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Electric rates going up regardless of nuclear plant bill's fate
[February 02, 2009]

Electric rates going up regardless of nuclear plant bill's fate

(St. Louis Post-Dispatch Via Acquire Media NewsEdge) Feb. 2--JEFFERSON CITY -- Hold on to your wallets, Missouri electricity consumers.

Your rates are going up.

It's the one thing on which both sides of the debate over whether AmerenUE should build a new nuclear plant agree.

Ameren and other utility interests are behind a bill filed by Sen. Delbert Scott that would pave the way for the massive $6 billion nuclear project in Callaway County. The measure would change Missouri law so utility companies could charge consumers higher rates during the construction of such large plants to help reduce finance charges.

If the bill passes, overturning a 1976 law overwhelmingly approved by voters, Ameren could begin charging higher rates within a year of seeking approval to build the plant, even though construction could take a decade or longer.

But if the bill fails, industry experts warn, Missouri's rates will be on the rise anyway, as the coal-dependent state will pay the price under strict new carbon regulations coming down the pike.

Either way, Missouri's energy future -- and the cost consumers pay for that energy -- hangs in the balance.

For now, Missouri consumers pay some of the lowest rates for electricity in the nation, said Warren Wood of the Missouri Energy Development Association. Wood is lobbying for Scott's bill.

Department of Energy statistics show that in all three categories of rates -- residential, business and industrial -- Missouri ranks in the bottom 10 nationally. And over the past eight years, Missouri is one of only three states to show a decline in rates.

"During that period we were dead last out of 50 states," Wood said.

It's a point that industry lobbyists, headed by Ameren's Matthew Forck, are hammering home to state lawmakers.

Those low rates will be affected by a decision last week by the Public Service Commission to allow Ameren to hike its profit margin.

Wood argues that any temporary increase in the state's rates must be compared with the long-term benefit of planning ahead so the state controls its own energy future. That's what building a nuclear plant would do for Missouri, said Wood. And his views are echoed by lawmakers on both sides of the aisle who support changing Missouri law to allow what is referred to as "construction work in progress," or CWIP.

That's the primary intent of Scott's bill.

When Ameren was building its first nuclear plant -- Callaway 1 -- in the 1970s, anti-nuclear activists spearheaded an initiative that stopped utilities in Missouri from being able to collect higher rates until a plant was operating. The idea behind the prohibition is that it forces companies to control costs. But it also makes financing more difficult -- next to impossible, Ameren says, for a plant as expensive and complex as a nuclear facility. Scott, Ameren and the state's other utility interests want to reverse that law.

Politically, their timing couldn't be better. The tight credit market exacerbates Ameren's financing dilemma. And the promise of thousands of high-paying union jobs is music to the ears of politicians eager to turn Missouri's economic fortunes around.

The concept is becoming popular in other states. Florida and South Carolina recently moved to allow upfront financing of nuclear plants. Georgia also is considering such a law. It's all part of a concerted effort by utility companies to produce a regulatory environment conducive to the construction of nuclear plants.

Why now?

First, new federal rules are expected to make it much less likely for traditional coal plants to get built. If utilities can't build coal, they will move to natural gas, industry experts say, and the price of natural gas fluctuates. For every year a nuclear plant gets delayed, the costs go up incrementally.

"If you wait, the cost is going to be a lot higher and you'll have a huge spike in electric rates," said Scott. "This way, we'll continue with low-cost energy and plenty of energy in the state of Missouri."

The concept of building the nuclear plant has the support of Gov. Jay Nixon, though he hasn't commented on Scott's bill. House Speaker Ron Richard, R-Joplin, made a specific reference to the need for Callaway II in his opening address.

But consumer advocates argue that Scott's bill does much more than allow Ameren or other utilities to charge ratepayers for costs before a plant is up and operating.

"The bar for outrageousness in this bill is very high," said state Public Counsel Lewis Mills, who was appointed to his job by ex-Gov. Matt Blunt and has retained it under Nixon.

The language in the bill does several things consumers should worry about, Mills said.

First, it allows Ameren to raise rates every three months during the construction process. Mills agrees with Wood that the "up-front" form of financing the proposed nuclear plant could save Ameren about a billion dollars in financing costs. But Mills fears far too much of it will go to pad the bottom line of Ameren's shareholders.

Also, the bill gives the Public Service Commission only three months to decide on whether to approve a permit for the nuclear plant once it is filed. If the PSC doesn't make up its mind in that time period, the plant goes forward anyway.

"If you can't do it in three months, the utility wins," Mills said. "There's nothing like that in utility regulation now."

According to the language of the bill, once the plant's initial costs are approved, the burden of proof in determining whether future costs are "prudent" switches from the utility to whoever is challenging the costs.

Finally, the bill takes the courts out of the equation. If Mills or some other consumer advocate wanted to question a decision by the PSC, they couldn't, if Scott's bill were to pass.

Utility executives don't deny that the new legislation tilts things in their direction. But they dispute the characterization that it guts consumer protections.

Wood, a former staff member at the Public Service Commission, said current laws provided "disincentive" for companies to plan for the future by considering the sort of large, base-load generation plants such as the nuclear facility Ameren is considering.

Ameren CEO Tom Voss has said there is no way the nuclear plant will be built without a change in the law. And if the plant isn't built, Ameren will have to seek energy from other, less energy-efficient sources.

They probably won't include coal. The Democratic Congress is considering new carbon regulations that would encourage more investment in renewable energy. With its dependence on coal, "we've got a bulls-eye" on our backs, Wood says of Missouri.

That's why utility companies want to change Missouri's regulatory process to make it easier to build nuclear plants or other large base-load facilities. And Wood argues that the existing regulatory process, which requires utility companies to get general regulatory approval for their long-term plans, provides enough oversight.

"It's not like we're going to drop 8,000 pages on somebody and then expect a decision in three months," Wood said.

Mills said he'd be more willing to accept that argument if Ameren and its supporters were open to the sort of study he's been seeking for months. He has filed a request with the Public Service Commission that the regulatory body open a hearing to study various financing options, including Ameren's favored method, for the nuclear plant. He's been ignored.

Last week, Public Service Commission Chairman Robert Clayton sought approval from his fellow commissioners for a similar study. The motion failed 3-2. Nixon condemned the vote in a news release. But he hasn't said whether he'll push Clayton to open a hearing on his own, which state law allows.

More study is all Mills says he wants. He's not even opposed to the Legislature's passing a law that would allow the Public Service Commission to consider the upfront financing method as one of many options -- so long as the commission, and not the utility company, makes the final determination.

(The bill is Senate Bill 228)

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