Task Force Recommends Decorah, Iowa, City Council Take Next Steps on Municipalization

by Paul Ciampoli
APPA News Director
January 17, 2023

A task force created by the City Council of Decorah, Iowa, recommends that the City Council proceed with the next steps in the process of pursuing municipalization, including holding a referendum on municipalization.

A report was completed in December 2022 by the Decorah Municipal Electric Utility (MEU) Task Force, which was created by the Decorah City Council in December of 2020. The report summarizes the work that the task force has done over the last two years. 

Among other things, the report examines the potential advantages and disadvantages of municipal electric utilities, as compared with Decorah’s existing electric utility provider, which is investor-owned Alliant Energy.

With respect to rates, “we find that on average, Iowa MEU residential and commercial customers pay substantially less for their electricity than Alliant’s residential and commercial customers,” the task force said. The report noted that industrial/large user customers served by a MEU in Iowa, on average, pay slightly more than industrial customers served by Alliant.

“We found that the reliability of electrical service provided by MEUs is as good as, or better than the reliability of electrical service provided by investor-owned utilities,” the task force said.

“We found the education session interviews with managers of Iowa MEUs to be particularly informative. We were impressed with the professionalism and expertise demonstrated by these managers,” the task force said.

Feasibility of Forming an MEU

The report also examines the feasibility of establishing a MEU in Decorah.

The task force said it built upon two competing feasibility studies from 2018, analyzed differences between those two studies, and considered new developments from the most recent five years that could impact the feasibility of establishing a MEU in Decorah.

Feasibility considerations included economic feasibility, feasibility of reliable service during and after a potential transition to a MEU, and the feasibility of a successful Iowa Utilities Board application process and service territory acquisition. 

“We find that both feasibility studies in 2018 significantly underestimated Alliant’s projected rate increases, given the magnitude of Alliant’s rate increase that occurred in 2019,” the task force said.

“Our comparison of the two feasibility studies, in combination with new information available since 2018, gives us confidence that a MEU in Decorah could be logistically and economically feasible. The legally required regulatory oversight process provides further reassurance that a petition from the city for municipalization of electric services must be feasible and in the best interest of customers in order to gain approval from the Iowa Utilities Board,” the report said.

The report also includes the task force’s conclusions and a relative assessment balancing the potential advantages and disadvantages of a MEU as well as an acknowledgement of uncertainties.  

The task force found that establishing a Decorah MEU has the following potential advantages:

• The opportunity to reduce the costs of electricity for customers;
• Improved financial viability for the Decorah community that could be accomplished by keeping energy dollars in the community;
• Financial benefits to the City of Decorah, including payments in lieu of taxes that could exceed the contributions currently made by Alliant;
• Improved reliability and resilience in the face of adverse weather events if the City decides to improve upon existing electric infrastructure;
• Flexibility to pursue goals from the City of Decorah’s Sustainability Plan; and
• Local autonomy could allow greater flexibility in responding to future challenges.

Along with the report, the Decorah Municipal Electric Utility Task Force recommended that the city of Decorah hold a referendum on municipalization at a time of its choosing.

In addition, the Task Force approved a list of factors that it encouraged the city to consider further as it makes decisions regarding a municipalization process.

Municipalization Gets Closer Look in Other Cities

Municipalization is also getting a closer look in other cities.

A meeting held in October 2022 looked at what it would take to transition investor-owned Rochester Gas & Electric to a public power utility.

The San Diego City Council on October 3, 2022 approved a contract for a consulting firm to examine the feasibility of the California city transitioning to a public power utility.

The contract approved by the San Diego City Council is with NewGen Strategies & Solutions LLC.

The American Public Power Association offers a number of resources related to municipalization on its website.