SCS SB 387, HCA 1 -- RECOVERY OF CERTAIN COSTS BY CERTAIN
ELECTRICAL CORPORATIONS

SPONSOR:  Goode (Mays, 50)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Utilities
Regulation by a vote of 20 to 3 with 1 present.

This substitute authorizes the Missouri Public Service
Commission to allow electrical corporations which are not also
gas corporations, which serve 175,000 retail customers in
Missouri, and which own at least 60% of a plant with a capacity
of at least 300 megawatts which was under construction and at
least 30% complete on January 1, 2001, (currently includes
Empire District Electric Company) to recover reasonably and
prudently incurred costs of the purchase of natural gas used in
the production of electricity in such plants and costs of
electricity purchased as an alternative to using such plants and
impacted by the cost of natural gas.  The recovery of purchased
electricity costs will be fully recoverable for one year after
the section becomes effective and limited to 50% thereafter, and
the electrical corporation must clearly document the impact of
the cost of natural gas on the purchase price of the electric
energy.  The recovery will be according to rate schedules
approved by the commission.

The rate schedules will be initially established pursuant to a
general ratemaking order but will not be established if the
commission determines that it would not be in the long-term best
interests of ratepayers to establish such a mechanism.

The electrical corporation will file updated schedules every 6
months, even if no change is sought, unless the schedules have
been replaced by a general rate order within the last 6 months.
Updated schedules will be reviewed separately from the general
ratemaking process and decided upon within 45 days, unless the
commission determines an extra period of up to 30 days is
required.  If, in reviewing the update filing, the commission
finds a substantial possibility that the utility is
over-earning, the commission will initiate a general rate order
proceeding.  That rate proceeding will be completed in 11
months, and any rate decrease will be retroactive with interest
calculated from the date that interim cost recovery was allowed
under the substitute.

The commission will establish a process to "true-up" the
recovery to refund any over-collection based upon the
adjustments authorized pursuant to the substitute, with
interest.  A utility will not be allowed to make up for
under-collection in previous adjustment periods.  Once
determined, refunds will be processed in the next billing
cycle.  Refund cases will be considered on an expedited basis.
The Public Counsel and any customer may intervene.

A utility which files under the substitute within 90 days of the
effective day may request, at the time of filing, that emergency
rate schedules be established under the expedited 45-day process
without waiting for the conclusion of the general ratemaking
order.  These requests will follow the same process used for
update filings and will only be allowed if the natural gas price
has changed by more than 25% since the corporation's latest rate
case.

The section allowing cost recovery for electrical corporations
terminates on December 31, 2004.

The substitute allows any non-profit electrical corporation to
recover and pass through its costs associated with the purchase
and transportation of electrical energy under an automatic
adjustment provision.

The substitute contains an emergency clause.

HCA 1 -- Reduces the number of retail customers that must be
served from 175,000 to fewer than 175,000.

FISCAL NOTE:  Cost to General Revenue Fund of $533,520 in FY
2002, $157,846 in FY 2003, and $161,818 in FY 2004.  Estimated
Net Effect on Public Service Commission Fund of $0 in FY 2002,
FY 2003, and FY 2004.

PROPONENTS:  Supporters say that the bill is necessary to help
utilities recover the cost of natural gas for the production of
electricity more quickly than in a general rate case.  They also
point out that the recovery mechanism will send signals to
consumers that prices are rising, which may help to initiate
conservation measures.

Testifying for the bill were Senator Goode; Empire District
Electric Company; Citizens' Electric Cooperative; and Missouri
Chamber of Commerce.

OPPONENTS:  Those who oppose the bill say that the bill violates
one of the most important ratepayer safeguards:  single-issue
ratemaking.  They argue that all factors should be considered
when deciding whether or not to raise rates and that the bill
might provide an incentive to build more natural gas-fired
electric generating plants, thereby increasing demand for the
fuel.

Testifying against the bill was Office of the Public Counsel.

Donna Schlosser, Legislative Analyst

Missouri House of Representatives
Last Updated November 26, 2001 at 11:47 am