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Missouri PSC Considers Energy Efficiency and Revenue Decoupling

August 5, 2015 By Cheryl Kaften

On July 20, the Missouri Public Service Commission (PSC) opened hearings on a new energy efficiency plan to replace St. Louis-based Ameren’s three-year-old initiative, due to expire at year-end 2015. Energy efficiency is a hot-button for utilities, which are seeing their sales and profits slump as ratepayers reduce their power usage – and Ameren is not required to accept the new PSC plan; it could just walk away.

However, a solution seems to be in the works: The PSC also has opened a working case (File No. AW-2015-0282) to consider proposals to create revenue decoupling for the state’s utilities – a no-lose revenue proposition that could satisfy both Ameren and environmental activists.

Today, nearly 20 U.S. states have instituted revenue decoupling among gas and/or electric utilities, according to the National Resources Defense Council (NRDC). For them, it represents a way to encourage energy efficiency and distributed generation, without disadvantaging electricity and gas utilities.

What exactly is revenue decoupling? According to the National Association of Regulatory Utility Commissioners, (NARUC), it is “a rate adjustment mechanism that separates … an electric or gas utility’s fixed cost recovery from the amount of electricity or gas it sells.”

Under decoupling, utilities collect the amount of revenue approved by a regulator. Periodically, their revenues are “trued-up” to the predetermined level using an automatic rate adjustment. If a utility has sold less power than originally envisioned, rates go up; if it has sold more, customers are reimbursed.

Last February 27, Missouri-American Water asked the PSC to promulgate a rule to allow water and sewer utilities to establish a revenue decoupling mechanism. The commission denied Missouri-American’s rulemaking petition on April 22, but indicated it would open a working case to further consider the concept of a revenue decoupling mechanism.

In opening the working case, the PSC has directed its staff to investigate the structure and operation of possible decoupling mechanisms for use in Missouri. The completed report is due no later than November 2.

As Martin Kushler, a senior fellow with the American Council for an Energy-Efficient Economy (ACEEE), told Midwest Energy News on July 30, the combination of energy efficiency and revenue decoupling could be powerful in Missouri. States with only the efficiency standard on average reduce electricity use by 0.9 percent, Kushler said, while in states that also have decoupled their electric companies, electricity use is reduced on average by 1.4 percent.

And even Ameren is cautiously enthusiastic. In an emailed statement to the news portal, Ameren Missouri said that it “remains interested in discussing decoupling and other policy approaches that could support greater energy efficiency efforts in Missouri.”

The Missouri PSC has invited interested stakeholders to submit comments on decoupling by September 1, 2015

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