HCS HB 723 -- RECOVERY OF CERTAIN COSTS BY ELECTRICAL
CORPORATIONS

SPONSOR:  Mays (50)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Utilities
Regulation by a vote of 19 to 5.

This substitute establishes a procedure to allow electrical
corporations serving fewer than 300,000 retail customers in this
state to recover reasonably and prudently incurred costs of
natural gas associated with the production of electricity for
retail customers.  For one year following the effective date of
the substitute, 100% recovery of costs associated with the
acquisition of electricity for retail customers is authorized;
thereafter, 50% of costs may be recovered.  The electrical
corporation must provide documentation that clearly identifies
the impact of the cost of natural gas on the purchase price of
electric energy.

Rate schedules for the recovery mechanism will be initially
established in a general rate proceeding for each electrical
corporation before the Public Service Commission.  After the
initial recovery rate schedule is established, replacement
schedules must be filed with the commission every 6 months,
regardless of whether or not a change is sought.

The substitute outlines information required for each filing.
The filings will be considered on an expedited basis and the
commission must issue a ruling within 45 days of the filing
date.  The Office of the Public Counsel and any customer have
standing to intervene in any proceeding relating to the
substitute's provisions.  Revised rate schedules become
effective immediately, but are interim in nature and subject to
refund.  If, when reviewing any recovery rate schedule filing,
the commission finds evidence of a substantial possibility that
an electrical corporation is over-earning, the commission is
required to initiate a general rate proceeding for that
corporation.

The substitute requires the commission to establish a "true-up"
mechanism similar to that used for purchased gas cost recovery
by gas corporations.  The mechanism will accurately and
appropriately remedy any over-collections from previous
adjustment periods through a refund procedure including
interest.  Refunds will be processed during the next monthly
billing cycle.  The electrical corporation is not entitled to
collect under-collections from any previous adjustment periods.
The commission must establish a case for the review of each
adjustment period, and the case will be considered on an
expedited basis, with a ruling within 30 days.

The substitute also authorizes electrical corporations to
request, within 90 days of the effective date of the substitute,
emergency establishment of interim schedules.  Emergency
schedules will only be established when, at the time of the
filing, the electrical corporation is experiencing at least a
25% increase in the price of natural gas as compared to the
price used to establish its current rate schedules.

Any electrical corporation required by its bylaws to operate on
a nonprofit basis is authorized to recover and pass through to
customers the reasonably and prudently incurred costs associated
with the purchase of electric energy and its transportation for
retail customers under an automatic adjustment provision.

The substitute contains an emergency clause.

FISCAL NOTE:  Estimated Net Cost to General Revenue Fund of
$507,859 in FY 2002, $157,846 in FY 2003, and $161,818 in FY
2004.  Estimated Net Effect to Public Service Commission Fund of
$0 in FY 2002, FY 2003, and FY 2004.

PROPONENTS:  Supporters say that the bill provides a tool for
the Public Service Commission to use in small rate cases to
allow certain electric utilities to recover the cost of
purchased gas used to generate electricity.  The bill also
protects electric utilities from market forces and protects
customers from sudden high prices.

Testifying for the bill were Representative Mays (50); Empire
District Electric Company; Utilicorp United; Citizens Electric
Corporation; Ameren Services; and Kansas City Power and Light
Company.

OPPONENTS:  Those who oppose the bill say that the Public
Service Commission used this tool in the 1970's and it was
struck down in court.  Companies without purchased gas
adjustments have a greater incentive to make prudent purchases.
Costs should be balanced between shareholders and customers.
Most Missouri utilities are enjoying record profits.  In setting
rates, the commission should consider all relevant factors, not
simply one cost.

Testifying against the bill were Office of the Public Counsel;
Sedalia Industrial Energy Users Association; Midwest Utilities
Users Association; and Missouri Industrial Energy Consumers.

Donna Schlosser, Legislative Analyst

Missouri House of Representatives
Last Updated November 26, 2001 at 11:45 am