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During the 2023 Iowa Legislative Session, proposals have been introduced with the intent to deregulate electric service territories in Iowa. Iowa’s electric cooperatives are concerned about the negative economic impacts of deregulation for rural Iowans because we know firsthand how exclusive service territories provide stability. They also provide consistency and reliability through a utility’s obligation to serve its assigned service territory. I’d like to provide some background on how rural Iowans benefit from these regulations.

Making electricity available to every Iowan

In 1976, the Iowa Legislature passed Senate File (SF) 1258, which created assigned electric service territories. The legislation’s goal was “to encourage the development of coordinated statewide electric service at retail, to eliminate or avoid unnecessary duplication of electric utility facilities, and to promote economical, efficient and adequate electric service to the public.”

Let’s break this down. First, the Iowa Legislature desired a coordinated statewide retail electric service system ready to serve Iowans. SF 1258 accomplished this goal by ensuring that every square foot of Iowa had an electric utility obligated to provide electric service upon request. Electricity is available to every Iowan no matter where they choose to live, work, vacation or adventure.

Second, the Iowa Legislature wanted to eliminate or avoid unnecessary duplication of electric utility facilities. SF 1258 achieved this by assigning a single electric utility to serve within the assigned service territory. This means that only one set of substations, power lines and transformers are installed to serve every home and business in a service territory. Imagine the cluttered landscape of several sets of substations, power lines and transformers in your community if multiple utilities provided electric service in your neighborhood.

Finally, the Iowa Legislature set out to promote economical, efficient and adequate electric service to the public. SF 1258 advanced economic electric service by reducing potential expenses related to duplication of electric facilities. Additionally, the legislation promoted efficiency by reducing the electric facilities installed and by establishing service territories based on existing facilities already installed.

Assigned service territories increase electric reliability

Although the Iowa Legislature didn’t set out to increase reliability by creating assigned service territories, SF 1258 accomplished that as well. According to a 2021 utility report, “At the Precipice: The Perils of Utility Restructuring,” published in 2021 by the highly respected law firm Wilkinson Barker Knauer, LLP, “Deregulation may make power cheaper for some major electricity buyers like Big Tech, but it increases costs for the average consumer, all while sacrificing reliability. In fact, nine out of 10 states in the continental U.S. with the highest utility costs have fully restructured markets with retail choice. Deregulation proponents also claim that the approach is clean and green. In reality, these restructured models offer little incentive for the kind of large-scale investment in clean energy technology that we’ll need to meet the demands of a changing climate.”

For more than 45 years, Iowa’s assigned service territory laws have reinforced reliable and affordable electric utility service. Efforts to weaken or eliminate these laws will only harm rural Iowans. 

Ethan Hohenadel is the director of regulatory affairs for the Iowa Association of Electric Cooperatives.

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