City-owned utilities fight new rules on late fees and rate-increase notices

An association of city-owned utilities is suing the Iowa Utilities Board over new rules that ban certain late fees and require them to give customers advance notice of rate increases.

The Iowa Association of Municipal Utilities, which represents 751 water, gas, electric and telecommunications utilities, is seeking judicial review of new rules approved by the Iowa Utilities Board last summer.

One of the rules specifies that municipal electric utilities “shall provide notice of rate increases to all affected customers at least 30 days in advance of the rate increase taking effect.”

Another new rule prohibits those same utilities from charging either interest or late-payment fees when those customers are on a pre-disconnection payment plans to keep their utilities from being shut off.

The new rules took effect Sept. 29, 2021.

The association is challenging the board’s authority to impose such requirements on city-owned electric utilities, citing a state law that says “a municipally owned utility furnishing gas or electricity is not subject to regulation by the board” except for certain specific issues.

Although the law specifically allows the board to require advance notice of rate increases imposed by “public utilities,” the association argues that element of the law does not specifically refer to municipally owned electric utilities and so it doesn’t apply to them.

“By imposing a mandatory 30-day waiting period, the rule also interferes with a municipal electric utility’s statutory obligation to establish and adjust rates when and as necessary to meet its operating and maintenance expense and debt service payments,” the association argues.

As for the rule prohibiting late-payment and interest fees imposed on customers who are already on a pre-disconnection plan, the association claims that by prohibiting the utilities from collecting such fees, the board is interfering “with municipal electric utilities’ exclusive rate-making power.”

The association is seeking a Polk County District Court ruling declaring the new rules to be void and unenforceable as to municipal electric utilities.

The board has yet to file a response to the lawsuit and a spokesman did not immediately return a call seeking comment on Friday.