Electric customers of Interstate Power and Light Co. should not be asked to pay for the utility’s management mistakes, Iowa’s Office of Consumer Advocate (OCA) said today in a filing with the Iowa Utilities Board.

In the filing, the OCA asked the utilities board to reduce electric rates for Interstate customers by $29.85 million annually, or approximately 2.8 percent. A subsidiary of Alliant Energy Corp., Interstate in March had filed an application with the Utilities Board to increase electric rates by more than 18 percent for residential customers and nearly 15 percent for large industrial customers.

“One of the reasons for OCA’s recommended rate reduction is to hold Interstate accountable for poor management decisions that have led to certain unreasonably high costs,” Consumer Advocate John R. Perkins said in a press release. “Another reason is that many of the utility’s alleged costs are not expected to be as high as Interstate claims.”

Ryan Stensland, an Interstate spokesman, said the issues are “not as black-and-white” as Perkins categorized them.

“The perception may be that we tried to pull one under the rug, but that was clearly not the intent,” Stensland said. The rate increase the company requested is needed to pay for necessary investments the utility has made to maintain system reliability and safety, he said.

“We try to make decisions that are in the best interests of our customers, but we must also be responsible to our shareholders,” he said. “We have to balance that on a daily basis.”

In order to obtain Utilities Board approval of the sale of electric transmission assets to ITC Holdings Corp.’s ITC Midwest subsidary, Interstate filed sworn testimony stating that the sale was structured in a way that would “zero out” any rate increase effects on customers for eight years, the OCA noted. The OCA opposed the sale at the time and predicted that Interstate’s transmission costs would increase if the transmission assets were sold to ITC Midwest.

In its pending rate increase application, Interstate proposed to increase rates by more than $87 million per year for increased transmission costs, violating its promise to hold customers harmless for eight years, the OCA claimed.

“Our evidence will show that Alliant Energy’s board of directors decided on behalf of shareholders to sell Interstate’s transmission assets,” Perkins said, “and shareholders need to bear the financial consequences of Alliant’s erroneous calculations. Interstate’s shareholders still possess a $217 million after-tax gain on the sale that can be used to cover the increased costs. The role of customers is not to protect shareholders.”

Perkins also said his office is very concerned about the effect of Interstate’s high electric rates on economic development.

“Iowa cannot afford for factories to close or not locate or expand in Interstate’s service area because of unreasonably high electric rates,” he said.

“The evidence shows that some of Interstate’s largest industrial customers have built their own electric generation facilities to escape Interstate’s high electric rates. Part of Interstate’s proposed rate increase is to have its remaining customers make up for these lost sales and revenues.”

Stensland said, “We find it very ironic that the OCA now wants to speak to economic development, when we had a $1.5 billion shovel-ready project ready for Marshalltown.” The OCA opposed Interstate’s request last year to construct a new coal-fired electricity plant in Marshalltown, which the Utilities Board rejected.

The Utilities Board has scheduled a hearing to begin on Oct. 5, and a decision is expected by January 2010. The Consumer Advocate’s rate reduction request was made in a detailed filing with the board on Friday. . The OCA’s entire filing is available on the IUB website: www.state.ia.us/iub.