During the 2005 legislative session, regulated utilities combined (through an umbrella organization called MEDA, the Missouri Energy Development Association) to push through a heavily-lobbied package of surcharges.
It is the only law of its kind in the country.
Section 393.266 RSMo, which became effective on January 1, 2006, authorizes the Public Service Commission (PSC) to promulgate rules implementing these new surcharges. So far little progress has been made in developing these rules, as monopoly utilities reject the inclusion of any meaningful consumer protections in the rules.
Each of these surcharges would increase rates without a full audit and rate case at the PSC. Each of these surcharges allow “single-issue ratemaking”, an unfair method of setting rates because rates are changed without taking into account all relevant factors (i.e., changing rates for one increasing expense, but not offsetting it against other decreasing expenses).
Fuel Adjustment Clause (386.266.1)—This surcharge will allow fluctuating electric rates based on “fuel and purchased power” expenses. Your electric rates will become volatile, just as natural gas rates now fluctuate with the Purchased Gas Adjustment. This surcharge was struck down by the Missouri Supreme Court in 1979, but is being reauthorized.
Because electric companies have many sources of fuel and purchased power, the current system provides an incentive to aggressively procure the most efficient source. (Even AmerenUE’s CEO has admitted that the lack of a Fuel Adjustment Clause in the past encouraged efficiencies). The new law will reduce or eliminate that incentive, allowing costs to simply be “passed through” without the thorough audit of a rate case.
These fuel surcharges are likely to encourage the purchase of expensive power from outside Missouri.
Environmental Compliance Surcharge (386.266.2)—This provision could ultimately cost Missouri consumers hundreds of millions of dollars in unfair charges. Environmental compliance costs are not defined in the new law. No protections are included in the law itself that would prevent civil and criminal environmental liabilities from being passed directly through to consumers.
This surcharge would allow electric, natural gas, and water rates to increase by 2.5%, compounded each year. Moreover, costs above and beyond this “cap” can be “deferred” each year and dumped into the next rate case. This deferral is potentially unlimited.
Weather Mitigation Surcharge (386.266.3)—This surcharge could allow natural gas rates to be slightly higher in warmer-than-normal winters and slightly lower in colder-than-normal winters. This significantly reduces the utility’s business risk without any requirement that its rate of return be reduced accordingly.
Conservation Surcharge (386.266.3)—This surcharge could allow adjustments to natural gas bills (non-gas portion of your bill) in order to recognize customer usage variations caused by conservation efforts. Natural gas utilities claim that this part of the law lets them increase rates when natural gas usage drops overall.
St. Louis ratepayers have already suffered from single-issue ratemaking. Another surcharge—the Infrastructure System Replacement Surcharge (ISRS), authorized in 2003, increased water rates for Missouri-American Water Company during a period when that company was over-earning above its revenue requirement. Approximately $1M was collected through the ISRS but cannot now be refunded to consumers.
As these surcharges pile up, it is likely that Missouri will lose its positive ranking a state with reasonable utility rates. Consumers do not have the resources to match up to the monopoly utilities when it comes to hiring the lawyers and experts necessary to file rate cases and force a realignment of rates. Missouri families and Missouri businesses will pay a high price for SB 179.
-John Coffman
Interim President, Consumer Council of Missouri
Is there any way to stop these unfair surcharges?
Below is a list of the proposed bills that have been filed this year to repeal or scale back these surcharges:
SB 529 (Dougherty)—Would repeal the weather mitigation and conservation surcharges.
SB 880 (Bray)—Would repeal the environmental compliance surcharge as well as the weather mitigation and conservation surcharges.
Unfortunately, none of these bills have yet been granted a hearing.
Here are two things that you can do to help:
As sad as it may seem, many Missouri legislators had no idea about the impact that SB 179 could have on ordinary ratepayers. You can write your state senator and representative now and ask them to support the legislation above so that SB 179 can be re-examined and hopefully repealed.
The Chairman Jeff Davis of the Public Service Commission has recently stated that he supports state-wide hearings on these new surcharges. You can write the Public Service Commission and tell them what you think about these surcharges at P.O. Box 360, Jefferson City, MO 65102.
Demand the PSC lower the price of gas adjustment to reflect the dramatically lower wholesale price of natural gas.
