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Emery discusses updates on utility ratemaking and modernization

JEFFERSON CITY, Mo. – Lawmakers met Tuesday in Jefferson City for the second of two meetings of the Senate Interim Committee on Utility Regulation and Infrastructure Investment. Sen. Ed Emery, R-Lamar, chairs the committee.

After an initial meeting spanning over the course of two days in late August, Tuesday’s meeting focused on testimony from Public Service Commission staff and a representative of the Regulatory Assistance Project; a nonpartisan, nongovernmental organization encouraging the national transition to greater energy efficiency. The last meeting focused on a greater variety of stakeholders, but Emery thought that yesterday’s hearing got almost all of the legislators on the same footing.

“There was general agreement that felt we should move forward with some kind of proposal for regulatory reform to facilitate some of the new technologies in letting consumers control their own electricity costs,” Emery said.

Sen. Ed Emery
Sen. Ed Emery

The need for that regulatory reform comes from the way the model has changed in the last decade. Emery pointed out that 10 years ago and beyond that, the utility business was a growth focused industry where consumers wanted to use increasingly large amounts of power and suppliers were happy to sell it to them at reasonable rates.

However, times have changed quickly for ratemakers and regulators as a greater number of people have tried to reduce their energy costs.

“We now have a completely different business model: it’s one of designed shrinkage,” Emery said. “By all accounts and politics, the desire is for less and less use of electricity. We’re focusing far more on conservation than on expansion.”

The ability for the consumer to have more say in how efficiently they use their power has contributed to the problem, Emery says. For example, some consumers can operate their thermostat, lights and other energy using devices remotely with their cell phones. These kinds of innovations reduce energy costs and lower an ecologically-conscious person’s carbon footprint, but it also means that the power industry is selling less power to its consumers in a regulatory environment designed to protect everyone on the assumption that use will always go up.

The decentralization of the grid also plays a role. Customers with solar panels can put energy back onto the grid, and wind farms in remote locations may also contribute to the grid from places not normally considered.

Emery feels new regulations should, ideally, reflect those changes, but they must be done wholesale because of how the different parts of the system, from costs to customer benefits, act as a continuum in which they are all linked to each other. An adjustment to anyone of those will affect other parts of the system.

“It’s not like passing a new speed limit,” Emery said.

So most of the senators on the committee have come to the conclusion that changes need to be made to the state’s regulatory framework, but exactly what those changes will look like is still up for debate. Emery says he will draft a list of recommendations in his report and ask for feedback before it is finalized before the interim session ends. He did not rule out another meeting before the end of the year.

The only elected official who had reservations was Sen. Gary Romine, R-Farmington. Romine fought in the Senate before and during the last two weeks of the 2016 session against a comprehensive energy bill from Rep. Rocky Miller, R-Lake Ozark, that among other things would have modernized the grid and updated ratemaking procedures to get rid of regulatory lag.

However, Romine thought these measures would give too much power to utility providers because he said it would essentially allow them to set their own rates.

“During Tuesday’s more than six hours of debate, I took a very active role in explaining to my Senate colleagues why there is no reason our utility companies should once again be asking for permission to make even more money at the literal expense of Missouri’s hard-working citizens and their families,” Romine said in a letter to constituents after the floor debate.

Emery said that any new legislation would likely look different than Miller’s bill and a bill it swallowed during the cycle, Sen. Ryan Silvey’s 21st Century Grid Modernization and Security Act.

But Romine reiterated that he “did not hear anything new” during the committee’s proceedings that would convince him the industry was in need of regulatory reform.

“Utility companies’ profitability is as high as ever, their stocks are trading at all-time high levels… Utility companies are doing quite well,” Romine said. “I just do not understand why we’re eager to change a process that’s working very well.”