Missouri’s largest utility selling recent utility law, watchdog groups highly critical

Ameren Missouri, the state’s largest power company, has been enthusiastically embracing a sweeping utility law passed by the legislature and signed into law by Former Governor Eric Greitens before he resigned.

The legislation was approved by a wide majority of lawmakers after the utility giant had spent years trying to get similar measures across the finish line with no success.

The new law includes rate caps Ameren contends are the most stringent in the country, a capital investment plan that the utility claims will unleash $1 billion in grid modernization and a 5% rate cut reflecting the large corporate tax reduction passed by Congress.

The utility says the rate cut will amount to more than $100 million in annual federal tax savings to its Missouri customers.  Warren Wood, Vice President of External Affairs and Communications for Ameren Missouri, says customers will see the rate reduction quickly.

“The rate cut provision has an emergency clause on it, so it’s already law,” said Wood.  “And there’s a timeline of 90 days from when the governor signs it for it to be implemented by the Missouri Public Service Commission.  So, the rate cut happens  well in advance of the rest of the bill even being effective.”

The 5% drop in utility rates is tied to a federal reduction of the corporate income tax from 35%-to-21% passed by Congress late last year.

Cara Spencer with the watchdog group Consumers Council thinks Ameren is misleading customers by praising the legislation for the rate reduction.

“The legislation does nothing to make that happen,” said Spencer.  “The Public Service Commission (PSC) already opened up a case to look at the rate reduction that would have been necessary following the significant drop in costs of doing business due to that tax bill.”

In fact, a rate case was filed on behalf of the staff of the Public Service Commission on February 16 to review savings Ameren would realize from the corporate tax reduction.

David Woodsmall is with Midwest Energy Consumers Group which represents the interests of large commercial and industrial customers.  He contends power companies all over the country, including Kansas City Power & Light in Missouri, voluntarily dropped rates after the corporate tax cut with no strings attached.

“KCP&L did it,” said Woodsmall.  “A lot of other utilities did it.  Ameren was the only anti-consumer utility that I know of that held those benefits hostage in order to get their anti-consumer legislation through.  Make no mistake, they held those benefits hostage.”

Woodsmall thinks Ameren attached the rate cut to the legislation to gain leverage for a more favorable final piece of legislation.

One thing the new law does is require that cost savings are tracked back to January 1st when the corporate tax cut was implemented.  It calls for those savings to be passed on to customers down the line by reducing a future rate increase by an equal amount.

The provision in the new law that caps rate hikes ranges from 2.85%-to-3% per year depending on the customer’s service area.  KCP&L will be allowed to raise rates 3% while Ameren will be limited to 2.85%, which Ameren’s Wood says is unprecedented nationally.

An analysis by the Public Service Commission concludes utility rates will increase 9.74% over 10 years, costing customers $282.5 million.   The rate caps are in place for five years and can be extended another five years by the Commission.

One of the most contentious components of the new law is a new accounting practice that allows the utilities to look backward and claim depreciation costs on infrastructure upgrades made previously when they return to negotiate new customer rates.  Ameren and KCP&L are participating in the practice which allows for 85% of those depreciation costs to be declared.

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.

Spencer with Consumers Council considers the accounting practice a ploy on the part of utilities to boost profits.  “To add extra incentive by adding those additional provisions allows them to recoup all those little pennies on the dollar,” said Spencer.  “But those things really add up.  And they make the cost of your utility bill at the end of the day more expensive.”

Ameren also has high praise for the portion of the new law that calls for utilities to present a five-year capital investment plan to the Public Service Commission.  The utility claims the provision will allow it to invest $1 billion in long overdue grid modernization.

Ameren’s Wood notes many interest groups decided to support utility legislation for the first time because of what the new law brings to the electric grid.  “We had over 160 different businesses and associations supportive of this bill, many of whom had not previously been engaged or supportive of legislation,” Wood said.  “(It was) in order to support grid modernization.”

Wood ran through numerous groups for Missourinet that were first-time backers of utility legislation with the new law, including Associated Industries of Missouri, the St. Louis Regional Chamber and the United Way of St. Louis.

Woodsmall with Midwest Energy Consumers Group thinks Ameren misleadingly sold the legislation as a driver of grid modernization.

“There is not a single word in that 30-page bill that mandates any grid modernization,” Woodsmall said.  “It’s basically you give it to us and trust us, we’ll do something.  But the first time Ameren sees a need to use cash elsewhere, you can bet they’re going to do it.  If they have an opportunity to buy another utility, will they cut back on their investment in Missouri?  Yeah, because they’re not required to do it.”

Language in the legislation would seem to refute Woodsmall’s contention.  “At least twenty-five percent of the cost of each year’s capital investment plan shall be comprised of grid modernization projects,” reads a portion of the bill’s text.

The new law will impact roughly 2 million customers of the state’s large investor-owned utilities, including Ameren Missouri, Kansas City Power & Light, and Empire Electric District (which serves portions of southwest Missouri, including Joplin).  It goes into effect August 28.