Op Ed
October 6, 2006

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Wounded watchdog
by Bob Quinn

The Missouri Public Service Commission has the job of looking at what it costs the monopoly electric utilities in this state to safely and reliably deliver electricity to our homes and businesses, and determine what is a reasonable rate for us to pay.

Before recent changes, described from the utility monopolies’ point of view in various newspapers across the state on Oct. 3 (“Consumers still protected by oversight of rates”), when the cost of coal or other fuel increased, that cost was absorbed by the utilities. With annual revenues in excess of $3,000,000,000 — that’s three billion dollars — it had been assumed the electric utility monopolies were in the best financial position to absorb that cost.

The utility absorbed increased fuel costs until, in a general rate case, the PSC could examine all the relevant engineering, economic, legal and other factors to determine if higher rates were indeed justified. But the historical fact is that, in most cases, while some costs to the utility had gone up, other costs had been reduced through efficiencies, improved technology and so on, and rates either stayed the same or were reduced.

And, as the utility monopolies noted in the Oct. 3 op-ed piece, the rules have not changed all that much.

The chief difference is that now, if the utility’s fuel costs go up, that increase will be absorbed by you and me — higher rates paid by you and me for electric service at our homes and businesses — until the PSC can examine all relevant factors to determine if our rates should have been raised in the first place.

That’s right. The PSC has decided that you and I could absorb the costs more easily than the three billion dollar monopoly electric utilities.

In fairness to the Commissioners, who voted 3–2 to adopt this new rule, it is the result of a new law passed by the state legislature in 2005. As the utility monopolies noted in the Oct. 3 piece, that law (SB 179) passed the state Senate on a vote of 26-5, and the Missouri House by 153–2. As a former member of the Missouri legislature myself, I can tell you that the margin by which a bill passes provides no clue as to whether the bill actually benefits the people of this state.

SB 179 is bad public policy, as is the new fuel adjustment clause rule adopted by the PSC to implement it. It benefits the three billion dollar electric utility monopolies at the expense of Missouri citizens. The higher electric bills that will result for you and me will hit our low-income friends and neighbors even harder, because they already have to expend a higher proportion of their household income for utilities.

The utilities point out that PSC staff will still review their costs under this new, automatic pass-through method. In fact, the legislature approved additional staff for the PSC to implement this. However, the authorized staffing level for the agency, which was 211 for Fiscal Year 2005 (FY05), was reduced to 199 for FY06 and further reduced to 193 for the current year, FY07.

These reductions subtract from agency staffing levels that were already reduced by half-a-dozen or more to accommodate the creation of one Personal Advisor for each Commissioner. It is fair to say the staff that carries out the day-to-day auditing, economic and engineering analysis, and other regulatory functions of the agency, has been reduced by at least 25 over the last few years during which time they have been given additional duties associated with other new ways for utilities to increase our bills with special charges, and a substantial number of general rate cases. The agency’s expense and equipment budget has also been slashed by nearly one-third since FY05, reducing the funding needed for equipment updates, staff training, even the hiring of outside experts.

The PSC is a wounded watchdog. Once upon a time, it protected us from monopoly utilities, while giving those utilities a fair opportunity to earn a profit for those who risked investing in them. Now, the PSC has taken a giant step toward protecting only the profit of the monopoly, while transferring the risk to those already having a hard time paying their utility bills

Bob Quinn is Executive Director of the Missouri Association for Social Welfare, a statewide social justice advocacy group. Quinn is a former Executive Director of the Public Service Commission.


              
              
                 

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