Even small increases can add up to a big hike in utility rates

[bananas]

http://www.stltoday.com/blogzone/the-platform/published-editorials/2009/04/even-small-increases-can-add-up-to-a-big-hike-in-utility-rates/

04.13.2009 9:00 pm
Even small increases can add up to a big hike in utility rates
By Editorial Board

Missouri’s largest electric utility wants to change state law so that customers could be billed for finance charges while a new nuclear power plant is being built in Callaway County. No big deal, AmerenUE officials say. The result would be “a 1 percent to 3 percent annual increase in rates several years from now,” AmerenUE President Tom Voss said in a letter to ratepayers. That sounds trivial. If you do the math, a 3 percent annual increase, compounded annually, would hike electric rates by 34.4 percent over 10 years. The average residential customer, who now pays about $75 a month, would be paying almost $101 a month at the end of that time. Or it could be higher. Nothing in Senate Bill 228, the law AmerenUE is pushing, would cap rate increases for what’s known as Construction Work In Progress (CWIP). A 5 percent annual rate hike would increase electric rates by 63 percent over 10 years, from $75 to $122.17. And that’s if rates don’t rise for other reasons.

These are rough estimates. In reality, rates probably would not increase by the same amount every year. But the cumulative impact still would be significant. Any increases would come on top of already-rising electric rates. AmerenUE got a $163 million-a-year rate hike in January. But even before the new rates went into effect March 1, company officials told investors they would ask for yet another rate increase this year. They declined to say how much more they’re seeking. There’s also the distinct possibility that Congress will pass a carbon cap-and-trade system later this year. That would increase costs for utility companies, like AmerenUE, who generate most of their electricity by burning coal. Added costs would be passed on to ratepayers.

Any way you slice it, electric rates are going up. The question for legislators and ratepayers is how to minimize those increases. AmerenUE says the answer is to repeal the state law against CWIP. But utility experts from the Office of Public Counsel, which represents ratepayers before the Public Service Commission, disagree. The PSC staff last month agreed with the public counsel’s assessment. The public counsel’s office says using a different financing arrangement called “credit metrics regulation” would cost less. Such a system could allow AmerenUE to accelerate depreciation on the new plant, thus reducing what it costs the firm to borrow money. AmerenUE says financing the new plant during construction would add between 10 percent and 14 percent to customer bills. Both the public counsel and the PSC staff say it will add far more — as much as 40 percent, according to the public counsel. The PSC staff reckons the increase at 55 percent. The actual figure depends on certain assumptions built into the estimate. A Maryland utility is building an identical nuclear power plant that carries a $9 billion price tag. AmerenUE estimates a cost of just $6 billion, because it says it will find partners to help with the cost. AmerenUE estimates it will take six years to build the facility. But Callaway I took more than eight years and came in more than $500 million over budget. Lawmakers are expected to take up SB 228 again soon, perhaps as early as next week. They’d be well advised to do the math before they do. Their constituents will be living with it for a long time to come.

(Embedded links in the original.)

[Kolesar]

1. Did you ever have a discussion thread on your obama-replace-dirty-coa link?

The detail that I recall is that electricity regulations do not support cogeneration "power" being fed back onto the grid. I have a link on it...somewhere.

[bananas]

2. There was some discussion

I never started a thread for that, just added it to my sigline.
There was some discussion of it here: http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=115&topic_id=192185&mesg_id=192221
but it was mainly two people saying we should use less energy.
Hopefully electricity regulations will change quickly to allow power to be fed back into the grid.

[Kolesar]

3. Article that noted the problems in electricity regulations

From our local alternative weekly. I foresee a hugely different generating infrastructure if the utility regulations were changed and cogeneration was adopted:

www.clevescene.com/cleveland/full-of-hot-air/Content?oid=1520729

There was too much material in there to create an excerpt.