Regulators warn Missouri lawmakers on power plant bill

MISSOURI - Missouri utility regulators urged lawmakers to tread lightly when considering overturning a law that bans electric companies from charging customers for the costs of new power plants during construction.

Public Service Commission member Jeff Davis told a House committee that he supports allowing utilities to pass the construction costs along to electric customers before a new plant begins producing power. But he did not take a position on legislation that would do that.

"Sometimes you have to take risks," he said. "You need to change the law and you need to do it now."

A 1976 Missouri law lets utilities recover the costs of a new plant from customers, but only when the facility goes online. This year, lawmakers are considering legislation that would let financing costs be added into electric rates during construction.

The measure would permit requests for quarterly rate increases.

The debate started after St. Louis-based AmerenUE filed an application with federal regulators to build a second nuclear reactor at its Callaway County power plant. AmerenUE has not yet decided whether it will build the reactor but has said changing the law is required for them to secure private financing.

Public Service Commission Chairman Robert M. Clayton III said letting utilities seek rate increases quarterly could make it difficult for regulators to review the requests sufficiently. Clayton said letting Ameren recover costs during construction of the estimated $6 billion plant could raise electric rates 40 percent. The Missouri Energy Development Association has estimated rate increases would be slightly more than 10 percent.

"These are issues that are not to be taken lightly," Clayton said.

Like Davis, Clayton did not take an official position on the legislation.

House members heard public testimony for more than three hours in a packed committee room in the Capitol's basement and did not take a vote.

During a Senate hearing on the proposal, some senators told AmerenUE officials they were concerned about consumer protections.

Thomas Voss, AmerenUE's president and chief executive, acknowledged the critical hearing and highlighted several elements designed to protect consumers.

"It came off that maybe we weren't interested in changing this bill or adapting it," Voss told the House panel. He said the utility is willing to work with lawmakers on the legislation.

But even Davis criticized Ameren's handling of the process so far.

"You don't need to adopt Ameren's bill verbatim," he said. "Quite frankly, it needs a lot of work."

He later said, "They need to be a lot more upfront with you and a lot more upfront with the public. A little bit of humility would go a long way."

Clayton said the simplest fix for securing financing would be to simply repeal the state law banning customers from being charged during construction. He said that under much of the measure lawmakers are considering, "burdens are shifted from the utility to new parties."

Voss defended the sections criticized by Clayton.

"This is all about getting certainty to our investors," Voss said.

But some lawmakers on the House committee remained unconvinced that the bill contains consumer protections.

"The certainty you're looking for would be a guarantee that you get to do what you want with no oversight," said Rep. Jake Zimmerman, D-Olivette.

If the state does allow utilities to charge their customers during the construction of new plants, Davis said lawmakers should try to mitigate the affect for Noranda Aluminum Inc., the large aluminum smelter in southeast Missouri. The company is Ameren's largest electric customer and said it could go out of business if electric rates go up too much.

"We need to be very sensitive to the needs of Noranda where the price of electricity is concerned," Davis said. "Not being able to pay your electric bill is bad. Not having a job to pay all your bills is worse."

Besides potential new construction jobs, Noranda Chief Executive Officer Kip Smith urged lawmakers to consider the steelworkers at his plant.

"This is not just about creating new construction jobs, it's about preserving the jobs we have," he said.

Lawmakers also criticized a provision in the bill that would restrict state courts from considering appeals of regulators' decisions on cost recovery during construction. Two said that might be unconstitutional, and Davis called it "repugnant."

Tom Byrne, an Ameren lawyer, said the utility would accept changes.