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Commentary: Getting rid of CWIP constraints would be unfairly sweet for Ameren

This article first appeared in the St. Louis Beacon, Feb. 11, 2009 - AmerenUE and other Missouri utilities are attempting to overturn a 1976 consumer protection law in order to pay for the construction of a $6 billion nuclear power plant. The law, called the No Construction Work In Progress (No-CWIP), makes it illegal for utility companies to charge rate-payers for power plants before they are fully constructed. State Sen. Delbert Scott, R-Lowry City, is sponsoring Senate Bill 228 , which, if passed, would permit the utility to charge higher rates to consumers so it can have lower finance charges while building the plant.

The Callaway County nuclear plant would take at least a decade to build and would probably cost more than $6 billion before it is finished. In addition to the utility companies, support for the bill has come from politicians of both parties and some labor unions because it will provide a much-needed jolt to the state's sagging economy. Industry analysts estimate that the construction project will produce thousands of jobs.

While the case for economic growth is important, there is much in the current bill to oppose. For one thing, its method of financing is inherently unfair to consumers. For example, other businesses are required to sell stocks and bonds to private investors to pay for new construction; why should AmerenUE be treated differently? The finance charges should be paid after the plant is producing electricity and not shifted to consumers before completion of the plant.

The Callaway I nuclear plant was built by Union Electric (AmerenUE's predecessor), financed and audited before the large cost was phased-in for rate-payers. Customers then experienced no significant cost increases for two decades while Union Electric profited considerably. This was done without the assistance of Construction Work In Progress.

Scott's bill would alter the risk but not the benefit of building a new power plant. It would require consumers to pay for the growth of private business, yet they receive no financial return for a company's use of their capital. Instead, company shareholders reap the benefits at the ratepayers' expense.

The CWIP bill would immediately raise electric rates and also allow for these rates to increase on a quarterly basis. This creates an extra burden on the poor and elderly who are already having difficulty making ends meet in a recession. At the same time, because the utility is not paying any of the costs related to construction, it has little if any incentive to operate efficiently and keep its costs down.

Consumers should not be forced to be the utility's "insurance company," guaranteeing the utility's risks, especially if there is no provision that would allow consumers to share the benefits.

The bill is also unfair to individuals or businesses that will not be around after any plant is built. Recent construction of nuclear plants in other states and countries has exceeded 12 years on average. It is unfair to allow utilities to charge current customers who may never see the project go into operation.

Some of the other provisions in Scott's bill that are problematic from a consumer's point of view include:

  • It allows Ameren to cancel construction, and if the decision is not deemed "imprudent" there will be no recovery to rate-payers of monies already paid for construction, permits, etc. In other words, if the project fails, rate-payers absorb 100 percent of the loss.
  • Although the Public Service Commission can set all kinds of standards on every aspect of the plant from design through construction, the bill allows no penalty for the company if it deviates from the contract, providing there was no imprudence on the company's part. The operative word is imprudence. This allows the company to function almost without fear of rebuttal on anything it does. Financial oversight happens after the expenditure, not before.
  • The PSC has three months to approve a permit for the nuclear plant after it is filed. If it doesn't take action, the plant goes forward. In other words, as in virtually all other aspects of the bill, the utility company gets the benefit of the doubt and none of the burdens of proof typically required of other businesses.
  • The bill limits access to judicial review of decisions made by the PSC.

If the above do not provide enough cause for concern, there are other disavantages with the CWIP bill. First, there is no requirement of competitive bidding before a plant is built. Second, the energy generated by the new plant is not required to be kept in Missouri as opposed to being sold to an out of state vendor.
Florida, which recently voted to overturn CWIP so a nuclear power plant could be built, has seen that construction lead to a 10.2 percent rate increase so far, and the construction is, to date, two years behind schedule.

This bill would overturn the will of the people of Missouri. The Anti-CWIP law was passed by a 2-to-1 margin by Missouri voters 30 years ago.

There are just not enough good reasons to support the bill and an overwhelming number of reasons to oppose it. It is time that this ill-conceived bill receives the attention it deserves so that the state's rate-payers can demand that their legislators vote against it.

Robert Cropf chairs the Department of Public Policy Studies at St. Louis University.

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