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PSC reviewing rules on revenue stabilization mechanisms: What are they?

Missouri’s Public Service Commission (PSC) recently asked the state’s utility companies, stakeholders, and the public to submit comments as it considers establishing a rule on revenue stabilization mechanisms (RSMs).

As the submission deadline approaches, here’s a look at the current rule and the changes that could be made. 

The rule in question would govern the process an electric utility company goes through to request rate adjustment authority to account for revenue changes. The PSC allows companies to file an application with the commission for authority to establish schedules for customer rate changes, known as RSMs, in response to changes in revenue due to weather or conservation issues. Utilities present data on commercial and residential customer usage to the commission and base requests for RSMs on their findings. 

Missouri law does not include requirements for the content, operation, or structure of these stabilization mechanisms, nor the procedure for the approval of rate adjustments; the commission largely considers RSMs on a case-by-case basis. 

Commission Staff said in September: While the lack of guidance in this area does not negatively impact the legal proceedings of establishing an RSM, input from companies and customers would help the commission determine whether standardized guidelines would streamline the process. Staff suggested opening the case to gather input before pressing forward with new standards.

The Office of Public Counsel (OPC) submitted its comments to the commission Friday morning, outlining four recommendations for a potential rule.

First, OPC said any rule established for electric utilities should encompass water services as well. It pointed to a change made to utility laws in 2018 by the state legislature, which established an RSM system for water companies. OPC pointed out that a uniform standard across industries would streamline rates for both companies and consumers since many utilities run operations in both areas. 

OPC further recommended a reduced rate of return for companies seeking an RSM, due to the reduced business risk of a rate change. The office suggested an increased cap on company debt or a decrease in return of equity to maintain financial balance. 

Another suggestion was a provision requiring utilities to report on rate adjustment status and consumer results every month to the PSC and OPC, allowing the entities to gather enough information to consider adjustment requests.

Finally, OPC recommended a drafted rule to allow RSMs to adjust in the face of an economic recession, since the current RSM rule allows for expansion only when customer usage is impacted by weather and conservation.

As of Friday morning, no other comments are included in the case’s public record. 

The commission is authorized to consider amendments to its own rules under the revised Missouri statutes. Changes would be further considered by the Secretary of State’s Office before applying to utilities.

The response deadline was set for Oct. 12.