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Keokuk Gaining Support, Opposition to New IUB Hearing

Jun 2, 2017

The city of Keokuk is gaining both support and opposition in its request for a new hearing before the Iowa Utilities Board (IUB) regarding a natural gas rate hike.

The IUB signed off, April 28, on a negotiated settlement between Liberty Utilities and the Iowa Office of Consumer Advocate (OCA).

The settlement allows Liberty Utilities to increase natural gas rates for its roughly 4,400 customers located in and around Keokuk to a level that would allow it to generate roughly $870,000/year in new revenue. The company had requested an annual revenue increase of $1-million.

At the same time, the IUB also ruled that Liberty Utilities could add an additional charge to customer bills to recover $814,643 that was spent on the rate case. Liberty Utilities would receive about $583,000 while the IUB and the OCA would receive the rest (roughly $231,000).

State law allows for the reimbursement of expenses related to a rate case, including legal fees, transportation and legal witnesses, as long as the reimbursement is considered “just and reasonable.”

Liberty Utilities initially estimated the rate case would cost it $389,979. But that estimate was based on there being no opposition to the rate hike. The actual expenses came in at nearly $610,000, a roughly $220,000 increase from the original estimate, thanks to Keokuk challenging the rate hike.

The IUB penalized Liberty Utilities $25,000 for the inaccurate original estimate, but signed off on the rest of the reimbursement, which Keokuk residents and businesses will have to pay back over seven years.

The city of Keokuk argues that it is not fair that its residents and businesses are punished for speaking out against a proposed double-digit rate hike. That’s why the city wants the new hearing, to argue its case for the reimbursement to Liberty Utilities to be cut further.

A motion filed by the Iowa Office of Consumer Advocate, dated May 30, 2017, supports Keokuk’s request for the hearing.

The OCA said Liberty Utilities should not be allowed to provide such an inaccurate initial estimate of the costs associated with the rate case and the IUB should not have gone so light on the company with a $25,000 penalty.

“The failure to present a complete estimate was entirely under Liberty’s control,” wrote the OCA in its motion. “The Board’s decision to disallow only $25,000 of rate case expenses bears no relationship to the violation that the IUB identified as the relevant violation.”

“By failing to include the full costs of litigating a rate case in its estimated rate case expense, Liberty denied the other parties the opportunity to challenge the reasonableness of the expected rate case expense early in the proceedings… The Board’s choice to disallow only $25,000 of rate case expense and allow Liberty to collect $225,000 more than estimated unjustly and unreasonably puts the burden of paying for the due process violation on the people whose due process rights were violated: Liberty’s customers.”

Liberty Utilities filed its own motion with the IUB on May 30, 2017, challenging Keokuk's request for a new hearing before the board.

“The city has not raised any new issues in its motion for rehearing that have not already been addressed at the hearing in this matter and/or through the extensive briefing of the parties. Contrary to the city’s assertions, the board addressed the city’s concerns regarding rate case expense and concluded that the company’s rate case expense is reasonable and just and the board’s findings are supported by the record. Accordingly, the city has provided no valid reason for rehearing this case,” wrote Liberty Utilities in its motion to the IUB.

The IUB has yet to make a decision regarding Keokuk’s request for a new hearing.

The higher natural gas rate hikes for customers in and around Keokuk are expected to take effect this summer.