Ameren Missouri made a strong case (File No. EO-2017-0023) for regulatory changes at the Public Service Commission (PSC), on September 26 – claiming that the utility could make $1 billion in badly needed infrastructure improvements only if the method for setting electricity rates changes could be modified, according to a report in the St. Louis Business Journal.
Ameren serves 1.2 million electric and 130,000 natural gas customers in 64 counties in central and eastern Missouri.
“While it is true that Ameren Missouri has access to the capital markets to finance these important projects, it is also true that the regulatory lag built into Missouri’s decades-old rate setting process prevents full recovery of the cost of these investments and other elements of Ameren Missouri’s costs to serve its customers,” Thomas Byrne, Ameren’s senior director of Regulatory Affairs, wrote in the filing with the PSC.
Currently under Missouri law, utilities must prove that their projects promote the public interest before the costs associated with them can be included in the companies’ rate bases, Public Counsel James Owen, who represents the public before the PSC, told the local news outlet. Any changes to that process would have to come from the state Legislature.
“We are still not certain as to why the electric utilities are not able to prove that because of this system, they can’t make certain investments,” Owen said. “I’ve never gotten a list of things they’ve not been able to do. I don’t see any evidence now that they can’t pay for those things under the current system.”
Ameren told the PSC that the $1 billion would be needed to update the existing infrastructure system. The utility alluded to the age of current components as its rationale. In the filing, the company said its four base-load coal generation plants are all about 50 years old, about half of its substations are more than 40 years old, and its underground network serving downtown St. Louis has facilities that range between 80 and 100 years old.
“These aging facilities must be replaced and modernized to maintain the strong reliability that our customers have come to expect today, but also to meet their future energy needs and expectations,” the filing said.
Declining electric sales and other factors mean that “there is simply no incremental revenue stream to timely pay for the replacement of these facilities,” Ameren said. The utility argued that formulaic rates, in which rates go up a certain amount every year, “reduce or eliminate lag on capital investments.”
Owen disagreed. He told the St. Louis Business Journal that so–called “regulatory lag,” is useful for several reasons. “When there’s a rate case, we get a chance to do discovery, open their books and look at management practices, and point those things out to the company and the PSC,” Owen said. “The public saves a lot of money every time we do that.”
A rate case, in which the Missouri PSC determines a profit utilities can earn, can take up to 11 months, Owen estimated.