Iowa Officials Reach Deal with Utility to Freeze Electricity Rates

Chris Clayton , Omaha World-Herald, Neb. 7-13-01

Jul. 11--MidAmerican Energy has reached a settlement with Iowa officials that  will freeze electricity rates for nearly 600,000 customers for five years and commit the company to building at least two new power plants in the state.

MidAmerican announced plans Tuesday to build a 540-megawatt, gas-fired electricity plant in Pleasant Hill, which is just east of Des Moines. Company  officials said the plant is part of a plan to invest $1.5 billion to add more electric power in Iowa.

The new plants are part of a formal settlement that -- if approved by the  Iowa Utilities Board -- should end regulatory fighting between MidAmerican and  the Iowa Consumer Advocate's Office over the company's rates.

Just last month, MidAmerican announced that the company needed a 5.4 percent across-the-board rate hike to deal with inflation and higher maintenance costs on transmission lines.

The company's proposed rate hike was filed to counter the state's Consumer Advocate, which had filed its own case with the Utilities Board claiming that  that MidAmerican's rates were already too high.

Iowa Attorney General Tom Miller, who helped negotiate the settlement, said  consumers will benefit from stable rates while MidAmerican and state taxpayers will avoid potentially costly litigation. The new power plants also will help curtail concerns that Iowa may face a potential energy shortage in the coming years.

"This is a very good result for consumers and for Iowa," Miller said.

The Pleasant Hill plant, which will be called the Greater Des Moines Energy  Center, should generate enough electricity to power roughly 180,000 homes. The plant will cost about $340 million to build, MidAmerican officials said.

The company expects to build at least one more facility that would produce 860 megawatts, but no site has been announced for the second plant, which likely will be fueled by coal.

"Our plans to build electric generating plants in Iowa represent one of the  largest financial investments in the state's history," said Greg Abel, president of MidAmerican Energy Holdings Co.

MidAmerican is owned by a group of Omaha investors, which includes Berkshire Hathaway Inc. MidAmerican Chairman David Sokol said last month that Berkshire  Hathaway plans to invest as much as $10 billion in the electricity industry  through MidAmerican.

The new Pleasant Hill plant will be similar to a $270 million power plant  that MidAmerican brought on line last month in Cordova, Ill. MidAmerican  officials estimate the construction work would generate up to 500 jobs. The  plant itself would have 24 full-time workers and provide about $2.7 million in  annual taxes.

The plant will produce power using both natural gas and steam. The steam turbines in the plant, which uses no additional fuel, will produce power by using the waste heat exhaust from the natural-gas turbines, company officials  said. The Pleasant Hill plant could be producing power by 2003 and in full operation by 2005.