Your Opinion: Ameren official responds on CWIP
Monday, August 22, 2011
In response to William Cochran’s letter to the editor, printed in the Aug. 14, News Tribune, I want to provide some facts about Missouri’s Construction Work in Progress (CWIP) law.
When opponents of nuclear energy failed to convince Missouri’s citizens that nuclear power was dangerous, they tried to convince them it was expensive. When voters passed Proposition 1 on Nov. 2, 1976, they were led to believe that the ban on CWIP was a consumer protection. But in reality, it’s just the opposite!
Without CWIP Missouri’s investor-owned utilities must borrow money and pay compounding interest on those funds until a construction project (new plant or equipment) is completed and placed into service. Then, when the utilities request cost recovery from the Missouri Public Service Commission (PSC) for their investment, the amount of money is larger due to the interest charges. These financing costs are what drive electric rates higher.
By banning CWIP in 1976, voters actually added $1 billion to the cost of Ameren Missouri’s Callaway Energy Center and millions of dollars to the recently completed clean-air scrubber at our Sioux coal plant in St. Charles County.
The economic analogy is quite simple. Imagine you buy a new TV and you decide to pay for it with a credit card. Then, you decide to wait five or six years before you start making payments on that credit card. By the time you pay off your new TV you will have paid for it several times over as a result of compounding interest charges.
The rural electric cooperatives and municipal utilities in Missouri are not bound by the 1976 CWIP law. This allows them to raise their customers’ rates more gradually over time and provides pay-as-you-go funding (CWIP) for their capital improvements. These utilities can then borrow less money and their customers pay less for these projects in the end.
Ameren Missouri is continuing to work with all of Missouri’s electric service providers to help shape Missouri’s energy future. Our alliance is evaluating all generating options in an effort to meet our state’s future energy needs. We are looking at nuclear power (large and small reactors), low-sulfur and clean coal technologies, hydro, wind and solar power, and we continue to work with our customers on energy efficiency.
All of these technologies have a place in our state’s energy future.