Alliant Energy Corporation’s (LNT - Analyst Report) subsidiary, Interstate Power and Light Company (“IPL”), has received approval from The Iowa Utilities Board (“IUB”) for its natural gas base rate case that was filed in May 2012.
With this approval, Iowa natural gas rate base is set at $254 million. IUB has sanctioned an increase in IPL's annual natural gas service revenue requirement of approximately $10.5 million and a 10% return on common equity. Also, IUB has approved IPL’s Cost Management Plan. This plan will use tax benefits to credit customer bills and mitigate any impact on base rates for a period of three years. New rates are expected to be effective from the first quarter of 2013.
Generally, cost of gas is passed on to customers on a dollar to dollar basis. On an average, cost of gas makes up 60% to 70% of the average residential natural gas bill. However, it has remained unaffected under this rate case proposal. Currently, due to lower gas costs, the average current residential bill is approximately 20.0%, down since the IPL’s last rate case in 2005.
Currently, the company is focusing on heavily expanding and developing its utility assets in the Iowa region. Recently, the company had filed two applications with the Iowa Utilities' Board for regulatory approval for the planned building of the 650 megawatt Marshalltown Generating Station (“MGS”). It expects a decision in the fourth quarter of 2013. The natural gas-fired Marshalltown unit is a $650-$750 million investment, which is expected to be a major revenue churner for Alliant Energy. Prior to this, the company had announced the completion of its Power Iowa project in Hardin County.
The company expects this rate case to recover more than $70 million spent for infrastructure investments in natural gas distribution systems since the last case.
The company seems to be focusing on the well-being of its customers and shareholders. Recently, its third-quarter earnings call increased its annual dividend to $1.88 from the current target of $1.80.
Based on stable economy, ability of IPL and WPL to earn their authorized rates of return, income tax benefits at IPL from tax initiatives, continuing cost controls and operational efficiencies and execution of capital expenditure plans, the company presently retains a short-term Zacks #2 Rank (Buy) like its peers Xcel Energy Inc. (XEL - Analyst Report) and Wisconsin Energy Corp. (WEC - Analyst Report).
Headquartered in Madison, Wisconsin, Alliant Energy Corporation is engaged in providing regulated electricity and natural gas services to residential, commercial, and industrial customers in the Midwest region of the United States. The company, through its subsidiary, IPL engages in the generation and distribution of electricity, and distribution and transportation of natural gas in Iowa and southern Minnesota; and generation and distribution of steam in Cedar Rapids, Iowa. Alliant Energy, through its subsidiary, Wisconsin Power and Light Company (“WPL”), is also involved in the generation and distribution of electricity, and distribution and transportation of natural gas in southern and central Wisconsin.