Elkader Council takes first step in approving new Alliant franchise agreement, fee

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By Willis Patenaude, Times-Register

 

“In my final statement, I’d like to say I believe this is a short-sighted budget effort that can potentially cost our citizens money,” Elkader council member Tony Hauber said before the final vote on the Alliant Energy franchise agreement passed last week with a 4-1 vote, with Hauber being the lone “nay.” The ordinance is a 25-year agreement with Alliant, with a 15-year termination window and a 1 percent franchise fee. 

 

According to Hauber, part of this shortsightedness is tied to two things: the profits generated by Alliant versus the rising cost to residents and where the money for the now approved franchise fee actual comes from. 

 

In new information provided to the council and in a separate interview, Hauber noted how, in the past six years, the Alliant electric subsidiary’s profits have grown 70 percent. Their margin (profit as a percentage of revenue) has grown 62 percent. 

 

Using data available from Alliant’s own website, Hauber estimates the numbers mean Alliant has earned $120,000 more per year from Elkader than it did six-years ago. If this trend continues, by 2036, which will be the first opportunity for the city to exit the agreement, Alliant will make about $600,000 per year. That means around $6 million will leave the local economy. 

 

“What did this town get from Alliant for that opportunity to profit more off us? We got nothing from Alliant. All we got is the ability to claim money that was being distributed to the county and other cities in our county,” Hauber said in the interview. 

 

Hauber also noted that electric rates have increased at over double inflation in all categories: residential, commercial and industrial. Each has seen over 20 percent increases in the last six-years, leading Hauber to question how residents on a fixed income can continue to bear the cost.  

 

“This means all of our citizens now must divert more of their budget every year to paying for electricity and all of our businesses need to tighten their budgets to pay more to this Madison-based corporation. So if Alliant is going to increase profits while offering us the exact same service and we are going to get into a franchise agreement that basically guarantees their ability to do that, at the expense of our citizens, the city should at least get bought off with Alliant’s money and not other public funds,” Hauber added in the interview. 

 

At the meeting, Hauber questioned why the rates have increased, despite Alliant’s production cost dropping 30 percent and  profits rising 70 percent. 

 

Alliant representative Dustin Mohs replied, “to be honest, I really can’t address the rates.” He stated Alliant couldn’t increase rates without first taking the case to the Iowa Utilities Board, which ultimately decides based on the information Alliant provides. 

 

The issue of rising cost cuts into other areas as well. While council member Peggy Lane suggested the franchise agreement doesn’t prevent people from investing in alternative energy, it does in Hauber’s view. Residents are transferring more money away from other things to cover the rising cost and are, therefore, unable to make the initial investment required to install items like solar panels. 

 

Mayor Josh Pope responded to this line of thought, suggesting people could “turn their lights off and turn their air down” as a way to save money. 

 

“The solution is to tell our energy burdened people that because Alliant’s rates are going up, you have to use less and less of what you used before and that turns out to be a worse deal for our citizens,” Hauber said. “We must stop leaking money, especially in deals arranged by the publicly elected officials, to large city economies like Madison.” 

 

On the issue of the franchise fee, which was the impetus behind renewing the franchise agreement six years early, the city can essentially begin generating around $18,000 per year once the ordinance goes into effect. 

 

As council member Bob Hendrickson noted, “if we weren’t discussing the $18,000 a year that we’re missing out on, we’d just be like ‘let’s talk about this in six years.’” 

 

Hendrickson added there is no plan that can replace Alliant, there is no system in place to do so and, currently, there is not a viable alternative to Alliant as an energy provider. 

 

“We’re talking about dreams. We don’t have something in place yet,” Hendrickson said. 

 

Council member Daryl Koehn commented on the fact that Alliant helps the Elkader court industry because it’s reliable, and suggested the city would have to raise taxes to build a clean energy system, something Hauber disagreed with quickly. 

 

“Electricity is a profit generating industry,” Hauber said. 

 

Koehn responded, “I don’t want to sacrifice $90,000.” 

 

While Hauber understands the motivation behind the $90,000, he also believes the city should have held off on a new agreement until Alliant could show rates would go down sometime in the next few years before the current deal expires. Then there is the fact, as Hauber has maintained, that the $90,000 doesn’t invent itself out of thin air. 

 

“The $16,000 a year figure people talk about is actually being clawed out of other public funds, over $8,000 coming from our county funds. While I recognize and even see the validity in the argument for us having that money and not having it dispersed in the county, I dislike the framing of this money as coming from Alliant. They are not paying us anything for this franchise fee,” Hauber said. “Alliant has stated they will simply pass it on to the citizens as a line item on the bill, which Iowa law allows.”

 

While the franchise fee begins at 1 percent, the city can actually increase it to 5 percent by state law, according to city administrator Jennifer Cowsert. In the end, residents could end up paying even more for electricity under the new agreement, both due to Alliant’s costs rising and the city raising the franchise fee that previously didn’t exist. While the motion passed, the ordinance needs to go through two more readings before it becomes official. 

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