The Missouri House is expected to finalize on Thursday sweeping utility legislation – a similar version has already passed in the Senate. The two bills have differences that must be reconciled in order to make it to the governor’s desk.
The measures from the House and Senate both cap rate hikes power companies can seek in negotiations with the state at 2.85% and 3% per year. The 2.85% limit applies to Ameren Missouri, the state’s largest utility, while the 3% ceiling applies to Kansas City Power & Light (KCP&L), the second largest power company.
John Coffman with the watchdog group Consumer’s Council contends the caps are not really rate caps, as applied to small businesses and residential customers, but are instead revenue caps. He says, as such, they just delay cost increases for customers rather than cap rates.
The bills also introduce a new accounting practice that lets utilities look backward and claim depreciation costs on infrastructure upgrades made previously when they negotiate new customer utility rates. But while the Senate bill allows 85% of those depreciation costs to be declared, the House version limits the claim to 50%.
Ameren has touted the new accounting practice, known as PISA for Plant In Service Accounting, as a way to stimulate investment in long-needed infrastructure upgrades on the part of power companies.
Coffman with Consumer’s Council points out the accounting method has an additional component in addition to the depreciation feature. He says it also adds carrying costs which include profits, which makes it a bonus profit to the utility.
Numerous amendments were made on the House floor Wednesday that separate its bill from the Senate measure it was once identical to.
One of those amendments, from Democrat Peter Meredith of St. Louis, calls for programs or rate adjustments to assist low-income residential customers. The change seemed to shore up support among Democrats for the bill, which was approved in separate votes as parts I and II by respective margins of 134-4 and 128-13.
Both the House and Senate bills include provisions allowing the state to reduce customer rates to make up for big savings utilities are getting from the recent corporate income tax cuts. Ameren Missouri, the state’s largest utility, claims the move will cut customers’ rates by 4-5% for a total of $100 million.
At least one watchdog group is highly critical of Ameren’s motivation, noting the utility giant was initially silent while other large electric companies around the country announced they’d be immediately passing savings on to consumers.
David Woodsmall with Midwest Energy Consumers Group says Ameren originally balked at the idea but used the savings give back as a bargaining chip to get favorable treatment from lawmakers.
“Instead of being like all the other utilities in the nation and giving the money back, they’ve held it hostage in order to use it to sell their legislation,” said Woodsmall.
Two business groups, Associated Industries of Missouri and the Missouri Retailers Association, have praised the savings return, which is required to reach customers within 90 days.
The Senate and House bills also allow for discounts to rate hikes on large industrial power users. Those customers would have their increases capped at 2% per year, instead of the 2.85% or 3% proposed for residential customers.
The discount translates to a reduction in rates of up to 33% for the large users. Cara Spencer with the watchdog group Consumer’s Council says that discount will be harmful to everyday residential customers.
“Mom, dad, grandma, we’re going to be subsidizing the rates of the very largest industrial users,” said Spencer. “We anticipate that will add about a 2% increase spread across the residentials.”
Even though the House passed its own utilities bill Thursday, the chamber’s Utilities Committee held a hearing on the Senate plan Thursday afternoon.
With both chambers having given some form of approval, the far-reaching utility legislation has now moved farther in the Missouri General Assembly than at any other time in what’s become a multi-year effort by power companies to change how they’re regulated.