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Utility "surcharge' debate moving slowly

Utility "surcharge' debate moving slowly

February 17th, 2013 in News

A group opposed to the infrastructure replacement projects bill took credit this week, after the Missouri Senate's Commerce, Consumer Protection, Energy and the Environment Committee didn't vote to send the bill to the full Senate for debate.

"The monopoly electric company's efforts to take more of your money, while sidestepping the oversight and transparency process, have stalled," the Fair Energy Rate Action Fund said in a news release Wednesday. "The bill championed by big electric companies was not voted out of committee ... thanks to your outcry."

But state Sen. Mike Kehoe, R-Jefferson City, who sponsors the bill, said Thursday he's not worried.

"This is a process that I want to make sure people are comfortable with, as we move forward," Kehoe told the News Tribune. "So, we're having meetings with the parties that have various concerns with this (and) with various senators and representatives who have more questions about it. ...

"Taking a little bit more time, and explaining some of the misinformation that's out there, I think is well worthwhile."

Kehoe's bill would allow Missouri's three investor-owned electric utilities - Ameren Missouri, KCP&L and Joplin-based Empire District Electric Co. - to replace "aging infrastructure" and pass the costs along to customers, all without first getting the Public Service Commission's approval.

Each project's costs is called an "Infrastructure System Replacement Surcharge," or ISRS.

Supporters argue that, in the long-run, the ISRS process is more efficient and less costly for consumers than the regular PSC rate cases that can take up to 11 months.

Opponents strongly disagree.

For instance, AARP-Missouri said in a letter to senators last month, the legislation would "make it easier and faster for utilities to increase rates to consumers and gut the process that is designed to ensure Missouri consumers pay fair utility rates."

But, in a letter to the Senate committee members, outgoing PSC chairman Kevin Gunn wrote: "In current ISRS proceedings, the PSC does provide oversight.

"The costs are examined and are allowed only if they are necessary and prudent. This is an important protection that must remain in place."

John Coffman, a former state public counsel who now is a private attorney in Webster Groves, disagreed.

As he reads Kehoe's proposed law, Coffman said: "It's really not about anything specific - it's about everything and the kitchen sink.

"It's about replacing the rate-case process with this automatic surcharge."

Kehoe and others promote the proposed law as giving to the electric companies the "same process that water and gas companies already have" in Missouri.

But opponents say the proposal isn't the same as the decade-old, existing ISRS law.

"It's a very significant expansion over what the gas and water companies have," said Lewis Mills, the state's current public counsel - who represents consumers in PSC rate cases.

"The gas companies - and the water companies, too, to a lesser extent - had, about 10 years ago, a lot of serious problems with safety and health issues because of deteriorating mains."

And, because they usually are smaller companies with less ability to raise money, lawmakers created the ISRS process.

"We don't have those same sorts of issues with the electric companies," Mills said. "They don't, right now, seem to be having any serious problems raising money to keep their systems in shape. ...

"In fact, they don't seem to have any problems providing safe and adequate service under the current rate-making regime."

Mills noted Kehoe's bill "goes way beyond the notion of just replacing distribution infrastructure, to make sure that service is provided to customers in a safe and adequate way. It covers computers for customer service folks.

"It covers generation plants."

Kehoe said that difference is fair, because water and gas companies just distribute a product, while electric utilities also create the product.

Mills doesn't think Kehoe's bill is needed, because there's nothing wrong with the current rate-making process. He agreed with Kehoe and Gunn the proposed law would give the PSC a chance to review all of the extra work.

Coffman, whose clients include AARP-Missouri, agreed with Mills the bill isn't necessary - but he's not sure the proposed law provides the consumer protections supporters say it does.

"There are several things (in current law) that are very important toward making sure that rates are fair for everybody," he explained, in a telephone interview.

He said Kehoe's proposal "basically ... throw(s) out every other thing ... we use to argue that the rates are fair."

Coffman and Mills agreed the ISRS process allows the utility to be more selective about what it seeks to raise rates on.

"The first problem with all of these surcharges is, they look only at one thing and, almost inevitably, the utilities advocate for whatever part of their business is going up (in cost)," Coffman said. "And, by only looking at that, consumers are denied the benefit of looking at the downwardtrending (costs). ... They should only raise rates if, overall, they really need it."

Under ISRS, he and Mills said, the law appears to restrict issues the PSC can review.

"These (surcharge) costs do get looked at, to make sure they're "prudent' - but that doesn't capture any other, offsetting savings from some other part of the business," Mills said. "You can't to back to the last rate case and capture savings. As a practical matter, its much harder to take things out of the rates once they're in them," Coffman said. "There's a practical burden on the consumer to argue that a cost should be removed."

The PSC hasn't taken a position on the bill.

"Typically, the Commission does not take positions on legislation unless it is being proposed by the Commission itself - and then, only if the Commissioners are unanimous," spokesman Kevin Kelly said last month, when Kehoe introduced the bill. "Commissioners are free to take individual positions."

In his letter to the Senate committee earlier this month, Chairman Gunn wrote: "ISRS, if done right, can be an effective way to replace aging infrastructure that will, in the long run, create a more reliable system as well as saving money for the consumer.

"Ongoing recovery of infrastructure investments may avoid, or reduce, the frequency of rate cases. This will result in more stable, and predictable, rate cases for businesses and residential rate payers."

AARP-Missouri representatives point to climbing rates in Illinois, which approved ISRS regulations for electric utilities a couple of years ago.

But Warner Baxter, Ameren Missouri's president and CEO, told lawmakers this month that, "If Ameren Missouri were to invest an incremental $100 million in our energy infrastructure today ... the cost would be about one-half of a 1 percent per-year increase on the average customer's bill" - or about "a 50-cent increase, per month, on the average customer's bill."

Rep. Jeanie Riddle, RMokane, has filed a companion bill in the House. It's been sent to the Utilities Committee, but has not been scheduled for a hearing.