The Iowa Supreme Court upheld a regulatory decision Friday that allowed a huge expansion of wind energy by the state's largest utility, rejecting a challenge from a rival company who claimed it was unnecessary and unfair to other energy producers.
The court voted 5-0 to uphold a 2009 decision by the Iowa Utilities Board that gave Des Moines-based MidAmerican Energy Co. the ability to nearly double its wind power generation and guaranteed the firm could raise customers' rates in the future to recover much of the cost of expansion. The court rejected a challenge by Florida-based NextEra Energy Resources, a producer that sells electricity in the wholesale market.
"We're just very pleased with the ruling and pleased that we are continuing our efforts to add more wind generation in Iowa," said MidAmerican spokeswoman Ann Thelen.
The case pitted two major players in the growing wind energy sector against each other in one of the states with the highest production.
NextEra is the largest wind energy producer in North America, owning 65 wind facilities, including some in Iowa. MidAmerican owns more wind generation capacity than any other rate-regulated utility in the U.S., with 30 percent of its capacity set to come from wind by the end of this year.
The decision means MidAmerican can move forward with the ongoing expansion approved by regulators in 2009, which allowed the firm to add 1001 megawatts of wind energy by 2013 and spelled out "advanced ratemaking principles" letting the company to pass certain costs to customers in a future rate increase. It also means that MidAmerican does not have to purchase wind power from NextEra, which the Florida company had proposed as an alternative.
Under the project, MidAmerican spent $985 million last year creating and expanding wind farms in central and western Iowa. The company plans additional wind projects in five Iowa counties this year that will cost hundreds of millions more.
MidAmerican is asking regulators to increase customer rates by up to $114.7 million over the next two years, which would increase the average monthly residential bill by $3.63. Thelen said those increases are not tied specifically to the expansion and reflect the rising cost of environmental regulations and transporting coal.
NextEra argued the Iowa Utilities Board should not have approved the project because MidAmerican did not demonstrate the need for extra capacity, did not properly consider other alternatives as required by state law and should have funded it through shareholders, not ratepayers.
NextEra claimed the expansion was unfair because MidAmerican will be allowed to sell excess wind power that is subsidized by its customers on the wholesale market. NextEra argued that it and other producers who compete with MidAmerican would be disadvantaged since they do not have a similar funding source.
Justice David Wiggins conceded that MidAmerican did not have a need for extra capacity until 2019, but found "substantial evidence" the plan would reduce carbon emissions, help maintain reasonable prices for customers and promote economic development and renewable energy in Iowa.
In a majority ruling, he rejected NextEra's argument that allowing MidAmerican to compete in the wholesale market discriminates against independent energy producers. Wiggins said any impact the expansion will have on the wind market would be slight, and outweighed by the benefits to MidAmerican customers.
Justice Edward Mansfield concurred with the court's outcome but not its reasoning. He said the court should have given more deference to utility regulators, and avoided commenting on whether the project was desirable since justices are not energy experts.
NextEra had no immediate comment.
Ronald Polle, an attorney for the Office of Consumer Advocate, which represents the public in regulatory proceedings involving utilities, said he was pleased the board's decision will stand. He said wind energy benefits customers because it is a low-cost and environmentally friendly fuel.
"We thought it was in the best long-term interest of customers," he said. "What wind does is ... it smooths the volatility of fuel costs. It ultimately results in lower costs over the life of the plant. And it helps MidAmerican comply with environmental regulations in a cost-effective manner."