Deregulation a top concern at task force hearing

The high-voltage topic for nearly everyone connected with the electric utility industry in Missouri revolves around the words "restructuring," "reregulation" or "deregulation," all of which refer to some form of relaxing regulations on regulated utilities.

For those who stand to gain, it's about becoming modern, leaving the old century behind and freeing the marketplace for healthy retail competition.

For those suspicious of changing the system, it's about new robber barons, price fixers, exorbitant rates and more California-style electric fiascoes.

The big question is whether anything related to this hot topic will make it into the final report by the Missouri Energy Policy Task Force, appointed by Gov. Bob Holden earlier this year.

Chairman Karl Zobrist, a Kansas City attorney and former chairman of the state Public Service Commission that regulates investor-owned utilities, said the issue is beyond the scope and capability of the task force.

Task force mission

The Energy Policy Task Force was set up in early February with a primary mission of investigating the winter's high heating costs. Its second purpose is to recommend a long-term energy policy for the state in a final report to the governor by Oct. 15.

Holden's charge to the task force did not specifically mention the restructuring or reregulation topic that has been bouncing around in the legislature for the past four years.

Instead, he asked for such things as a "clearer understanding" of the state's energy supply-and-demand picture, information on research and development opportunities, more about supplier compliance with consumer protection rules, an action plan including best practices from other states, and the "impact of energy policy on Missouri's environment."

In its hearings, the task force has collected information that has touched on all energy issues, said Zobrist, who works for Blackwell Sanders Peper Martin, a firm that counts Kansas City-based utilities giant UtiliCorp United Inc. among its clients.

UtiliCorp executives and Zobrist have promoted deregulation and a freer electric market in speeches to various groups, according to UtiliCorp Web site information.

Zobrist also was instrumental in forming the Retail Electric Competition Task Force, a 35-member group that completed a report in 1998 sizing up possible scenarios and making policy recommendations for a restructured Mis-souri electric market.

"We really have not talked about (deregulation)," said Zobrist of the Energy Policy Task Force's work so far. "My feeling is that we should tell the governor some things that are positive about restructuring and some of the negatives."

But task force member Peter Shemitz, resource conservation manager for the city of Kansas City and does not favor deregulation under current circumstances, believes the group should take a bolder stand. "We would be remiss if we didn't," he said.

Deregulation

When the task force met in Springfield on June 15, it discussed readying a first draft report due Aug. 1.

Shemitz suggested including a recommendation on electric deregulation to accompany the information collected in hearings around the state. Zobrist objected, saying the group had not studied the issue sufficiently and was not equipped to do so.

At the urging of Shemitz, the chairman said it would be appropriate for members to submit their own recommendations in writing.

Task force member Russell Strunk, business manager of the International Brotherhood of Electrical Workers Local 753 in Springfield and an opponent of deregulation, had his recommendations prepared and turned them in after the meeting.

Citing the California electric market's instability last winter and what he said were growing concerns in Pennsylvania, which is supposed to be a model of stable reform, Strunk's recommendations said:

"The governor should oppose any proposals for retail restructuring at this time. Deregulation should not be considered until it is demonstrated that it would benefit all customer classes in Missouri."

Missouri is generally regarded as a low-cost-energy state. As a result, many analysts speculate that opening the market to retail competition (deregulation) would translate into rate reductions for big-volume industrial and commercial users while residential customers would see higher prices.

Further, Strunk's statement said " ... the growing dependence upon natural gas as a fuel for electric generation may result in consumers paying drastically higher prices for natural gas as a heating source, as well as electricity as a source for power."

The Missouri Department of Natural Resources, which is represented on the governor's Energy Policy Task Force by DNR Director Steve Mahfood, also delivered its energy policy recommendations in writing.

It stressed a balance involving reduced energy consumption, increased development of renewable sources and ample energy supplies with environmental soundness.

It urged the state to proceed cautiously on deregulation.

"Regulatory actions to protect the public interest are necessary until such time as public benefits programs are established in conjunction with deregulation," the DNR recommendations said.

DNR advocated programs that help citizens, businesses, industries, school districts and governments with energy efficiency, renewable energy sources, low-income weatherization and energy assistance.

The race to restructure

The restructuring movement began in states with high electricity rates in the belief that freer markets and competition would lower rates and improve service. In recent years, about two dozen states have enacted some form of restructuring.

The experience resulting from reforms has been too limited to show a well-formed pattern of improvement for customers. But nobody is hoisting success trophies, and trouble spots have developed outside the limelight of California in New York, Pennsylvania and Montana, according to news reports.

Restructuring in Missouri would primarily affect the five regulated utilities that supply a large share of electricity to the state's residents, businesses and industries. That includes Empire District Electric of Joplin, which has numerous customers in the Springfield area.

Municipal utilities such as City Utilities in Springfield and rural electric cooperatives are not state-regulated and would not come directly under the reforms. But a competitive retail market would force them to change the way they do business.

Other energy issues

Meanwhile, other energy-related matters were raised during June 15 hearing in Springfield, and several presentations on energy subjects were made to the Energy Policy Task Force.

Supplies of electricity in Missouri should remain ample enough so the state remains a net exporter, said Ryan Kind, an energy economist with the Missouri Office of Public Counsel, which represents consumers in utility rate matters before the Public Service Commission.

Options for satisfying the state's future needs will require generation capacity increases, more energy efficiency and demand-response programs, he said.

The executive director of the Missouri Corn Growers Associ-ation, Gary Marshall, told the task force that increased use of corn-made ethanol would help clean up motor vehicle exhaust emissions in the state and spark the farm economy.

There were presentations on a greater emphasis on solar and wind power in the mix of energy choices, with wind power appearing to show more feasibility and market appeal than solar.

Joe Lucas, vice president of Ameri-cans for Balanced Energy Choices, an organization funded by the coal industry, said the coal-fired power plants now produce about half the nation's energy.

Lucas predicted usage will grow at the same time that coal-burning pollution is being reduced. He said experiments are under way to develop pollution-free coal-fired power plants, and they are nearing practical reality.

The Sierra Club's Carla Klein in her presentation criticized the heavy reliance on fossil fuels as energy sources in Missouri because of the pollution they cause.

"Two of the most polluting forms of energy use in the state of Missouri come from the burning of fossil fuels, the coal we burn for energy production and the gasoline we burn for transportation," she said.

"I would like the members of the task force to fully consider the harmful effects of these energy sources on our health and the environment and weigh this evidence in determining the best choices for Missouri's energy future," Klein said.

Businesses certainly need to make a profit, and to do so they must keep costs down to remain competitive, she said. However, she added, "The problem is, the real cost of using cheap, dirty energy is not being addressed."