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Elkader Council debates franchise fee, energy future with Alliant

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By Willis Patenaude, Times-Register

 

At its latest meeting, the Elkader City Council debated a resolution that centered around enacting a franchise fee and whether the city should sign a new 25-year non-exclusive franchise agreement with Alliant Energy. 

 

Council member Tony Hauber was displeased with the length of the agreement, instead arguing for an extension of no longer than five years. He claimed 25 years is unnecessary and that shorter agreements keep the city’s options open. 

 

That option would consist of the city generating its own power, but according to Hauber and the current agreement language, the city is not allowed to do so. 

 

Beyond self-generated power, Hauber was short on listing other options, as was city administrator Jennifer Cowsert, who explained Elkader really only has one option for electricity because of the way the Iowa Utilities Board decided the service areas for providers. For Elkader, it’s Alliant. No other provider currently exists. 

 

The agreement length also raised the ire of council member Randy Henning, who stated, “I’m not on board with 25 years.” Members Peggy Lane and Bob Hendrickson agreed, with Hendrickson adding that, if the city can renegotiate the agreement every five years then it should be able to have a contract for five years. 

 

However, Alliant representative Jacob Semann, who was at the meeting, said the shortest agreements are typically 15 years. He said the reason for the lengthy agreements is because, if Alliant is going to invest money into the town, the company want time to recoup that cost. 

 

What happens if the city decides to move forward without an agreement when the current one ends in 2026? Semann explained that the city would then be responsible for all repairs and changes. 

 

In a separate interview, Cowsert added that “franchise agreements give the company some security that they will be a partner in the community for ‘X’ years. Without that, they may not make investments in infrastructure, such as they made last summer by putting lines underground.”

 

Cowsert said a franchise is an agreement that grants non-municipal utilities the right to operate within the city right-of-way. 

 

“If we don’t have an agreement, and they want to dig up a ROW, there is nothing we can do to make them repair that or return the ROW to the way it was. If they want to abandon all their poles, there is nothing that would make them remove them,” she explained.

 

Only council member Daryl Koehn supported the agreement length, mentioning the investment Alliant has made in the community, such as remodeling the facility in town.

 

“They are a friend of this community. They’re just trying to know that, if they’re going to continue to grow here and invest, they want some kind of guarantee,” he added. 

 

Koehn used to be an employee of Alliant, but according to all accounts, there was no conflict of interest in Koehn voting on the issue because he would not benefit financially from the agreement in any way. 

 

Alliant’s corporate media team stated, “As we plan for the future, franchise agreements allow us to understand our customer base and service territory. The renewables we’re installing for customers will last at least 25 years, so knowing that customers will be on our system during that time helps protect all customers from extra costs.”

 

Cost is another point of contention, at least for Hauber, who questioned Semann about the revenue Alliant generates versus what it puts back into the community—a question Semann could not answer. 

 

Hauber’s main concern was that too much money is being taken out of the local economy and put into the pockets of a corporation. 

 

Cost also applies to what Elkader pays for energy from Alliant, and in Hauber’s view, it’s too much, especially considering Alliant has increased its renewable energy output since 2019. But despite the fact renewable energy production costs have gone down, Alliant has raised energy rates by an average of 2.2 percent per year since 2010, according to the Alliant website. 

 

“Alliant boasts cheap base rates, but then if you continue to read about their rates, they have various riders that allow them to recover money for various reasons…and the math is obfuscated. These charges add to your base rate,” Hauber added in an interview. 

 

Alliant did not respond to questions regarding the rates Elkader pays and the reason for the cost increase, but the corporate statement read, “While there are several factors that determine a customer’s overall costs, we remain focused on keeping our costs in the lowest quartile of overall rates in the state.”

 

Cost applies to the franchise fee ordinance debated by the council as well. A franchise fee is a fee that is assessed as a percentage of gross revenue collected in the city by the utility. The franchise fee is displayed as a line item on each customer’s energy bill. 

 

As Hauber explained, “it is an indirect tax on our citizens just to add $18,000 to $36,000 to our budget that comes from our citizens’ pockets.” 

 

Alliant’s own definition of the franchise fee indicated the cost will be passed onto the customer, and Cowsert noted in a separate interview that, while the agreement doesn’t specifically say who should pay the fee, “in our experience, the company passes it on directly to the customer. It is even listed on their bill as a franchise fee.” 

 

Why is the city pursuing a franchise fee? As both Cowsert and mayor Josh Pope pointed out in interviews: revenue. Cowsert acknowledged the limited options the city has to raise revenue and commented on a recent bill signed by Gov. Kim Reynolds that will phase out around $34,000 to Elkader. 

 

“The state legislature just keeps enacting new legislation that negatively impacts local budgets and doesn’t seem concerned about it at all,” Cowsert said. 

 

Pope also noted the lack of revenue sources available to the city and the fact that raising taxes is not always an option, as the state limits the general fund tax levy.

 

“If we have limited revenue sources and the state is curtailing what can be done with property tax revenue, we need to seek other revenue sources,” he added. “Having an agreement that at least gives the council the option to implement a franchise fee is beneficial. It is easy to say cut expenses, but the cost of everything is going up. We have to increase our salaries to stay competitive.”

 

Hauber, while complimenting the city for finding a new revenue stream, was still not willing to tax citizens further for it, or “sacrifice 25 years of Elkader’s energy future and moor the city to Alliant for a quarter century.” 

 

Instead, Hauber would like to see Elkader focus on ground breaking changes which give the city more control over its energy production and future. 

 

The council eventually tabled the proposal by a 4-1 vote, with only Koehn voting in favor.

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