Iowa gas plant review raises data center cost questions for utility customers

Consumer advocate seeks additional review

The Office of Consumer Advocate wants the Iowa Utilities Commission to require additional evidence and a hearing before deciding Interstate Power and Light Company’s pending Riverhawk Energy Center application.

Interstate Power and Light Company seeks a certificate of public convenience, use, and necessity for a proposed 1,200-megawatt natural gas-fired combustion turbine facility in Iowa’s Cerro Gordo County.

The proposal centers on Riverhawk

Riverhawk would add about 1,200 megawatts of generation capacity in Cerro Gordo County if regulators approve Interstate Power and Light Company’s pending certificate application for the proposed project.

Riverhawk remains subject to regulatory approvals, environmental requirements, and oversight by the Iowa Utilities Commission and Iowa Department of Natural Resources before facility construction can proceed under required permits.

Consumer office raises affordability concerns

The Office of Consumer Advocate represents Iowa consumers and the public interest in utility matters involving safe, reliable, reasonably priced, and nondiscriminatory service across regulated markets and proceedings.

Its September 11 filing raised affordability concerns if project costs reach customers and sought earlier review of Riverhawk’s need, cost-effectiveness, fuel expenses, and generation alternatives before certificate approval.

The dispute turns on certificate scope

The central dispute concerns what the Iowa Utilities Commission must examine under Iowa law before granting a certificate for a large generating facility within this specific regulatory proceeding.

The consumer office wants evidence on need, cost-effectiveness, fuel expenses, and customer effects before approval rather than leaving those questions entirely for applicable ratemaking review under Iowa law.

The company points to ratemaking

Interstate Power and Light Company argues this certificate case does not require proof that Riverhawk is prudent, necessary, or cost-effective before regulators decide the application in this docket.

The company contends any request for customer cost recovery would face Iowa Utilities Commission review in a future rate proceeding before expenses could be included in approved electric rates.

Project approval and rate treatment differ

Certificate approval would allow Riverhawk to advance under regulatory conditions, while any customer cost recovery would remain subject to applicable ratemaking review before costs could be included in electric rates.

The distinction separates project authorization from future rate treatment, a central disagreement between the consumer office and Interstate Power and Light Company during this ongoing Riverhawk regulatory proceeding.

Fun fact: Natural gas surpassed coal as the leading source of U.S. electricity in 2016 and has remained a major part of the power grid since then.

Two projects carry combined cost estimate

The consumer office estimated Riverhawk and Morgan Valley Energy Center together would require about $2.1 billion to $3.2 billion in combined capital spending before counting ongoing operating expenses.

Morgan Valley Energy Center is another proposed Interstate Power and Light facility, and the combined estimate underpins affordability concerns if the utility later seeks regulated customer cost recovery.

Little-known fact: U.S. data centers directly consumed about 17 billion gallons of water in 2023, compared with roughly 5.6 billion gallons in 2014.

Data center demand enters the review

Iowa Business for Clean Energy linked scrutiny of Alliant Energy’s generation plans to the company’s data center contracts and called for greater public review of related generation decisions.

The organization urged regulators to examine whether customers driving additional power needs pay their fair share before other customers face potential long-term cost risks from new generation investments.

Rate recovery requires additional review

Growing Iowa’s Economy, a group that includes Alliant Energy, argues certificate approval does not automatically place Riverhawk costs into customer rates without later review by the Iowa Utilities Commission.

Alliant Energy describes the 2024 Iowa Utilities Commission order as supporting base-rate stability, while Interstate Power and Light’s retail electric base-rate moratorium runs through September 2029, subject to exceptions.

A solar precedent enters the case

Interstate Power and Light Company cited a previously decided 50-megawatt MidAmerican Energy Company solar certificate case as precedent for limiting issues the Riverhawk docket should decide in this proceeding.

The utility argues that prudence, necessity, and cost-effectiveness belong outside this certificate proceeding, relying on the Iowa Utilities Commission’s treatment of those questions in that earlier solar case.

Peaker classification remains disputed

The consumer office questions whether Riverhawk is only a peaking plant, pointing to Interstate Power and Light filings indicating the facility may operate more frequently depending on market conditions.

Interstate Power and Light Company responds that the legal standard for a certificate remains the same regardless of how often the facility operates after entering regular commercial service.

Other groups seek resource study

Clean Energy Districts of Iowa and Iowa Business Energy Coalition also asked regulators to require a resource evaluation study before approving Riverhawk Energy Center’s certificate application in this docket.

Their comments also sought evidence addressing need and cost-effectiveness, adding those questions to the Commission’s record alongside the requested resource evaluation before the Riverhawk application is decided by regulators.

Want to read more about the latest developments? Check out how the Nevada gas plant approval let data centers bypass utility power limits.

Commission still faces procedural decision

The Iowa Utilities Commission must decide whether to grant Interstate Power and Light Company’s request to waive an evidentiary hearing on the pending Riverhawk Energy Center certificate application.

If commissioners require more evidence, the review would broaden before approval. If they waive the hearing, Riverhawk’s certificate request could advance under the existing record without formal testimony.

Want to stay ahead of the news? Check out why America’s $4 billion wind rollback is reshaping energy investment as cheap natural gas gains ground again.

What matters more: adding new power generation for growing data center demand or protecting utility customers from higher costs? Share your thoughts in the comments below!

This slideshow was made with AI assistance and human editing.

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