Company files for first change in Iowa natural gas base rates since 2005
CEDAR RAPIDS, Iowa – May 25, 2012 – Interstate Power and Light Company (IPL), a subsidiary of Alliant Energy Corporation (NYSE: LNT), today is filing a request with the Iowa Utilities Board (IUB) to increase its Iowa retail natural gas rates. IPL’s request proposes to increase annual revenues by approximately $14.8 million, or 5.6 percent. Impacts for each customer class will vary.
“It has been seven years since our company adjusted its natural gas rates in Iowa. During this time, we have invested more than $70 million in Iowa’s natural gas delivery infrastructure to increase both the safety and efficiency of the system,” said Tom Aller, President-IPL. “In addition to these investments, our mix of customers and their usage patterns have changed. This rate case allows us to adjust and continue to keep our rates consistent with the costs of providing natural gas service to each customer.”
Customers have benefited from lower natural gas costs in recent years (see table below). The cost of gas makes up, on average, 60 to 70 percent of the average residential natural gas bill. This cost of gas is a dollar-for-dollar pass-through for customers, and is unaffected in this rate case proposal. Because of these lower gas costs, the average residential bill is down nearly 20 percent since IPL’s last rate case in 2005.
IPL-Iowa Residential Cost / Average Cost Per Therm
2005 – $1.19
2006 – $1.31
2007 – $1.25
2008 – $1.23
2009 – $1.06
2010 – $0.99
2011 – $1.00
Interim – $1.03*
Proposed Final – $1.08
*These costs are estimated based on average IPL-Iowa residential usage in 2011 and do not reflect future changes in gas costs or impact from the proposed Cost Management Plan.
In addition to the recent benefit from lower gas costs, IPL has proposed a cost management plan as part of its final rates proposal. If approved, the plan would credit customers’ bills for three years using approximately $36 million of federal tax benefits expected to be received by the company. Because of these two factors, total bills are expected to be lower than in 2005.
“We recognize customers rely on us to provide natural gas safely, efficiently, and responsibly,” said Aller. “At the same time, we continue to seek ways to manage our costs while continuing to maintain and improve aging infrastructure. We believe we have proposed a plan that best balances our need to recover our costs and the needs of our customers to keep rates low.”
In Iowa, IPL provides natural gas service to more than 240 communities. Some of the larger natural gas communities IPL serves are Ames, Marshalltown, Mason City, Clinton, Muscatine, and Burlington.
Customer impact
IPL expects the proposed change in natural gas rates to impact customers’ natural gas bills in two stages – interim and then the final rates with the cost management plan.
Interim rates
Interim rates will go into effect on June 4, 2012 and will remain in effect until the IUB issues a final ruling on IPL’s rate case request, which is expected to be on or before April 2013. IPL expects interim rates to increase annual natural gas revenues by approximately $8.6 million, or 3.3 percent on average.
· For an average residential gas customer using about 63 therms a month, IPL expects interim rates to increase the typical monthly natural gas bill by approximately $2.17 or 3.4 percent.
Final rates
Final rates will go into effect after the IUB issues a final decision on the company’s natural gas rate request. Because the IUB has up to ten months to rule on this request, IPL customers can expect final rates to take effect on or before April 2013. If the final natural gas rates approved by the IUB are lower than the interim rates, IPL will issue refunds equal to the difference between the interim and final rate levels, plus interest. Final rates are implemented in place of, not in addition to, interim rates.
· For an average residential gas customer using about 63 therms a month, IPL is requesting final rates to increase the typical monthly natural gas bill by approximately $5.07 or 7.9 percent.
Cost Management Plan
IPL’s proposed cost management plan will only impact final rates. This plan will allow a gradual phase in of the impact of this rate case, and will be finalized when final rates are set. Subject to approval, residential customers can expect IPL’s proposed cost management plan to completely mitigate the increase in the first year following the implementation of final rates, mitigate 80 percent of the rate increase in the second year and 40 percent in the third and final year of the cost management plan.
Financial details
IPL is requesting in its final rates, return on $264 million in rate base, a return on common equity of 10.9 percent, and 48.7 percent common equity ratio in the capital structure.
