An Iowa business group is pushing back on Alliant Energy's plan group to invest in additional power plants, saying everyday customers could get saddled with billions in costs for generating capacity intended mainly to serve the record development of data centers in Iowa.
Iowa Business for Clean Energy, an advocacy group with years of utility expertise, said Thursday, Sept. 10, that Wisconsin-based Alliant proposes an eightfold increase in its natural gas "peaker" power plant capacity in Iowa. It claimed Alliant is using a loophole in Iowa law to hide how much customers could end up paying for the projects, which it estimated would cost $3.5 billion,
Alliant doesn't have to "show the gas plants are needed, that the plants are the best option, or that the data centers will pay their fair share to receive Iowa Utility Commission approval to build that massive amount of added capacity," Bob Rafferty, Iowa Business for Clean Energy's executive director, said in a statement.
Alliant and MidAmerican Energy, the state's largest utility, have said big tech companies will pay 100% of their energy costs.
"Alliant Energy's commitment is straightforward: Existing customers will not pay for new large-energy-user growth," the company, which owns Cedar Rapids-based Interstate Power & Light, said in a response Thursday.
Alliant, which has agreed to freeze electric rates until 2029, said it's required to serve all customers as energy demand grows, planning for and ensuring "all customers receive reliable, cost-effective energy service, both now and into the future."
It said new, large-energy users help spread the costs across a bigger customer base, which provides rate stability.
Under state law, regulated utilities can build natural gas peaker plants — which can be quickly started to meet spiking demand — without disclosing to customers how much they will cost.
After a plant is built, utilities can ask state regulators to approve rate increases to cover that cost.
"The question is simple: why shouldn't Alliant be required to show this large investment is in the best interests of ratepayers and if it is, that the data centers are paying their share of the cost?" Rafferty said. "Iowa needs transparency before ratepayers are locked into decades of higher costs."
Experts have said it's unlikely state regulators will deny a rate increase after billions of dollars are invested in new power plants, although the commission could limit the impact on ratepayers.
Rafferty alleged that Alliant has hammered out "secret rate agreements" with data center operators rather than using "large-load public rates," a move he said shields "the entire process from accountability."
"It's hard to see how ratepayers don't get taken for a ride," he said.
Jesse Harris, a spokesperson for Growing Iowa's Economy, a group that supports data center development, said in a statement that Rafferty's group ignores "key customer protections and regulatory safeguards."
"It is fair to ask questions about major energy investments. It is not fair to tell Iowa families they are being handed a multibillion-dollar energy bill, while ignoring the agreements, regulatory oversight and customer protections specifically designed to prevent that from happening," said Harris, whose group includes building trades, labor unions and economic development interests.
Iowa Business for Clean Energy's criticism comes as tech companies like Alphabet's Google and QTS Data Center are investing heavily in Iowa data center construction to support growing cloud and AI infrastructure.
Virginia-based QTS expects to build $10 billion in new data centers in Cedar Rapids and proposes another center in Clinton. And California-headquartered Google said last year it plans to invest $7 billion in Iowa data centers over the next two years.
Alliant and MidAmerican, the Des Moines-based utility owned by Warren Buffett's Berkshire Hathaway, are scrambling to provide energy to meet the expected data center demand.
Alliant received approval to build a peaker plant at its existing Marshalltown power station and it seeks to build additional peaker plants near Cedar Rapids and Clear Lake. MidAmerican proposes building a peaker plant in southwest Iowa's Adams County.
More: Iowa regulators order Alliant Energy to cut natural gas rates by $2.6M
In addition, Google last year inked a 25-year agreement with NextEra Energy to buy power from the Duane Arnold Energy Center, Iowa's only nuclear plant. The Florida utility is working to restart the 615-megawatt plant, which closed after its cooling towers were damaged in the massive 2020 derecho.
On Tuesday, the U.S. Department of Energy announced it would provide NextEra a $1.9 billion loan to help pay for the restart.
Iowa Business for Clean Energy said Alliant's peaker-plant buildup will increase the utility's current base rate by 50%. Peaker plants are "the most expensive way to generate electricity — equivalent to the expense of a new nuclear plant," the group said.
"The company is simply using data centers as the excuse for an expense that will increase Alliant's annual profits by roughly $175 million, but cost Alliant's customers billions," said Rafferty, whose organization's board includes former state utility regulators and the owner of Iowa 80 Truck Stop in Walcott, the world's largest.
Growing Iowa's Economy countered that utilities "must prove that investments on behalf of customers are needed and in the public interest, otherwise, they may not recover the costs through rates."
"The costs of new generation facilities are not automatically placed into customer rates, as those costs are subject" to regulatory review, said the group, whose roughly 40 members include Alliant.
Alliant said it's building peaker plants because they "provide flexible, dispatchable energy that complements renewable generation and helps maintain reliability when customer demand is high or weather conditions are extreme."
"We develop generation resources to meet the needs of the overall electric system, not any single customer," it added.
Growing Iowa's Economy took issue with the finding of the Iowa Business for Clean Energy analysis that peaker plant costs are similar to those for nuclear plants.
"Renewable resources, storage and dispatchable generation are not necessarily interchangeable on a one-for-one basis," the group said, adding that a peaker plant's costs "should not be evaluated solely as though it were intended to operate continuously."
More: See inside Iowa's only nuclear power plant, set for restart in 2029
Iowa Business for Clean Energy said the Iowa Utility Commission's standards only require data centers' special rates to cover marginal costs, which Lazard Power, Energy & Infrastructure Group, a widely cited industry source, says is about half of the full cost of new development. That means "ratepayers could be stuck paying the rest," the Iowa business group said.
And if the "projected data center usage does not materialize over the life of the assets, Iowans would be left responsible for even more of the cost," Rafferty said.
"Those expenses would show up in public rates paid by Iowa households, small businesses, manufacturers, farms, schools and local governments," he said, adding that Alliant's residential and small business rates are "already 60% higher than MidAmerican Energy's."
Donnelle Eller covers agriculture, the environment and energy for the Register. Reach her at [email protected].
This article originally appeared on Des Moines Register: Iowa group claims Alliant hiding true cost of adding data center power