A five-year comparison of MidAmerican Energy financials shows a steady decline in profits, but the privately owned utility still earned a healthy 11.03 percent return on equity from its Iowa electric operations last year.
The utility has avoided seeking an electric rate increase since 1996 and has agreed not to increase rates through 2013 under a deal with the Iowa Utility Board (IUB).
The move enabled the utility to keep in place a high allowed rate of return while offsetting its higher operating costs with substantial sales to other utilities (wholesale buyers in the Midwest region) and lower borrowing (interest) costs.
Under the deal struck with the IUB, the utility must share profits above an 11.75 percent return. Between 1996 and 2007, a total of $280 million was returned to electric ratepayers.
MidAmerican has been able to sell between 35 to 42 percent of its total electrical generation on the wholesale market over the past five years. The company has been successful selling to other utilities because it has substantial surplus capacity and is able to generate the additional electricity using low-cost coal capacity. In 2010, 38 percent of the electricity the company produced (11.7 million megawatt hours) was sold on the wholesale market.
Meanwhile, MidAmerican has been able to lower its cost of long-term debt as interest rates have fallen. The cost of the utility's long-term debt fell from more than 7.5 percent in 1997 to 5.43 percent in 2010.
New advanced ratemaking rules pushed by the utility and put in place by the state have allowed MidAmerican to add substantial electric capacity from new coal, natural gas and wind generators during the past 10 years without triggering a full rate case review.
The advanced rate-making assures the utility will be able to add the cost of those additional electric generating units into the ratebase when it does come in for a future rate increase. The advantage for ratepayers is the value of that new generating capacity also will reduced by the amount of depreciation of the generating equipment since it was placed in service.
MidAmerican is owned by Berkshire-Hathaway, Warren Buffett's conglomerate headquartered in Omaha.
The utility obtained a "rate adjustment" in 2010 when the state legislature approved a bill allowing MidAmerican to charge customers $15 million to study the feasibility of building a nuclear power plant in Iowa.
In the last legislative session, MidAmerican sought a change to allow advanced ratemaking for nuclear power plant construction.That bill narrowly failed, largely because of the reaction to the Fukushima nuclear plant disaster in Japan.
