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Decorah Power consultant says Alliant's $50 million estimate of the value of its Decorah facilities can be reduced almost $15 million by using just two factors alone

Posted: Mon, Mar 12, 2018 11:07 AM

A consultant from the company which did Decorah Power's feasibility study of a Decorah municipal electric utility says two factors in Alliant's feasibility study which he says have no basis in Iowa law would reduce the valuation of the Decorah facilities by more than $15 million.

NewGen Strategies and Solutions consultant Dave Berg says the $50 million valuation by Alliant of the Decorah facilities includes $11 million in expenses because of assumptions Alliant's study made about the new municipal utility's service area and another $4.5 million because of Alliant's claim that it would be paid $4.5 million for being a "going concern."

Alliant's feasibility study assumes that the MEU would be required to separate existing Alliant customers into two groups--those within the city limits and those outside the city limits--at a price tag of $11 million for a "reintegration fee."  Berg says the Iowa Utilities Board would never require this split, since the board's mandate is to make decisions in the best interests of the community, not necessarily by geographic city limits.  
Berg quoted the IUB's ruling stating that, "the Board does not rule out establishing electric service area boundaries that go beyond the city limit."  He also emphasized the IUB's repeated statement that, "unreasonable duplication of facilities should be avoided."
Berg also dismisses Alliant's claim that they would be paid $4.5 million for being a "going concern."  This term is normally used to describe the value of a customer base in a competitive marketplace.  Alliant has a monopoly, so Berg says "they are assigned their customers, they do not earn them, and there is no precedent for a utility being paid this sort of fee."

Alliant Energy has stated that its consultant, Ann Bulkley from Concentric Energy Advisors, has 30 years of experience in the field of utility valuations.  Bulkley's study predicted $24 million in higher costs over the first 10 years of operation and $53 million in higher costs over the first 20 years of operation.  She also created a best-case and a worst-case scenario, but both showed higher costs than with Alliant's service.