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Keokuk Files Lawsuit Against IUB Over Rate Case

Jun 20, 2017

The city of Keokuk does not believe its residents and businesses should be forced to reimburse a utility company nearly $600,000 for legal expenses and other fees on top of a natural gas rate hike. So it's asking the court system to get involved.

The city filed a lawsuit Friday afternoon in Polk County District Court. The lawsuit asks the court to review “the entire record of the proceedings” involving Liberty Utilities request to the Iowa Utilities Board (IUB).

RATE HIKE

Liberty Utilities approached the IUB in mid-2016.

The company sought permission to increase the natural gas rates charged to more than 4,000 customers located in and around Keokuk by enough to generate an additional $1 million in revenue each year.

A settlement was eventually negotiated between Liberty Utilities and the Iowa Office of Consumer Advocate (OCA) that would allow Liberty to generate more than $870,000 annually.

The IUB signed off on the settlement in late April 2017.

In addition, the IUB is allowing Liberty Utilities to add a new monthly fee to bills for the next seven years. The money collected would be used to reimburse Liberty Utilities, the IUB, and the OCA for expenses related to the rate case such as legal fees, transportation, expert witnesses, and printing.

The IUB and OCA are in line to share about $230,000 while Liberty Utilities would receive roughly $585,000. Liberty requested more, but the IUB docked the company $25,000 for providing an inaccurate estimate of its potential expenses at the start of the case.

HEARING DENIED               

Keokuk has argued from the start that the total reimbursement amount (nearly $815,000) is unjust and unreasonable given the customer base served by Liberty Utilities.

The city requested a new hearing before the IUB to specifically look at the reimbursement, in particular the per-customer cost.

Keokuk raised the fact that customers served by Iowa-American Water Company would pay an average of $13.15 to cover the reimbursement associated with an approved rate increase in February. By contrast, the city said its residents and businesses would pay an average of $185.15.

“The [IUB] never addressed why it is just and reasonable for customers in Keokuk to pay 14 times more per customer in rate expenses than is to be paid by Iowa-American customers,” wrote Keokuk in its hearing request.

The city also said the amount of reimbursement for Liberty Utilities could serve as a deterrent the next time the company seeks a rate hike.

“As the record shows, and as raised by Keokuk in its objection, Liberty plans another rate increase in 3-5 years. The [IUB] never explained in its ruling why it is just and reasonable to allow a per-customer expense so large that it would deter customers from exercising their right to object to rate increases… [and] why it is just and reasonable to impose large (even punitive) expenses on customers who merely exercised their right to object to a proposed rate increase that could have been projected to be as high as 80%,” wrote Keokuk.

The IUB does not agree, spelling out its opinion in a 15-page order rejecting Keokuk’s request for a new hearing, which also had the support of the OCA.

“The [IUB] has reviewed its final order, the motion for rehearing, OCA’s answer and Liberty’s resistance and concludes that neither Keokuk nor OCA has provided sufficient reason for rehearing,” wrote the IUB in its order. “The [IUB’s] decision to disallow $25,000 in rate case expense represents a response to Keokuk’s objection to the reasonableness of the expense… It is clear that the [IUB] determined a portion of Liberty’s rate case expense was unreasonable and disallowed part of the overall expense on that basis.”

LAWSUIT

Keokuk had up to 30 days to file a lawsuit in district court challenging the IUB’s decision. The city only took about a week before filing its petition for judicial review in Polk County District Court.

The lawsuit asks the court to review the entire Liberty Utilities rate hike request and to either reduce the amount of the reimbursement itself or to order the IUB to reconsider its decision “with instructions to make a proper determination of the assessment of just and reasonable rate case expenses, declare the criteria for determining such expenses and to clearly establish such applicable criteria.”

The city argued in the lawsuit that its rights “have been prejudiced because the actions of the IUB are [among others]:

  • Based on a determination of facts not supported by substantial evidence in the record viewed as a whole.
  • The product of reasoning that is so illogical as to render it wholly irrational.
  • Otherwise unreasonable, arbitrary, capricious or an abuse of discretion.

A hearing on Keokuk’s petition for judicial review has yet to be scheduled.