PSC Staff Analysis of Legislation Confirms Consumers’ Fears

ST. LOUIS, Mo., April 8, 2013 — An analysis by the staff of the Public Service Commission finds that under legislation pending in the Missouri General Assembly consumers would have to pay higher rates faster for electric utility infrastructure investments and would lose protections afforded under current law.

“These are exactly the points we at Consumers Council of Missouri have been making as we educate the public and legislators about the dangers of piecemeal ratemaking,” said Joan Bray, interim director of the organization.  “In the next four years, consumers across the state could be charged more than $600 million for building or repairing facilities without the utilities having to initially justify the costs.”

Consumers Council asserts that consumers fare better under the general ratemaking process in Missouri, when all revenues and liabilities of a utility are examined, Bray said.  A single-issue surcharge as proposed in Senate Bill 207 and House Bill 398 avoids such scrutiny.

The analysis responded to questions Senator Eric Schmitt (R-Glendale) posed to the PSC staff regarding the two bills.

Bray noted that the PSC staff analysis makes a great case that the current law is doing a good job of providing safe and reliable electric systems that consumers expect and need.  In fact, the report quotes executives of four investor-owned utilities in Missouri boasting about the reliability of their service, she said.

According to the analysis, the bill proposes two mechanisms that could dramatically affect consumers’ bills: an Infrastructure System Replacement and Addition Surcharge, or ISRS, and a “tracker.”  Regarding the surcharge, the report says, the “Staff is of the opinion that use of the ISRS rate mechanism included in SB 207 will have the impact of charging electric customers in Missouri higher rate levels at any point between general rate proceedings than would be charged to them under traditional rate regulation. … For all electric utilities combined, the amount of total ISRS increases over a four-year period would be approximately $275 million, according to the Staff’s updated estimates.”

The report also says “items … qualifying for the ‘tracker’ have tended to result in increases in a utility’s revenue requirement over time. No significant cost of service items that tend to decrease a utility’s revenue requirement over time … are included…. It is almost a certainty that implementation of this provision will mean higher customer rates in the future than would be authorized under traditional ratemaking regulation.”  The report estimates the tracker could cost Missourians $327 million over four years.

PSC Staff Analysis of SB207

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