Rethinking Regulatory Lag
Last month the Public Service Commission started a “Working Case to Consider Policies to Improve Electric Utility Regulation” to begin discussions among the many players on the Missouri utility landscape about possible reforms.
On June 22 Daniel Hall, Chairman of the PSC, filed an “outline” proposal, which includes draft legislative language. See it here. (I think this link will work, but if it or others are funky, all this can be found on the PSC website calling up EW-2016-0313 from the docket.)
Hall explained the benefits of his proposal: “This would eliminate the need for an ISRS, not involve single-issue ratemaking, but would greatly reduce regulatory lag; Utility would still be motivated to find efficiencies but also to invest in needed infrastructure; Utility would enjoy stability and customers would avoid rate shock; Commission would retain current authority to review costs and determine those appropriate for recovery in rates; The performance criteria would be flexible to address company specific issues and evolve as times change; The capital review would allow the commission to guide such investments without micromanaging…”
Last week comments were filed by numerous stakeholders: the big investor-owned utilities, their umbrella association MEDA, Brightergy, GridLiance Heartland LLC, IBEW Local 1439, as well as diverse advocacy groups like Renew Missouri, Missouri Industrial Energy Consumers, United for Missouri and the Office of Public Counsel.
Although the comments were varied (for example United for Missouri wrote that it “does not support the concept of low-income utility rates. It is impossible to legislate compassion…”) the central recurring topic seems to be how to minimize “regulatory lag,” the time between the expenditures that the utilities make and the time they recover those costs, while preserving rate protection for consumers.
Some commenters pointed to the framework used by other states. Liberty Utilities for example cited GRAM, the Georgia Rate Adjustment Mechanism. “GRAM provides for annual rate adjustments based on projected earnings during a future period, using a rate stabilization feature and an element of decoupling through a true-up mechanism…”
The Office of Public Counsel’s comments included a long discussion about the pros and cons of regulatory lag. Interestingly the OPO showed an openness to performance-based rates as long as they included consumer protection. “While the OPC took the position the [2016 legislation] did not actually address PBR as it simply re-labeled formula ratemaking as such, we believe this is a subject worthy of more dialogue. Incentive-based regulation can include decoupling measures (that would require aggressive consumer protection measures such as “claw-back” provisions and rate case moratoriums), revenue-cap regulation, or any form of regulation tied to specific performance incentives, such as reliability of service or achievement of specified resource objectives. OPC has reviewed a number of states including California, Oregon, Washington, Wisconsin, Michigan, New York, and Hawaii as well as the United Kingdom and found a number of ideas worth exploring…”
Ameren explained its view: Electric utilities now operate in an environment with little or no load growth, persistent moderate inflation, the need to replace and modernize aging infrastructure, increasing customer expectations and rapidly-evolving technology that could materially change the landscape for vertically-integrated utilities. From Ameren Missouri’s perspective, the fundamental problem with Missouri’s existing regulatory framework is simple: Missouri sets rates for future periods based on historical data. Specifically, Missouri uses costs and revenues from an historical test year, with some updates through a true-up period, to set future rates… [This] means that there will be tremendous regulatory lag associated with capital investments in the electric utility’s system, often spanning a period of years, not months.
On Hall’s proposal, Ameren states: We appreciate Chairman Hall’s willingness to think outside the box (of existing regulation) in putting together this proposal, but we are concerned that it does not address the underlying problem of regulatory lag. Since there would be no true-up in the 7-month Rate Case Adjustment cases, we do not believe that regulatory lag would be ameliorated by that proposal.
The Missouri Industrial Energy Customers comments in contrast show that they are pretty content with the current regulatory framework. They presented several attachments of data to show that Missouri utilities and consumers were being treated about average compared to other environments.
“The foregoing discussion shows that Missouri's current regulatory structure is working well in terms of allowing utilities to earn adequate profits, allowing them to raise rates when necessary, and affording investors an attractive structure in which to invest.”
They offer minor tweaks to the current system (for example, “Shorten discovery response time from 20 days to a more reasonable time (perhaps 12 to 14 calendar days).” Or “Shorten the time between when the utility provides its true-up data and when other parties must respond to that data to 30 days. (In a recent Ameren Missouri case, the interval was approximately 40 days.)”
The chasm between the Missouri Industrial Energy Consumers and the other players hints at a continuing stalemate in utility policy. It was thought that Noranda was the prime force behind the last five years of trench warfare in utility policy, but maybe the movement lives on – even after their demise.
To the extent that regulatory lag is a disincentive for utilities to invest and upgrade in the grid, consumers – industrial and residential – don’t want to ignore its impact or they will feel its impact eventually.
The recent bankruptcy of Noranda stands as a cautionary tale. They were sunk for sure by the Apollo hedge fund’s self-directed “dividends” together with the macro supply-demand imbalance. But had a strategy of compromise prevailed instead of obstruction, they might have won concessions earlier before they needed them and been in a stronger position.
Koster Preannounces Monster Quarter
The press release: Today, the Koster for Missouri campaign announced it raised $3,573,530.05 in the 2nd quarter of 2016 from 2,134 donors. The committee will report having $10,193,195.38 on hand as of June 30, 2016… 95% of contributors to Koster for Missouri this quarter came from within Missouri.
Greitens Releases Two New Ads
Kinder Press Conference
Here’s the press advisory… sounds intriguing…
Lt. Governor Peter Kinder will be holding press conferences on Friday July 15, 2016, in St. Louis, Cape Girardeau, Springfield and Joplin to make a major announcement. The details for the St. Louis event are below.
WHAT: Lt. Gov. Peter Kinder to make major announcement with Navy SEALs
WHEN: Friday, July 15, 2016, at 9 a.m.
WHO: Lt. Governor Peter Kinder and several Navy SEALs.
New Zimmerman Ads
These are both 15-second that are quick and to the point.
RYH4K Seeks to Rally Supporters
We are in the courts right now fighting to make sure this critically important amendment stays on the ballot, and the voices of 330,000 Missourians are not silenced by a self-interested trade group. And we will win.
As we do that, we need you to stand up and fight alongside us, just like you’ve
always done. In the days ahead we’re asking you to consider:
- Writing a letter to the editor…
- Spreading the message on social media. Use the hashtag #LetUsVote4Kids…
- Using your Facebook pages…
- Thinking about where you shop. The Missouri Petroleum Marketers and Convenience Store Association has made it clear where they stand. We can make clear where westand by where we go.
- Sending a blast email out to your organization…
Thankfully it continues to remain true that despite our opposition’s obstructionist legal wrangling, no court has called for removal of the Early Childhood Health and Education Amendment from the ballot…. Our opponents want to disenfranchise voters, and that will not happen on our watch….
Herzog for Eigel
Stan Herzog contributed $100K to Bill Eigel’s campaign. When we see numbers from the fundraising quarter, it’s important to remember that Eigel will have brought in an addition $130K that we know of since June 30.
Rep. Anne Zerr has not received any large contributions since the June 30 deadline.
Sinquefield for Randles
The $300K in the large contributions below brings the total Rex Sinquefield investment in Bev Randles’ lieutenant governor bid to $2 million cash, plus another $191K in-kind TV buys.
He must believe she’d do a really great presiding over the Senate…
Krewson Whisper Number
Alderwoman Lyda Krewson, running for St. Louis City mayor, will report raising $144K for the quarter and will have over $350K cash on hand. That’s a pretty strong haul considering she didn’t announce she was running for mayor until the middle of June. It shows she’s using this time well, while some of her potential rivals – City Treasurer Tishaura Jones, and Sen. Jamilah Nasheed – must wait until their re-elections are over before jumping in.
Post-Dispatch’s Kurt Erickson has the scoop. Former Rep. Don Gosen’s been polling, talking to a consultant… See it here.
Pull Quote: “I am contemplating my future in politics,” Gosen said… Gosen says he would more likely look at a city or county position, primarily because it would involve less travel and time away from home than serving in the Missouri Legislature, which has a four-month-long session in Jefferson City every spring. “As we all know, I didn’t handle that very well,” said Gosen, who is a State Farm Insurance agent.
Pursuant to Supreme Court Rule 10.28(d), the Twenty-First Circuit Judicial Commission releases the following information relating to applicants for the circuit judge vacancy created by the retirement of Judge Robert S. Cohen: Michael A. Becker, John N. Borbonus III, Sreenivasa Rao Dandamudi, Dennis M. Devereux, Margaret T. Donnelly, Judy P. Draper, Ellen W. Dunne, Jay D. Fisk, Mondonna L. Ghasedi, Mary W. Greaves, Peter W. Gullborg, Heather S. Heffner, Robert M. Heggie, Bruce F. Hilton, Dale W. Hood, Paul F. Horgan, B. Joyce Kelley, David C. Knieriem, Gary J. Krautmann, Jacqueline Kutnik-Bauder, Julia P. Lasater, Henry F. Luepke III, Brian H. May, Diane M. Monahan, Mary E. Ott, Susan M. Petersen, Thomas J. Plunkert, Mary B. Schroeder, Kenneth R. Schwartz, Dean A. Stark, Dana W. Tucker, Robert E. Tucker, Colleen J. Vetter, Stanley J. Wallach, Kimberly D. Whittle, and Nicole S. Zellweger
The members of the Twenty-First Circuit Judicial Commission are: Philip M. Hess, chief judge of the Missouri Court of Appeals, Eastern District; Matthew J. Rossiter, Rev. Anthony Witherspoon, Jeffrey D. Sigmund and Christy Bertelson.
MEC Dismisses Complaint
Missouri Ethics Commission dismissed complaints against the Special Administrative Board in the City of St. Louis. The complaint alleged that a flyer they produced advocated for passage of Proposition 1. See the letter here.
John Parris, Erika Leonard and John Bardgett Jr, deleted Noranda Aluminum.
James Gwinner deleted Telligen.
Missourians for Randles - $300,000 from Missouri Club for Growth PAC.
Midwest Region Laborers’ Political League Education Fund - $6,325 from Laborers Supplemental Dues Fund.
Podhola for Missouri - $20,000 from International Union of Painters and Allied Trades PAT PAC.
MO Leadership Committee - $15,000 from Engler for Missouri.
Right to Vote - $10,000 from Missouri National Education Association.
Greitens for Missouri - $200,000 from Sheldon Adelson.
Greitens for Missouri - $25,000 from David Porter.
Missourians for John Brunner - $5,001 from Kanyalal Patel.
UAW Region 5 Midwest States Political Action Committee - $6,000 from UAW Region 5 Exchange Account.
Michael Carter - $100,000 from Michael Carter Law Offices.
Bolander for Judge - $15,000 from David Bolander.
Happy birthday to Alderwoman Dionne Flowers, and the Senate’s Adriane Crouse.
Saturday: Former Rep. Jeanette Mott Oxford, and John Sondag.
Sunday: Richard Callow, David Klarich, and Jeffrey Earl.
Today is deadline to file July quarterly campaign finance reports. I’ll put out a special report tomorrow overviewing the results.