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Regulators Forum: Restructuring Rollback

State-policy turmoil reshapes utility markets.

Fortnightly Magazine - November 2007

funding during its construction phase so KCP&L could maintain its investment-grade credit rating.

Third, in the next month I expect the PSC will publish rules allowing utilities to seek an environmental cost-recovery mechanism (ECRM), which will allow utilities to seek recovery of compliance costs associated with new environmental regulations and upgrades.

Fortnightly: Will time-of-use metering help stabilize energy prices? Is Missouri adopting the advanced metering policies advocated in EPAct?

Davis: To the extent time-of-use metering shifts customer usage away from peak demand it can help stabilize peak energy prices. However, it needs to be part of a comprehensive plan to reduce load growth. Time-of-use metering can’t do it alone.

Our current utility tariffs include provisions for time-of-use metering, but few customers choose this option, possibly because the difference between Missouri’s on-peak and off-peak rates are not as much as you see in other parts of the country. The average retail customer in Missouri doesn’t like volatility and doesn’t want to watch electric rates flutter up and down all day. The cost of the metering and the customer’s interface also are concerns.

Plus, consumers get their bills in arrears and they have a much higher tolerance for price elasticity than some had believed previously. This commission and approximately a dozen other states have rejected the advanced-metering policies in EPAct.

Fortnightly: Will Missouri consider decoupling utility returns from sales volume?

Davis: Yes. In 2007, the Missouri Public Service Commission decoupled rates for Atmos and MGE (a division of Southern Union). The rates for Laclede Gas Co. are essentially decoupled as well.

It’s important to remember decoupling isn’t just a mechanism for reducing the utilities’ disincentive to encourage energy efficiency. It also shifts costs away from high-use customers and can ensure customers are paying the actual costs associated with maintaining gas lines running to their homes.

In our decisions where decoupling has been awarded, this commission has required utility investment in energy-efficiency programs. Now, it’s incumbent on this commission and the utilities sponsoring these programs to produce some tangible results for consumers.

Fortnightly: Are novel rate structures being presented to you for consideration?

Davis: Not really. Many of our industrial consumers have interruptible rates. However, the primary function of those rates is to ensure reliability and they actually function like economic-development tariffs. Most of the industrial consumers never expect to lose power.

I’d enjoy the opportunity to consider new rate designs, especially if they’re designed to encourage conservation or provide customers with fixed billing options.

Fortnightly: Does the rupture of AmerenUE’s Taum Sauk pumped-storage facility have implications for other utility infrastructure in Missouri?

Davis: Yes. The occurrences at Taum Sauk should be a constant reminder to all utilities and public utility commissions that we need to emphasize safety first. We are trying to re-examine all of our policies systematically to ensure all utilities—electric, gas, water, and sewer—are committing sufficient resources to maintaining, inspecting and reporting the condition of critical infrastructure.

The Missouri PSC is finalizing minimum standards for the periodic inspection of electric utility infrastructure. Additionally, we are implementing new regulations requiring utilities to enhance