FERAF Opposes Electric Rate Legislation

Fair Energy Rate Action Fund, March 11, 2013

Businesses, just like politicians, need to be held accountable to the public when making public policy. Ameren, Empire and KCP&L’s recent explanation for why they need to abolish the PSC’s oversight of new expenditures and add a surcharge to the electric bill of every Missouri business and residential customer is a case in point.

The ISRS legislation was pitched to legislators as allowing electric companies to be able to collect a surcharge from customers to replace outdated and unreliable infrastructure, just like water and gas companies are able to do on a limited basis. If only it were true.

Unfortunately some extremely controversial and costly provisions were included in the legislation that are nothing like how water and gas companies are permitted to operate. This fact has left many legislators scratching their heads and hitting reverse.

These false claims include:

  • Changing the definition of what an ISRS is all-together, unlike the more restrictive uses for water and gas companies. In fact it will cost customers an additional $14 million for every $100 million the utility spends through the ISRS. This additional $14 million per $100 million spent provides no benefit to customers other than opening up their pocketbook sooner and wider for the utility company.
  • Slipping in an expensive cost overrun tracker that puts into law a disincentive for utilities to operate efficiently and keep their spending in check. The utilities can rack up overrun costs on this newly proposed ratepayer credit card. Had this provision been in effect over the past several years it would have cost Missourians an additional $200 million on top of the $5.7 BILLION in rate increases paid during this time. Missouri businesses and residents would have received the same exact service, but been forced to pay over $200 million more for absolutely nothing in return.
  • Allowing the electric utilities to build brand new generation facilities through a new surcharge without going through the traditional ratemaking process that includes a prudency review and full revenue versus cost review by the Public Service Commission. The capital expenses allowed as part of this proposed surcharge are a monumental $3.4 BILLION over a three year period. To put this in perspective, under the electric ISRS, utility companies could spend more money than it cost to build Callaway I or Iatan II. By comparison, water companies can only spend $125 million every three years.
  • Claiming that Ameren’s bond rating is so low it isn’t able to borrow money at the cheapest rates possible. The only problem with this talking point is that Ameren Missouri, funded by Missouri customers only, is one of the healthiest utility companies in the country with an A3 bond rating, which is a strong investment grade according to Moody’s. Ameren’s corporate bond rating is poor because its other two units, Ameren Illinois and Ameren Generating Company, have experienced huge losses in the open market lately. It frankly should not be the Missouri legislature’s job to bail out the poor business practices of Ameren Illinois and Ameren Generating Company.
  • Utilities have argued that this won’t lead to higher electric bills for Missouri families and businesses. By its very definition a surcharge adds costs to consumers. That’s why in a recent poll by Public Opinion Strategies, 71% of Missourians opposed this legislation, with 77% of Missourians less likely to support a candidate for office in Missouri that favored this legislation.

Proponents of this legislation also continue to talk about the jobs that would be created, even though the opposite is actually true. A study released last week, by a firm that has done work recently for Ameren, showed if electric rates were increased by 10%, as the electric ISRS allows, Missouri would lose 60,000 jobs. All of the hard work that has been done in recent years by legislators to make Missouri a more business friendly state might as well be thrown out the window if this legislation passes.

The first question these utility companies need to answer is why they proposed legislation that says one thing but they claim does another. These monopolies need to be accountable and prove they can be trusted with more of Missourians’ hard earned money.

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