A bill changing how utility rates are set won overwhelming approval in a Missouri House committee Monday after a hearing where backers said it is vital to the state’s economy and opponents said it would soak consumers with higher costs.
The proposal to repeal a 1976 law passed by initiative petition that prohibits companies from charging for power plants under construction but not yet operating has already passed the state Senate. Following the 17-4 vote Monday in the House Utilities Committee, it could go directly to Gov. Mike Kehoe if nothing is changed during the upcoming debate in the full House.
The legislation would allow companies to seek rate increases for “construction work in progress,” or CWIP, with a specific allowance for new generating plants that burn natural gas and an allowance in another section for any generating plant that is an approved resource plan.
The initiative that passed the 1976 law was launched by people upset over rate hikes allowed for the construction of a nuclear power plant in Callaway County.
The bill repeals the ban for 10 years and allows the Public Service Commission to extend it for another 10. State Sen. Mike Cierpiot, the Republican from Lee’s Summit who is sponsoring the bill, said he doubts the new CWIP allowance would be used for a new nuclear power plant.
“I was asked to have nuclear CWIP (in) this bill, and I actually don’t think that’s a horrible idea, but I think it’s kind of 15 years off before we actually start deploying those,” Cierpiot said.
In the Monday vote, two of the committee’s seven Democratic members supported the legislation along with 15 of 16 Republicans, while three Democrats and one Republican were opposed.
During two hours of testimony, opponents argued the CWIP provisions, when coupled with other allowances for utilities to seek more from customers, would add as much as $1,100 a year to residential electric bills.
“This bill is not designed to benefit Missourians,” said Gretchen Barwick, director of the Missouri chapter of the Sierra Club. “It’s designed to provide corporate welfare to monopoly utilities.”
Representatives of utilities and the Public Service Commission said growing power demands mean new generation plants will be built in the Midwest. Passing the law allowing the charge for construction of new plants will be an incentive to build in Missouri, they said.
Large industrial users of electricity will locate plants where power is plentiful, said Jason Klindt, senior director of external affairs at Evergy. The bill includes requirements that large users pay a rate that is not subsidized by residential users, he said, arguing that will spread the cost out and result in lower overall rates for everyone.
Evergy is the major power provider for western Missouri. It is building two new gas-fired power plants in Kansas. The company would like to build in Missouri as well, Klindt said.
“We look forward, frankly, to announcing new power plants if we can get this bill across the finish line,” he said.
The bill would apply to investor-owned utilities regulated by the PSC. The commission has no control over rates for municipal power companies or rural electric cooperatives.
The bill would also allow all utilities regulated by the commission — water, gas and sewer along with electricity — to seek rates based on what the bill calls a “future test year.”
Currently, rates are set after the PSC examines the actual costs incurred to deliver service and determines if each expense was prudent and necessary. In a future test year scenario, the utility would outline what it expects to spend and the costs would be pre-approved by the PSC.
There are some aspects of the bill intended to benefit consumers. The Office of Public Counsel, which represents the interests of ratepayers in utility cases, would receive dedicated funding for the first time from an assessment on utility revenues.
There are changes to the rule blocking shutoffs for non-payment during hot and cold months as well as provisions requiring the commission to account for any federal tax savings by adjusting rates.
The bill would also allow the PSC to order electric utilities to repay customers for construction work in progress charges if the plant does not go into service.
The time is now for CWIP because of a rapidly escalating demand for power, said Rich Germinder, policy and strategic initiatives advisor to the PSC. The rapid increase in the number of electric vehicles and the construction of power-hungry data centers is helping drive up demand.
“Everyone was caught unprepared for the demands of the increased load growth that we’re seeing,” Germinder said.
Opponents of the bill said the items intended to help consumers won’t offset the additional costs.
Two of Missouri’s three major electric suppliers are before the commission seeking rate increases. Ameren, which serves eastern Missouri, is seeking a rate increase of nearly 16% and the Empire District Electric Company, which serves many smaller communities doing business as Liberty, wants regulators to increase its revenue by nearly 30%.
The CWIP and future test year provisions will just add to the additional costs consumers already face, opponents said.
If this legislation passes, it will be the most costly and expensive legislation ever passed by the Missouri legislature,” said Diana Plescia, attorney for the Missouri Industrial Energy Consumers, a consortium of 14 major manufacturers.
The legislation will increase rates by an additional 40% to 80%, she said, making it too expensive to attract new investment.
“The damage to our economic base in Missouri will be real,” Plescia said “And I say this in terms of both the jobs that will be lost and the jobs that will never come.”
This story was first published at missouriindependent.com.