Iowa Supreme Court Decision Boosts Renewable Energy Development

A recent Iowa Supreme Court decision may give a boost to small-scale renewable energy development in that state. On July 11, the court issued its opinion in SZ Enterprises, LLC vs. Iowa Utilities Board (link to decision), determining that a third-party power purchase agreement for behind-the-meter generation is not subject to regulation as a “public utility” or “electric utility” under the Iowa Code.

Eagle Point Solar (Eagle Point) and the City of Dubuque had proposed to enter into a power purchase agreement, pursuant to which Eagle Point would have installed, owned and operated a solar generation system on the roof of a city-owned building. The city would buy the output of the system on a per-kWh basis for use by the city on its side of the meter.

Iowa’s utility statutes prohibit a “public utility” or “electric utility” from serving customers within the exclusive service territory of another utility. Because the statute’s exemption for customer-owned generation would not apply to the third-party sale of power from Eagle Point to the City of Dubuque, Eagle Point sought a determination from the Iowa Utilities Board (IUB) that the project would not qualify as a public utility or electric utility. The IUB rejected Eagle Point’s request, determining that the project would be a public utility and prohibited from selling power to a customer within the exclusive service territory of Interstate Power & Light Company. Eagle Point sought judicial review from a state district court, which reversed the IUB decision. The IUB appealed to the Iowa Supreme Court.

After reviewing the statute and case law on the question, the Iowa Supreme Court applied a multi-factor analysis to determine that a third-party power purchase agreement for behind-the-meter generation is not “clothes with the public interest” and did not merit treatment as either a public utility or electric utility. Though the IUB and utility company intervenors argued that projects like the Eagle Point facility could diminish demand for electricity from regulated utilities, the court found nothing in the record to quantify this risk nor any evidence that utilities had been materially impacted in other states that permitted third-party power purchase agreements.

Advocates of renewable energy have praised the ruling, saying that it will encourage other similar projects in the state, while Iowa’s electric utilities argue that it may result in a loss of their most profitable customers and an increase in rates for their remaining customers.

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