February 27, 2011
JOPLIN, Mo. — Why should state legislators reject House Bill 124 and Senate Bill 50? Let me count the reasons.
The bills, which are identical, would repeal a fundamental consumer protection by allowing Ameren Missouri and other electric monopolies to recover from customers the cost of an “early site permit” to build a second nuclear power plant. The result of the legislation would be higher rates for families and businesses — at a time when everyone is struggling to recover from the recession.
Current law forbids a utility from charging its customers for a new plant until the plant is producing energy.
In 1976, the public put that law on the ballot through the initiative petition process. The voters passed it overwhelmingly, by a nearly 2 to 1 ratio.
The Consumers Council of Missouri opposes Ameren’s effort to change the law. We have engaged in the debate in the Capitol because:
1. The Legislature should not overturn the will of the voters.
2. Ameren ultimately wants to shift the risk for building a nuclear plant away from its stockholders to its customers. This is just the first step.
Ameren is a private corporation that has a monopoly on providing energy within its service area. It operates under state regulations that allow it a generous profit of 10.1 percent, even in this recession.
But the financial world is signaling that nuclear plants are extremely risky because of outrageous cost overruns. In discussing financing a nuclear plant through the private credit market, Tom Voss, president and CEO of Ameren Corp., told the St. Louis Post-Dispatch: “We just couldn’t do it.
The risk would be too great. We don’t think people would lend us the money. We don’t think our board of directors would approve it. And we don’t think our stockholders would think it’s prudent.”
If Ameren has decided that the numbers don’t work for its shareholders to invest in the plant, why is it OK to foist that risk upon the rest of us? Why should customers bear the burden of costs that could spiral out of control?
Ameren’s customers should pay attention to what is taking place in Florida. In December 2006, Florida Power & Light Co. introduced a plan to build a nuclear power plant that would cost $6 billion and begin operating in 2016. As of May 2010 the cost was projected at $22.5 billion and the operational start date moved back to 2021. It is hard to know if the project will ever be completed, but huge prepayment costs are being charged on customers’ bills.
3. Ameren is asking its customers to reimburse it $40 million for money it has already spent. It made the decision to spend the money for the permit with no assurance it could change the law and charge its customers for the expenditure. Contrary to proponents’ claims, HB 124 and SB 50 would not produce any jobs. Ameren would only be reimbursed for money it has already spent on the permit.
4. Ameren’s customers are already weighed down with rate increases. Within the past two years, the company has been granted $577 million in rate increases. It is now back before the Public Service Commission seeking $263 million more. That means the average residential customer has seen her annual bill increase around $200 — or 26 percent — and is facing 11 percent more if Ameren gets its way this year. Another rate increase to reimburse the company for the permit application would be just piling on.
5. The pending legislation would weaken the utility’s incentive to keep costs down. Experience shows that when investor-owned utilities are allowed to charge for power plants before completion, cost overruns are much more likely.
When utility investors must risk their own money, like any other business owners, pencils are sharpened and efficiencies are greater.
The current law was in effect when the first nuclear power plant was built. As a result, consumers were saved from having to pay approximately $400 million in cost overruns.
Missouri consumers have enjoyed relatively low energy costs in years past.
That is because our state had a well-regulated industry due to its laws and the work of the regulator, the Public Service Commission.
But that dynamic has changed in recent years through the utilities’ success in getting laws passed to diminish the PSC’s oversight and allow guaranteed rate increases through a variety of surcharges.
This session the Legislature must stand up to Ameren and its fellow utilities and, using the voice of the people, utter a resounding “no” to House Bill 124 and Senate Bill 50.
Joan Bray is chairwoman of the Consumers Council of Missouri.