Missouri Utility Rate Bill to Encourage Grid Modernization Investments
In February 2018, the Missouri Senate passed a bill aimed at simplifying the rate case process and providing incentives to encourage Missouri utilities to invest in infrastructure improvements. Senate Bill 564 (SB 564) will affect Missouri utilities Ameren Missouri, Empire District Electric Company, Kansas City Power & Light (KCP&L), and KCP&L Greater Missouri Operations (GMO). This bill now lies with the Missouri House of Representatives, where the House Utility Committee has proposed HB 2256, an amended version of SB 564. If passed by the House in an upcoming vote, the bill will head back to the Senate for further legislation and negotiation. Previous attempts to modernize the current rate case framework have not been fruitful; however, a successful outcome for this bill could offer Missouri utilities an improved rate structure by January 2019.
- Since 2007, the rate case process has taken an average of nine Through an annual rate increase limit of 2.85%, SB 564 intends to shorten and simplify the rate case process, while providing customers with predictability. This 2.85% annual growth rate cap will remain in place through 2023 with an option for extension through 2028, pending regulatory approval
- Within the current framework, capital investments that occur between rate cases are rarely fully recovered in subsequent rate SB 564 will allow utilities to defer and recover 85% of depreciated capital expenses through 2023
- Investments in grid modernization must equal or exceed 25% of deferred capital expenses
- AMI cannot make up more than 6% of deferred capital expenses
- The bill requires utilities to invest in utility-owned solar facilities in Missouri or an adjacent state, while offering rebates to Missouri residential and non-residential customers for solar Larger utilities, like Ameren, will invest $14 million in solar projects and offer rebates of up to $28 million by 2023
- The bill contains a provision allowing the Public Service Commission to make a one-time adjustment to consumer rates to account for the reduced corporate tax rate from the 2017 Federal Tax Cut and Jobs Act
Predictability of annual rate increases and improved ability to recover costs are expected to spur large investments in grid modernization and solar generation. Ameren Missouri has already expressed its desire to invest an incremental $1 billion in infrastructure by 2023. Ameren is no stranger to legislative-driven investments in grid modernization—it spent $648 million on grid modernization through the Illinois Energy Infrastructure Modernization Act in 2011.
A successful legislative effort will continue to improve Missouri’s place on the Grid Modernization Index, an index which benchmarks states on grid modernization policies, investments, and activities. In 2017, the GridWise Alliance ranked Missouri 20th, citing improvements in customer engagement and grid operations, and the start of a grid modernization proceeding pertaining to regulation of and planning for DERs by the Public Service Commission. The top five states were California, Illinois, Texas, Maryland, and Oregon.
Missouri Senate: SB 564 modifies provisions relating to public utilities
Missouri Times: House position on energy bill moves out of committee
51st State Perspectives: DERs are coming and Illinois is ready for them
GridWise Alliance: Grid Modernization Index 4
This report is part of the Grid Edge Minute series. To view all featured Minutes, please click here.
Additional Contributing Authors: Gamble OuztsView More
Welcome to ScottMadden!
Sussex Economic Advisors is now part of ScottMadden. We invite you to learn more about our expanded firm. Please use the Contact Us form to request additional information.