DEFINED ELECTRIC SERVICE AREAS PROTECT RURAL IOWANS
At the Iowa Association of Electric Cooperatives, we are constantly monitoring issues that could impact the people and rural communities served by Iowa’s electric cooperatives. As Iowa’s 2025 Legislative Session kicks off in January, we are concerned about potential challenges to state law regarding defined electric service areas. This law has been crucial to our co-op mission to serve members.
What are defined electric service areas?
In Iowa, where you live determines which electric utility will serve you. This regulatory protection is called defined electric service territory and the State of Iowa wrote Senate File 1258 into law almost 50 years ago to efficiently ensure that every square foot of our state has an electric utility obligated to provide service upon request.
The legislation’s goal was “to encourage the development of coordinated statewide electric service at retail, to eliminate or avoid unnecessary duplication of electric utility facilities, and to promote economical, efficient, and adequate electric service to the public.” Because of this law, electricity is available to every Iowan no matter where they choose to live, work, vacation or adventure. Click here to view a statewide boundary map.
Why do Iowa's electric cooperatives support defined electric service areas?
Iowa's locally owned electric cooperatives are committed to safeguarding defined service areas because they protect rural Iowans by supporting affordable electric rates, securing a resilient electric grid and encouraging economic development.
Defined service areas provide a high degree of certainty to Iowa’s electric cooperatives because we can confidently make long-term investments in power generation to maintain affordable rates, finance major grid upgrades to ensure resiliency and utilize new technologies to enhance service. Electric co-ops can also be proactive in maintenance and vegetation management to improve reliability for the homes, farms and businesses we serve every day. Additionally, defined service areas allow electric co-ops to robustly support economic development efforts in the communities we serve, which retain and create local jobs and provide needed services and tax revenue.
Any efforts to remove or weaken Iowa’s defined service areas could result in higher biller and decreased reliability for Iowans. This issue is critical for Iowa’s electric cooperatives, which are mission driven to power lives and empower communities by providing electricity that is safe, reliable and affordable.
Why are defined electric service areas being challenged?
Recently, Big Tech companies have been working through special interest groups to draft legislation that could remove Iowa's electric service territory protections. Often referred to as "deregulation" or "customer choice," removing defined service areas could result in lower power costs for very large electric users at the expense of higher rates and lower reliability for everyone else. Over the past 20+ years, several states have deregulated their electric utilities, but the promises that competition would result in lower rates and improved reliability have not materialized.
The realities of electric deregulation:
- Electric rates have increased in deregulated states.
- According to a 2023 New York Times investigation, "Deregulation has resulted in increased rates/fees in every state where it has been introduced." The report goes on to conclude that "On average, residents living in a deregulated market pay $40 more per month for electricity…”
- According to a 2021 report published by a highly respected law firm, “Deregulation may make power cheaper for some major electricity buyers like Big Tech, but it increases costs for the average consumer, all while sacrificing reliability. In fact, nine out of ten states in the continental United States with the highest utility costs have fully restructured markets with retail choice."
- Referencing an American Public Power Association 2021 report, The average electric rate is 28% higher in deregulated states, as compared to traditionally regulated states.
- According to a 2023 New York Times investigation, "Deregulation has resulted in increased rates/fees in every state where it has been introduced." The report goes on to conclude that "On average, residents living in a deregulated market pay $40 more per month for electricity…”
- Electric reliability has decreased in deregulated states.
- From 2018-2023, electric outages in Iowa are 65% shorter on average compared to deregulated Midwestern states. Iowa outages are 22% lower than deregulated Midwestern states when excluding major weather events. Source: EAI-861 data from IA, IL, MI, and OH; 6-year average SAIDI analysis with and without major events.
- From 2018-2023, Iowa electric consumers experienced 34% fewer outages on average compared to deregulated Midwestern states. Iowans experienced 20% fewer outages than deregulated Midwestern states when including major weather events. Source: EIA-861 data from IA, IL, MI, and OH; 6-year average SAIFI with and without major events.
- From 2018-2023, electric outages in Iowa are 65% shorter on average compared to deregulated Midwestern states. Iowa outages are 22% lower than deregulated Midwestern states when excluding major weather events. Source: EAI-861 data from IA, IL, MI, and OH; 6-year average SAIDI analysis with and without major events.
- Electric cooperatives' economic development investments could be at risk if deregulation is successful in Iowa.
- For the 5 years ending in 2022, Iowa electric co-ops had an impact of $4.7 billion in economic development projects.
- These investments supported more than 7,300 Iowa jobs (retained, attracted or expanded) during that same time period.
- For the 5 years ending in 2022, Iowa electric co-ops had an impact of $4.7 billion in economic development projects.
Research on deregulation:
CUB report: Customers choosing ComEd alternatives losing millions
Chicago Daily Herald / August 27, 2024
Annual Report to the Illinois Commerce Commission (referenced in the news article above)
Why Are Energy Prices So High? Some Experts Blame Deregulation.
New York Times / January 4, 2023
Retail Electric Rates in Deregulated and Regulated States: 2021 Update
American Public Power Association
At the Precipice: The Perils of Utility Restructuring (March 2021)
Wilkinson Barker Knauer, LLP
The Failure of Electricity Deregulation: History, Status and Needed Reforms (March 2007)
Tyson Slocum, Director of the Public Citizen's Energy Program