By John J. Reed
During this legislative session, the Missouri General Assembly has been debating how to modernize Missouri’s electric infrastructure, and with good reason. Today the electric grid is the life blood of our economy, and the foundation of many technologies that we have not just come to enjoy, but also to depend on for communication, commerce and convenience. The 21st Century Grid Modernization and Security Act, if it becomes law, would improve the quality of electric service to customers in Missouri and provide electric customers with more stable and predictable rates through a set of unprecedented consumer protections; protections that would set new standards for the electric industry across the United States.
Moving forward with this legislation would enable greater investments in technologies to harden the grid against outages and keep some outages from even occurring. Plus, there are new threats to the electric grid that were once only the stuff of science fiction. Late last year was the first confirmed cyber-security attack on an electric grid, this one happening in Europe. This type of event won’t be the last time portions of the grid are taken down by cyber-attacks, and we can’t hope to meet this challenge with an electric grid that hasn’t evolved much since the advent of air conditioning.
The single greatest impediment to Missouri’s ability to keep pace with the need to modernize the grid in an affordable and sustainable manner is its current laws that regulate investor-owned electric utilities, which were enacted in 1913. Customer expectations for safe, reliable and secure electricity have changed dramatically over the last 100-plus years and are only going to increase as we continue to rely more on advanced technology. Missouri is one of a very few states left in the country that has not passed laws to support modernizing their electric infrastructure. You don’t have to look far to find success stories coming from legislation that supported investments in new electric infrastructure. Illinois is in the sixth year of its grid modernization program, and the enhanced reliability, economic development and customer benefits of that program have exceeded almost everyone’s expectations.
Some of the most important aspects of Missouri’s proposed legislation are its consumer protections. These protections are important to help balance the utilities‘ need to make beneficial grid investments with the need of consumers for safe, dependable and secure electricity at stable and predictable electric rates. By putting a ten-year cap on electric rate increases, and then empowering the utility to work within that cap to fund renewal of the infrastructure, technology upgrades and environmental improvements, Missouri will be able to secure an energy future that is as bright as any in the U.S. And, all of this is designed to occur at levels of rate increases that are lower than what has been experienced in the past several years.
The legislation moving through the General Assembly, if passed, would be unprecedented in terms of its consumer protections in utility legislation across the country. For example, no state in the country has placed ten year caps on electric rates, which also requires the first billion dollars of EPA-mandated environmental costs to be placed under the caps. No state has moved renewable energy-mandated costs under a cap like this legislation would require. Also few, if any, states have an average annual cap on rate increases at 3.15% or less and moved fuel costs, and the volatility those costs represent, under this cap. This is an opportunity for the “Show Me” state to become the “Let Me Show You” state and lead the nation in regulatory reform and energy infrastructure revitalization.
The 21st Century Grid Modernization and Security Act will modernize the grid…and it will set a new bar for stable and predictable electric rates while improving system reliability and putting people to work building the grid and the state’s economy.
John J. Reed is Chairman and Chief Executive Officer of Concentric Energy Advisors with more than 35 years of experience in the energy industry. Mr. Reed is an economic and financial expert on energy industry issues, and has appeared in approximately 200 regulatory, political and legal forums across North America on a wide range of energy policy matters.