FERC Upholds Net Billing in Iowa

July 2001

Iowa's alternative energy producers received a victory in March when the Federal Energy Regulatory Commission (FERC) upheld net billing arrangements in Iowa. Net billing allows entities like schools, farms, and residences to install alternative energy facilities and produce power for their own electricity needs—during a monthly billing period, if additional power is needed, the facility purchases it from the utility at retail rates. If the facility produces more power than it uses, it sells the excess to the utility at a lower, avoided cost rate.

The FERC decision denied MidAmerican Energy's petition to override the Iowa Utilities Board's net billing requirements. FERC stated that net billing arrangements are legal and not in violation of any federal laws. FERC ruled that only one transaction takes place between a utility and alternative energy facility at the end of a given billing period—either a net sale or net purchase for electricity—and this transaction is allowable through the Federal Power Act and other federal guidelines. FERC also ruled that a month is a reasonable timeframe for measuring the net transaction.