(The Gazette)

A proposed Interstate Power and Light Co. generating station in Marshalltown undergoing review by state regulators would result in an average 10 percent increase in customer rates by 2018, the company estimates.

The division of Alliant Energy filed its applications last week for a siting certificate, which would enable it to build the 600-megawatt natural gas-fired Marshalltown Generating Station. It also filed for advanced ratemaking principles, asking the Iowa Utilities Board to allow a 11.25 percent return on its investment in the plant.

The power plant is part of a long-term energy plan proposed by Alliant that includes about $440 million in upgrades to extend the life of existing power plants by reducing air emissions, a proposal to extend its nuclear power purchasing agreement by buying 431 megawatts of power from the Duane Arnold Energy Center at Palo, and more investment in renewables and energy efficiency.

Unlike the previous proposal for a coal-burning power plant in Marshalltown, the proposed Marshalltown Generating Station would be an “intermediate” load facility not intended to operate continuously.

Natural gas has a more favorable carbon emissions profile than coal, reducing the risk of running afoul of carbon emissions regulations planned by the Environmental Protection Agency.

The plant would have less economic impact, however. It would create 15-20 permanent jobs with an annual payroll of $1.7 to $2.2 million. Construction would generate a payroll of $150 to $200 million, according to the utility’s filing.

The Iowa Environmental Council, which opposed IPL’s last plant proposal, hasn’t decided whether to oppose the Marshalltown Generating Station.

“One of the things we’re looking at is the ability of the power plant to integrate well with wind energy,” said Nathaniel Baer, energy program director for the coalition of environmental groups.

If the plant is designed so it can quickly ramp up power output and ramp down in response to changing output from wind farms, Baer said it could potentially “provide some flexibility to actually help develop wind energy in Iowa.”

One issue that could come up in state hearings on the plant is whether it would be more economical buy generating plant capacity in the region that is already sitting idle.

“There are thousands of megawatts of natural gas fired units sitting ide due to the market in Illinois,” said Bob Latham of Latham & Associates, who represents a group of large IPL customers known as the Large Energy Group in regulatory proceedings.

He said it’s possible the utility could acquire some of those units without the big investments in transmission capacity that would be required to connect a new power plant in Marshalltown.

Alliant spokesman Ryan Stensland said the utility issued a request for proposals for existing generating capacity in the region, but none of them came in at a price more competitive than building the Marshalltown Generating Station.

Latham said the impact of IPL’s latest power plant proposal on base electric rates would be considerably lower — perhaps 60 percent — of the impact of the previous proposal. Even so, he said the long-term impact will depend on things like how it will impact the transmission and fuel cost factors on customers’ bills.

The Iowa Office of Consumer Advocate will perform a complete independent evaluation of IPL’s proposals. State Consumer Advocate Mark Schuling said the 11.25 percent return on investment requested by IPL may look high because of the current low interest rate climate, but it may not be. That’s because utilities typically recover their investment in a new power plant over periods as long as 30 or 40 years.

Schuling said the analysis also will include how the natural gas-fired plant would balance the utility’s mix of power sources.

In its filing, IPL said power demand on its system grows 20 to 25 megawatts per year. It said the company’s programs to help reduce energy demand have exceeded their goals, and the natural gas-fueled power plant fared the best of alternatives it analyzed in making its decision.

Transmission upgrades would be needed to get power from the plant to customers who needed it, according to the filing.

The filing calls for a 10-mile-long natural gas pipeline from the Marshalltown plant site to the Northern Border pipeline 10 miles northeast of the plant site, and a 63-mile, 345-kilovolt transmission line from Marshalltown to Morgan Valley substation along existing right of way.

Another 345 kilovolt transmission line would go from Marshalltown to Newton along new right of way. An existing transmission line from Marshalltown to Prairie Creek Generating Station in Cedar Rapids would be retired, and a 161 kilovolt transmission line from Marshalltown to Jasper would be rebuilt.

The cost of transmission improvements are included in the estimated rate impact, according to Stensland. The power transmission improvements would be undertaken by ITC-Midwest, which owns the transmission system.