Utility companies seek rate flexibility from lawmakers

Tuesday, March 22, 2005

By Marc Powers

Nevada Daily Mail

JEFFERSON CITY, Mo. -- The state's official consumer advocate warned a House committee last Tuesday that a bill to allow utility companies to seek special rate adjustments to cover certain operating costs could lead to substantially higher electric, gas and water bills for Missouri residents.

Industry officials say the proposal, which has already cleared the Senate, would allow them to more efficiently recoup costs that will eventually be passed on to customers in any event and could in some circumstances lead to lower rates.

The bill would enable utility companies to ask the Public Service Commission, which regulates utilities, for rate increases when they experience spikes in the costs of fuel or for compliance with environmental rules. They could also lower rates as those costs fall.

Public counsel John Coffman, who represents consumer interests before the commission, said the bill would skew rate-setting decisions in the favor of utility companies.

"It should be very clear that this legislation changes the rules of the game pretty significantly," Coffman said.

While it is proper for companies to pass on expenses to customers, Coffman said the bill would allow rate hikes based on isolated factors rather than through a thorough examination of a utility's overall costs.

Under existing rules, if growth in a company's expenses for fuel and environmental compliance are offset by other savings, such as a reduction in payroll, that could mitigate the need for a rate increase.

Coffman said the bill would enable companies to raise rates based on certain costs without passing on rate reductions for savings elsewhere.

"I truly believe the fairest way to set rates is to look at the entire financial picture," Coffman said.

Missouri Energy Development Association president Charles Caisley said utilities need flexibility to pass on costs -- and savings -- more quickly than is possible under the current rate process. MEDA is a trade group for the state's investor-owned utilities.

"These are two very volatile components," Caisley said. "They are prone to spiking way up and then going down."

Among states that regulate utilities, Missouri is one of only three that doesn't allow special rate increases for fuel and environmental costs, said state Sen. John Griesheimer, the bill's sponsor.

The others are Utah and Vermont.

Industrial consumers of power, natural gas and water initially opposed the measure. They dropped that opposition after changes were made to address their concerns.

"We believe we have a very good compromise that will not only protect consumers but do what we want to do," said Griesheimer, R-Washington.

Those protections include requiring companies that receive special rate increases to periodically prove the extra revenue is only being used to offset expenses and not to pad profits.

AmerenUE, which serves many gas and electric customers in Southeast Missouri, is among the companies pushing the legislation.

Janice Schupp, a spokeswoman for AARP of Missouri, said the senior citizens advocacy group opposes the bill due to concerns it would impose higher costs on elderly Missourians who can't afford them.

"This bill authorizes a new way for Missouri utilities to increase rates, even if a company's overall costs are going down," Schupp said.

"Our utility rates will become more volatile."

The House Utilities Committee must approve the measure before it can be forwarded to the full chamber.

The bill is SB 179.

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