Decorah, Iowa, city council votes to create municipalization task force

by Peter Maloney
APPA News
December 10, 2020

The Decorah, Iowa, city council on Monday voted 6-1 in favor of forming a task force on the municipalization of the city’s electric power infrastructure.

The main job of the task force is to recommend to the city council how to move forward with respect to a feasibility study done about two years ago, Emily Neal, a member of the Decorah city council, who voted in favor of the measure, said.

If successful, Decorah would form a public power utility and would no longer take electric power from Interstate Power & Light (IPL), a subsidiary of investor-owned utility Alliant Energy.

Decorah residents supporting municipalization say a municipal utility would invest more heavily in renewable energy and those investments would remain local and return more money back to the community. “Motivations vary from person to person, but for me municipalization means local power and local dollars staying in our community,” Neal said.

The task force is charged with making a recommendation among four options:

• authorize another feasibility study
• update the existing feasibility study
• appoint a third-party to review the existing feasibility study, or
• conduct another referendum on forming a municipal electric utility before authorizing another feasibility study.

The feasibility study was funded in 2017 by the advocacy group Decorah Power with the support of the Decorah city council. The study, conducted by NewGen Strategies & Solutions, examined the costs and benefits of forming a public power utility – called a Municipal Electric Utility (MEU) in the study – and found that Decorah could save about $5 million annually by setting up its own utility. The study found that Decorah’s 8,000 residents could save about 30% on their electric bills compared with taking service from IPL. Decorah’s 25-year franchise agreement with IPL ended in June 2018.

In the study, NewGen put the cost of municipalization at about $5 million and said the costs could be funded by issuing $5.5 million of 20-year, 5% taxable bonds. In addition, NewGen estimated startup costs for a MEU at about $2 million, about half of which would be costs associated with the regulatory process of seeking approval from the Iowa Utilities Board to set up a utility. The set-up costs could be funded with a $2 million, 20-year, 3.5% tax-exempt bond issuance, NewGen said.

Alliant Energy also commissioned a feasibility study and the report, by Concentric Energy Advisors, estimated start-up costs and the cost of buying its assets that serve Decorah at $51 million.

In May 2018, Decorah residents voted on a referendum that would have authorized the city council to pursue a MEU. The measure failed by three votes, 1,385 to 1,382.

“It often takes two or three passes before a municipalization goes through,” said Neal, who was a volunteer for Decorah Power before she was on the city council. She noted that the vote was very close and there has been “tons of misinformation” surrounding the vote and the proposal was “not promoted very well. For those who think it is a good idea, it is worth doing again.”

In addition to considering the four options with respect to the feasibility study, the task force will convene stakeholders and listen to their concerns and interests and will “draft some comments to give to the Iowa Utilities Board to inform them about the MEU process and the undue hardships when even exploring the issue,” Neal said. The aim, she said, would be to see if the utilities board could help “level the playing field. It is a David and Goliath fight” to take on an investor-owned utility. “We are using public dollars.”

Meanwhile, the task force has a year to study the issues and make its recommendations. Beyond that, the city would have to hold another referendum to gain voters’ approval before presenting a proposal to the Iowa Utilities Board. State rules also require that the city establish a legal utility entity before it can apply to municipalize its electric service.

In 2015, Decorah set up a telecommunications utility entity when it was considering municipalizing phone and internet service, but ultimately found the idea was not feasible.

The last Iowa city to create a public power utility was Anthon, in 1976. Since then, a municipalization effort in Iowa City failed in 2005 when 67% of residents voted against the effort. And in 2008, the Iowa communities of Everly, Kalona, Rolfe, Terril and Wellman pursued municipalization but failed when the utilities board rejected their proposal.

The American Public Power Association offers a variety of resources related to municipalization.