Senate Substitute # 2 for Senate Bill 4 (SB4), an anti-consumer bill that will cause utility bills for customers captive to monopoly companies to rise at least $1,115 per year, was passed by the Missouri Senate on February 24 (22-11 in a bi-partisan manner) and has now been assigned to the House Utilities Committee.
- A hearing has been set for Monday, March 10, 1 p.m. with an executive session that day. This is confirmation that House leadership is fast-tracking this bill.
- Please contact members of the House Utilities Committee immediately to share your opposition to this bill and how higher bills would impact on your household. See the Committees tab at www.house.mo.gov for a list of members.
- Write a letter to the editor expressing your opposition to SB4.
- Ask your state representative to vote no.
Background
Missouri utility prices are rising much faster than national inflation and far exceeding wage growth and Social Security cost of living adjustments. Electric and gas rates in Missouri have risen higher in Missouri since 2008 than in all but three states, according to the Retail Energy Supply Association. SB4 strips away current consumer protections and stacks the deck in favor of monopoly investor-owned utility companies and their stockholders. What protections do we lose?
- Electric companies cannot charge customers for power plants that are not “fully operational.” This ban was created by initiative petition process in 1976 with a margin of 2-1 saying no to consumers being charged during construction.
- The Missouri Public Service Commission (PSC) bases current rates on actual costs that have been audited and evaluated against prudent spending standards. SB4 would ground our rates in budgeted amounts instead.
- Ratemaking is a comprehensive process, looking at all expenses and factors instead of singling out selected rising costs as a trigger for increased rates.
HERE ARE THE MOST DANGEROUS PARTS OF SB4:
Construction-Work-In-Progress (CWIP)
- SB4 would overturn the current ban on CWIP.
- Utility companies have not demonstrated any real financial need to overturn the will of the people by implementing CWIP. Instead, they are fearmongering, hinting that the lights will not come on if they do not get CWIP.
- The Callaway I nuclear plant was almost completely built without pre-charging consumers though CWIP.
- CWIP in the rate base reduces incentives for management to carefully control project costs and scheduling.
- CWIP has led to massive abuses in other states:
- In South Carolina consumers were charged billions of dollars for a power plant (V.C. Summer) that was never completed.
- In Georgia, a CWIP-funded nuclear power plant (Vogtle) had cost overruns at around $17 billion, with the final project cost reaching approximately $35 billion, significantly higher than the initial estimate of $14 billion.
- CWIP socializes the risk and privatizes the profit – while we are held captive to monopoly investor-owned companies, without the ability to shop for lower rates.
Future Test Year
- Water and gas bills would be based on utility company guesses about future expenditures rather than actual audited costs, required by current law.
- This rewards higher costs with higher rates, whereas our current system has built in cost controls since utility companies must justify money they have already spent when they come before the PSC.
- The evidence from other states that use Future Test Year is that our bills would be 10-15% higher for the same level of service.
Plant-In-Service-Accounting (PISA)
- The legislature already granted PISA in the past decade, creating much of our current utility inflation in MO. SB4 would expand current PISA law, resulting in more profits for utilities.
- PISA tracks only selected increasing costs, while ignoring favorable changes in other costs and revenue growth between test years, factors that ought to lower our rates.
IMPARTIALITY OF THE MO PUBLIC SERVICE COMMISSION ABANDONED
Equally concerning to the Consumers Council of Missouri is that PSC Chair Kayla Hahn has been vigorously lobbying for CWIP in the Capitol Building, even testifying in support of CWIP bills in a House hearing in late January. The PSC has traditionally not testified for or against utility legislation. Consumers expect this quasi-judicial body to remain neutral. At rate hearings, the PSC is sequestered away from the utility companies and customers during the question-and-answer portion of the agenda in order to safeguard their impartiality, so this cheerleading for CWIP by the PSC raises ethical questions.
For more information, email info@moconsumer.org.
