Ameren Seeking Faster Payback On Building Projects

St. Louis Post-Dispatch, January 21, 2012

Ameren Missouri says legislation to undo 1970s-era consumer protections to help facilitate a new nuclear plant isn’t on its wish list this spring.

But don’t think the utility and its lobbyists arrived in Jefferson City without an agenda.

Warner L. Baxter, Ameren Missouri’s chief executive, sees an opportunity — and a need — to ramp up infrastructure spending. And, he said, the utility is looking for policies that encourage those investments.

“I think we have an opportunity in Missouri to modernize policies so we can modernize our energy infrastructure,” Baxter said in a meeting last week with the editorial board of the Post-Dispatch.

By policies, Baxter means changes in the way rates are set so Ameren can get paid more quickly for investments in power plants and the utility’s sprawling local power grid.

Ameren can seek to recover the cost of an investment in a new substation or power line only after the equipment is in place and working. Rate cases take about a year from start to finish, so it can be two years or longer for the utility to get reimbursed.

Baxter said the utility would like to see a policy similar to the infrastructure surcharge used by gas utilities for the past decade to recover costs more quickly.

The so-called Infrastructure System Replacement Surcharge, or ISRS, allows natural gas utilities to implement a surcharge with Public Service Commission approval to accelerate replacement of gas mains and lines.

Ameren executives were in the Capitol last week, discussing the idea with key legislators.

A bill is expected to be filed within the next several weeks, with Sen. Mike Kehoe, R-Jefferson City, and Rep. Jeanie Riddle, R-Mokane, as the primary sponsors. Kehoe and Riddle could not be reached for comment.

Consumer advocates are skeptical.

“(Utilities have) made no secret over the past five or six years that they’re interested in mechanisms to get more money more quickly,” said Public Counsel Lewis Mills Jr., whose office represents consumers in utility matters. “I don’t have a lot of sympathy for them. They talk like the regulatory paradigm we’ve had for 100 years is broken and it’s not. There’s no reason it needs to change.”

John Coffman, Mills’ predecessor as public counsel who now represents the Consumers Council of Missouri, has fought previous efforts to break apart the traditional ratemaking process in the state, including a controversial 2005 law that allowed utilities to pass through changes in fuel costs to consumers without a full rate case.

Examining one aspect of a utility’s cost structure in a vacuum is fraught with risk for consumers, he said.

Consumer advocates also say the ISRS charge for gas utilities was narrowly tailored and meant to encourage gas utilities to more quickly replace corrosion-prone cast iron and steel gas lines because of safety concerns. They worry electric utilities will seek a very broad definition of infrastructure, exposing customers to frequent rate increases.

Baxter said Ameren isn’t trying to escape regulatory oversight.

“We’re not losing sight of consumer protections,” he said. “We get that. We have no problem with it.”

Instead, Ameren officials have seen the benefit of the infrastructure surcharge. It’s helped the gas utility replace miles of cast iron gas mains more quickly than it would have otherwise.

“You don’t have the rate cases as frequently, it spreads them out and you reduce the administrative costs of that,” said Warren Wood, the utility’s vice president of legislative and regulatory affairs. “All of those are subject to (PSC) approval and review.”

Baxter said boosting infrastructure investment will also benefit consumers and the state by making the grid more reliable.

Ameren has significantly improved the reliability since storm-related mass outages in 2006, he said. But expectations are growing. And the existing power plants and grid are going gray. Much of the system was built in the 1960s and ’70s as air conditioning was becoming a fixture in homes and electricity demand was rapidly growing.

The time is right to accelerate programs to replace aging equipment, he said. With an anemic economy, interest rates are at historic lows and vendors and suppliers are hungry for business.

“When you’re going out to bid a project, better to have 10 bidders than two, or certainly one,” he said. “And you have skilled labor that’s ready to go.”

Not surprisingly, the nexus between energy investment and the health of the state’s economy has been a frequent topic for House Speaker Tim Jones, R-Eureka, who lists energy among his top priorities. He did not respond to emails or phone messages seeking comment on the Ameren proposal.

Jones said in his blog this month that the House would work on policies that threaten coal use, enhance the state’s ability to compete in the race to develop next-generation nuclear reactors and help consumers.

Missourians for a Balanced Energy Future, a lobbying group that organized to help promote the expansion of nuclear power in Missouri, has shifted its attention to promoting an electric utility infrastructure bill as a way to modernize the grid and create jobs.

“We have to do something to upgrade our infrastructure,” said Irl Scissors, MBEF’s executive director.

Baxter said Ameren remains interested in helping commercialize the first small-scale nuclear reactors. After losing out on a federal grant last year, the utility and partner Westinghouse plan to seek funds expected to be made available in 2013.

But, he said, the utility has no intention of seeking a repeal of the 1970s-era construction-work-in-progress (CWIP) law that prohibits utilities from charging consumers for equipment before it is put in service. The law has been seen as a barrier to Ameren’s plans to expand nuclear power in Missouri.

Legislative skirmishes over the CWIP law have become an annual rite of passage in Jefferson City in recent years.

Said Baxter: “One thing I can say with absolute certainty: the CWIP deal — that’s not being touched. That’s not something that’s on our radar screen.”