Senate panel debates utility charges
Wednesday, February 6, 2013
State Sen. Mike Kehoe’s bill allowing utilities in Missouri to charge customers for infrastructure repairs generated nearly two hours of testimony in a Tuesday afternoon committee hearing.
And Chairman Brad Lager, R-Savannah, said his panel likely will act next week on Kehoe’s measure, sending it to the full Senate for debate.
The bill would let the state’s three investor-owned electric utilities — Ameren Missouri, KCP&L and Empire District Electric Co. — replace aging infrastructure and pass that cost on to customers without needing approval from the Public Service Commission.
Customers would see the additional costs on their bills as an “infrastructure system replacement surcharge,” or ISRS.
The costs would be reviewed later by the PSC.
“The economic impact of this bill,” Kehoe, R-Jefferson City, reminded the committee, is “for every $100 million that’s spent on utility infrastructure investment, it creates close to 1,200 jobs.”
Warner Baxter, Ameren Missouri’s president and CEO, testified for his company and the two other regulated companies that have formed a collaboration called the Missouri Electric Alliance.
“Our customers’ and our state’s energy needs and expectations have changed radically over the last 100 years,” Baxter said. “One thing that hasn’t changed ... are the policies and regulations associated with infrastructure investment in this state.”
Approving the proposed changes would allow the utilities to answer consumers’ needs more quickly, he said.
Among the opponents was Chip Smith, Noranda Aluminum’s president and CEO.
“We’re opposed to the bill, primarily because it removes critical consumer protections,” he said, “and it may create incentives to overbuild assets and overcharge customers.”
Noranda’s southeast Missouri smelter is Ameren’s single biggest customer.
“We bought $162 million worth of electricity last year,” Smith testified, noting Ameren’s recent rate increases have raised the company’s rates $33 million since 2007 — and would have been $20 million higher if Kehoe’s proposed law had been in place since 2007.
Kehoe read parts of a letter from PSC Chairman Kevin Gunn, telling the committee the nation faces a potential $1.5 trillion to $2 trillion in electrical infrastructure repair costs by 2030.
Speaking for himself and not the full commission, Gunn wrote: “As ISRS has been effective for gas and water (utilities) infrastructure, there’s no reason why it cannot be effective for the electricity sector, as well.”
Morris Brubaker, a St. Louis-based regulatory consultant, told the committee the ISRS proposed for the electricity providers really isn’t like the surcharges allowed for the water and gas companies several years ago.
“We’re not seeing the safety hazards, or the massive outages, that we had with water and gas,” he said, “and we certainly don’t see the weak financial conditions the water and gas utilities were experiencing.”
The ISRS law for water and gas utilities was designed to allow them to replace aging distribution pipes and make other technological improvements.
“We ask that you vote no on Senate Bill 207 out of our concern for elders, persons with disabilities and low-wage workers,” said Stu Murphy of Jefferson City, the immediate past president of the statewide Missouri Association for Social Welfare.
“These neighbors are already struggling to pay their heating and cooling bills (and this proposal) threatens to add an average of 10 percent, or around $125, to their electric bills each year.”
But, Kehoe countered: “That is just not factual. There is a cap involved in this legislation, where — over the three-year period of a mini rate case and a full-blown rate case — an investor-owned utility could not exceed the 10 percent in that three-year period.”
He added: “That’s really a four-year period — three years in the legislation, and it takes about a year for a full-blown rate case.
“The protections that the consumer gets are in this, in that it gives us a steady way to improve our infrastructure, versus some spikes.”