The following information has been reviewed by the Iowa Ethics and Campaign Disclosure Board and approved by the Decorah City Council on December 23, 2024, for dissemination to the citizens of Decorah.
A Municipal Electric Utility (MEU) is an electricity service provider owned and operated by a local government. Much like the city owns and operates the water and sewer system in Decorah, many cities also own and operate other utilities, including electricity or communications. There are 135 Municipal Electric Utilities currently operating in Iowa. The last time a new MEU was established in Iowa was 1974. Nationwide, approximately 14.2% of customers are served by consumer owned electric utilities, including Municipal Electric Utilities (MEUs) and Rural Electric Cooperatives (RECs).
A Municipal Electric Utility is a city utility that is owned by the city whose voters established it. Investor Owned Utilities are owned by private investors and operated for profit. Electric service in Decorah is currently provided by an Investor Owned Utility (IOU), Interstate Power and Light, also known as Alliant Energy. The safety and service characteristics of all electric utilities in Iowa are regulated by the Iowa Utilities Commission (IUC). The IUC determines which entity (MEU, REC, or IOU) is permitted to be the exclusive provider of electric service within its assigned service territory. Electric service providers (MEUs, RECs, and IOUs) must provide electricity to retail customers within their assigned service territory and may do so by entering into wholesale supply agreements or by acquiring their own generation facilities.
The municipalization process is not easy; communities have to demonstrate capacity to serve the customers in the assigned service territory and must show that it is in the public interest, which includes factors other than merely rate relief. In addition, many communities served by Investor-Owned Utilities have entered into long-term franchise agreements of up to 25 years. In 2018, Decorah's franchise agreement was open, and it will be again in 2025.
Under Iowa law, the proposal of a city to establish a MEU must be submitted to voters for their approval before the city may undertake the operation of the MEU, including communication with the Iowa Utilities Commission regarding the costs of purchasing infrastructure. Decorah needs information on electric infrastructure, operational costs, and projected revenue to make an informed decision on whether or not to proceed with municipalization, and that information cannot be acquired unless voters authorize the city to proceed.
Tuesday March 4, 2025. Polls will be open from 7am to 8pm. Early/absentee voting will begin February 12th, 20 days before the election, in accordance with Iowa state law.
“Shall the City of Decorah, in the County of Winneshiek, State of Iowa, be authorized to establish a Municipally-Owned electric utility?”
To “establish” the MEU means that the city would be allowed to create the legal entity that is the “utility.” This is only the first step in the municipalization process described below. The city would not begin serving customers immediately because there are other necessary steps that must be taken first.
If a majority of Decorah residents votes to establish a municipal electric utility, the City of Decorah will be authorized to initiate proceedings with the Iowa Utilities Commission (IUC) and request information about Alliant’s current service area that is not accessible otherwise, including information on Alliant’s infrastructure inventory, expense, and revenue data. Obtaining this information would allow the City to make an informed decision about whether to conduct a new feasibility study or to update the study completed before the 2018 referendum. If the feasibility study indicates that the City could serve customers in Decorah cost-effectively and reliably, then the City would consider creating a business plan for the MEU. If the study indicates that the City cannot cost effectively and reliably operate the MEU, then the City is not required to proceed with municipalization. At any time in this process, even after a vote, the Decorah City Council retains the authority to change its mind and pause or terminate the municipalization process.
A bond issuance is not necessarily required. However, if funding is needed to proceed with the IUC process or for the purchase of infrastructure, the City can propose a ballot question on whether to issue general obligation bonds. Such a question would require a 60% majority of votes. To actually begin serving customers in Decorah, the City would need to seek the permission of the IUC. The IUC would determine whether it is in the public interest for the City to be allowed to provide electric service and, if so, what its assigned service area would be. As part of this determination, the IUC would determine how much it will cost for Decorah’s MEU to acquire Alliant’s service territory. If the City of Decorah determines the price set by the IUC is reasonable, the Decorah MEU could issue revenue bonds to purchase the service territory. Revenue bonds are secured by the rates charged to customers within the service area; no new taxes are levied for revenue bonds. The electric rates paid by ratepayers would pay back the bonds. The amounts and timing of the revenue bonds would all be included in the MEU business plan and evaluated by the IUC.
The steps above (the cost of a feasibility study, the legal expenses associated with petitioning the IUC, purchasing the electric infrastructure, and the operation of an MEU) all involve financial obligations that would be incurred by the city of Decorah. Details regarding these financial implications would be determined as part of the IUC’s petition process. If the City of Decorah proceeds with the process at the Iowa Utilities Commission, substantial upfront costs could be incurred. A referendum may be required to seek voter approval to issue bonds to cover these expenses. At that time, the City would have more specific information on the operational costs of the MEU. A general obligation bond referendum would need a 60% majority to pass.
The Decorah City Council (or a Utility Board appointed by the Council) will ultimately be responsible for making decisions about electricity rates. Such rates would be set based on the cost of providing electric service within the MEU’s service area. The IUC will not approve an MEU’s application for the right to serve electricity within its assigned service territory unless the IUC determines that the MEU is able to operate with comparable reliability to the incumbent utility and at comparable rates for customers. The MEU’s rates would be established once its costs are determined with certainty.
Not necessarily. An MEU could purchase electricity from wholesale electricity providers. The MEU could also supplement that wholesale supply with its own generation.
MEUs are not required to offer these programs, but many do. The MEU would have full control over its operations, including whether to offer net-metering and energy efficiency programs.
The MEU would ultimately be responsible. MEUs often participate in Mutual Aid Agreements with other electric service providers to maintain and restore services in the event of natural disasters. Additionally, MiEnergy has indicated a willingness to enter into a Maintenance and Operation agreement with a Decorah MEU.
Alliant Energy (Interstate Power and Light) would remain the electric service provider for the Decorah area service territory.
This is a map of the Decorah area service territory, defined by the IUC, currently managed by Interstate Power and Light (Alliant Energy).
The Decorah service area (in purple) is currently served by Interstate Power and Light/Alliant Energy, and is surrounded by territory served by MiEnergy Cooperative (in beige). There are approximately 3,800 customers within the municipal boundaries of Decorah, with some additional homes and businesses outside the City, yet inside the current Alliant service territory. In addition, some parts of Decorah, including residents on the West Side, and the Decorah Business Park, currently are served by MiEnergy. The Iowa Utilities Commission makes its decision about whether or not to approve a petition to municipalize based on what it determines to be in the public interest.
The city may intend to conduct a feasibility study. However, feasibility studies must be based on accurate input data. The City of Decorah has requested the information it needs on multiple occasions to produce an accurate feasibility study but Alliant has refused to provide until the City passes a referendum and files a petition at the Iowa Utilities Commission to acquire Alliant’s service territory. The city may conduct a feasibility study as soon as it is able to obtain the information it needs to do so accurately.
The city does not intend to request a certificate of authority from the Iowa Utilities Commission to furnish electric service to MiEnergy’s customers within the city.
This question is hard to answer because a lot will depend on how far Decorah proceeds down this road. For example, if Alliant furnishes the City with the requested data, and the Decorah MEU's financial feasibility does not appear strong, then the City may decide not to proceed with the petition. On the other hand, if the feasibility does appear strong, then more expenses will be incurred to present this evidence to the Iowa Utilities Commission. While the City has sufficient funds to file the petition and may be able to cover additional costs like the feasibility study with public donations or grants, at some point the City may have to issue General Obligation bonds, which require a 60% supermajority of Decorah voters.
Yes, in one way or another. Like Alliant Energy, some MEUs pay replacement taxes. Many MEUs also make transfers of surplus funds after all debt obligations and other expenses are paid. A municipal utility can also provide free or discounted electric service to the City.