcard where you can sell some fear of higher rates. And, you just, the fear of the unknown, it’s just that that maybe plays better into a one sentence sound bite. But, as far as the city taking a look at and getting information out to the citizens, they have done a very good job. The city itself can’t take a stance on the issue of a vote yes or no, but they have held several town hall meetings to get questions from the community and to be kind of that neutral third party to say, look, here are the facts. And those have been very helpful. And just in terms of kind of separating some of the misconceptions and even misunderstandings of people of what this really means.

John Farrell:

You’re listening to an interview with Joel Zook and Andy Johnson from Decorah Power. I’m John Farrell and Local Energy Rules will be right back.

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John Farrell:

Boulder, Colorado, which has kind of famously been going through a process of taking over the utility from Xcel Energy since their first ballot initiative back in 2011, they were outspent something like 10 to one, the local activists in favor of the city owned utility, compared to Xcel Energy. I’m curious if that squares with what you’re seeing in terms of the amount of money and resources Alliant is willing to put in here and whether or not you feel like there’s a way to overcome that disadvantage.

Andy Johnson:

Yeah. We, we don’t know exactly what Alliant is spending, but I suspect it may not be too far from that 10 to one. It’s hard to say it’s a very large advantage for sure. Which raises a fair amount of questions, too, doesn’t it about the regulated monopoly approach to investor-owned utilities. The money Alliant is spending, or any investor owned utility around the country that might engage in a no campaign like this to try and prevent the community from sort of taking its destiny into its own hands, the money they spend is our money originally in almost all cases. I mean, there may be cases where an investor owned utility has other lines of business, but generally investor-owned utilities in the energy business and they’re granted by we, the people and our regulators, the right to serve us and make a profit.

So then what they can say at this point in efforts like this is, well, we’re not using rate payer dollars, we’re using our shareholder dollars or we’re using a different pot political action dollars, right? Except that all those dollars, as far as I know, originated from the rate payer. So the regulators grant the utilities the right to earn a profit, the utilities then can take those profit dollars and turn around and distribute them to shareholders. But also for other uses like this, that can turn around and use our own dollars against us in a community and drop maybe half a million dollars in a small town to spread fear and confusion and try and prevent the community again from sort of taking its own path. So it raises a lot of questions. Free speech is one thing, you know, honesty and truth in, in these conversations, this is a whole different ballgame.

John Farrell:

I am, you know, obviously it will be on the morning of May 2nd when you’ll be able to look back on this and ask or answer the question about whether or not it was worth it in its entirety. But I’m curious, you know, what you would offer for other communities that are looking at this issue of controlling their energy future and considering municipalization as a method for getting there, whether or not this process has been worthwhile. That even, even if you don’t succeed on the ballot that, you know, you alluded to earlier that you have gotten one of the most energy literate populations in the country. And if there is something in that communities should be excited about, even if they maybe are not successful in moving to a utility system takeover.

Joel Zook:

Well, like you said, I think we’ve got people engaged. And I think that’s a really good thing that they’re paying attention and thinking about how this impacts their daily life and the economy of the town that they live in. I think going forward, we’ll still have a long road to go regardless of how the vote comes out. And in terms of thinking about this, one of the things that I’ll be interested in is to be watching how the community reacts to Alliant’s rate increases that they’ve got planned for the future. They’ve already indicated to the Iowa utilities board that they have in the works and they’re laying the groundwork for, and then also just any changes that they make to their energy efficiency programs. There’s still a bill alive in this Iowa state house that would gut the energy efficiency programs that are mandated by the state and, Alliant at the beginning of this campaign before they, that bill had showed up and before they had signed on and supported it, talked a lot about how great their energy efficiency programs are and all the dollars that, that brought to the community, which, which is true. There’s, there’s a lot of good work that is done there. But you know, in our feasibility study we left 5% of gross annual revenue into an energy efficiency fund that would be managed again locally by the electric utility here that we own as a town. And so after that study came out and they saw that we were very serious about energy efficiency and serious about funding it. And after this bill comes up in the state legislature that they’re in support of and it’s signed onto, they really haven’t talked a lot about energy efficiency since.

John Farrell:

A very telling omission.

Andy Johnson:

I’ll just add to that real quickly to the values to the community. You know, I do think are there, I mean, it is a very, it’s a big job to, to bite off, you know, to, to do a feasibility study that’s high quality costs quite a bit of money, takes quite a bit of time. So there’s that, and then there’s in the political process of your city council needs to be friendly enough to say, all right, let’s vote. And now this campaign and the campaign gets, can get very unpleasant. And so people need to be aware of that if they’re thinking of going down this road. Part of the awareness though, this community was very energy aware because many, many of us, many organizations have already been doing a great deal of efficiency here. And we have higher penetration of customer owned solar than just about anywhere in the Midwest, but you know, the economics have been an eye opener.

I do think because a lot of folks are still unsure what to believe. Yes. But when we realize the amount of energy we all spend and that in most communities, certainly in the Heartland, but most communities across the country, it’s a giant sucking sound of dollars leaving our community, essentially the energy sector and not coming back it’s year after year, after year after year. And so this, I think this process has awoken a good chunk of folks, the community to the, the reality that where those dollars are going and the opportunities to keep them local. And so I think that conversation will not end with this vote.

John Farrell:

Andy and Joel, you alluded to earlier that it’s hard to put these concepts around energy in a sound bite, but quote, “a giant sucking sound of dollars leaving our community” sounds like a pretty good way to summarize the fight that you’re up against. Well, we wish you the best of luck come May 1st and thanks so much for talking with us.

Andy Johnson:

Thanks, John.

Joel Zook:

Thank you.

John Farrell:

You just heard a 2018 Local Energy Rules interview with Andrew Johnson, Joel Zook, and Larry Grimsted, leaders of the citizen-led municipalization movement in Decorah, Iowa, speaking about their quest to dramatically increase local influence over their community’s energy future. On the show page, look for links to earlier episodes about Decorah’s pursuit of energy democracy, as well as numerous other Local Energy Rules podcast interviews with communities pursuing municipalization or using their city-owned utility to benefit the local economy with clean energy. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear more powerful stories of communities taking on concentrated power to transform the energy system. Until next time, keep your energy local, and thanks for listening.