Rate increase suspended until IUC approves company’s revised compliance tariff
The Iowa Utilities Commission (IUC) issued its final decision and order today regarding a request from Iowa-American Water Company (Iowa-American) to increase the water and wastewater rates it charges to Iowa customers. The order, in Docket No. RPU-2024-0002, approves a rate increase for Iowa-American; however, the effective date of the increase and financial impact on customer bills will be dependent on the company filing tariffs that show the new rates and how they were calculated. The IUC will review the tariffs to determine compliance with today's order.
Iowa-American filed its application with the IUC on May 1, 2024, seeking an increase in water rates and requesting a permanent annual revenue of approximately $66.3 million for water service and approximately $1.1 million for wastewater service rates.
As part of the rate case proceeding, the IUC received written public comments and held two in-person public customer comment meetings in Iowa-American’s service territory and one virtual customer comment meeting in the summer of 2024. The IUC conducted public hearings on January 6 and January 21, 2025. The IUC ultimately approved an annual revenue requirement of approximately $58.7 million for water service and approximately $1 million for wastewater service.
Iowa-American’s application also requested approval of modifications to the utility’s qualified infrastructure plant (QIP) mechanism, which is a surcharge to cover the costs of certain infrastructure investments, as well as a new alternative rate design mechanism, a Revenue Decoupling Mechanism (RDM). The IUC approved the QIP rider with modifications, requiring Iowa-American to file an updated rider within 20 days. The IUC denied Iowa-American’s proposal for the RDM.
Today’s order approves a return on equity of 9.6% and denies Iowa-American’s request to shift a portion of its wastewater revenue requirement to water customers. The order also requires Iowa-American to:
- File an updated cost of service study, revenue allocation, rate calculations, and proof of revenue consistent with the order. The proof of revenue is required to show the percentage of rate increase by customer class.
- Issue a refund of the amount Iowa-American over-collected from customers in interim rates, with interest. Within 20 days Iowa-American must file the amount of the interim rates collected, the amount collected per customer class, and the proposed refund amount that each customer class is expected to receive as a bill credit in an upcoming month.
- File annually a capital investment plan followed by a stakeholder meeting.
Iowa-American had filed its application based on a future test year. As such, the utility must request a subsequent proceeding within 90 days after the first year that rates approved by the IUC have been in effect. The IUC will then determine whether actual costs and revenues are reasonably consistent with the costs and revenues approved by today’s order, or a subsequent public hearing will be scheduled to address questions from the IUC.
Iowa-American is a rate-regulated utility that provides water service to approximately 70,000 Iowa retail customers in and around the cities of Clinton, Davenport, Dixon, Bettendorf, LeClaire, Riverdale, Panorama Park, Blue Grass, and Donahue, and wastewater/sewer service to 825 retail customers in and around Blue Grass and Donahue.