Deregulation stymied

A former member of the Pub-lic Service Commission, now employed by City Utilities, doesn't expect any electric de-regulation bills to make it through the 2002 General As-sembly.

That's because the "legislature has not been kind to any type of restructuring," said Ken McClure, CU's associate general manager of customer relations. "We're a low-cost state, and we can't be sure there's going to be any benefits to any customer classes, so why risk it?"

Deregulation has been on the minds of many in light of the demise of Enron, but McClure said he believes most of the problems there were poor management, not particularly deregulation issues.

Deregulation in Missouri hasn't even made it to the floor of the General Assembly for de-bate, he said.

Investor-owned

Missouri has five investor-owned utilities, the entities subject to deregulation, but deregulation would affect citizen-owned utilities, like CU, a mon-opoly created by city charter.

The investor-owned utilities are Ameren in St. Louis (the old Union Electric Company); Kan-sas City Power and Light, re-named Great Plains since it merged with St. Joseph Power and Light; Empire District; and Utilicorp, known in the state as Missouri Public Energy.

"For many years the investor-owned utilities were not too inclined to restructuring," Mc-Clure said, except Utilicorp, which operates nationally and internationally. "Ameren for a long time was opposing it, but that started changing two years ago," McClure said.

"Large industrial users are the ones who want to be able to choose their utility." Those companies have the money to hire experienced regulatory consultants to testify for them when they intervene in rate cases in front of the PSC, and to generally provide education on the issue, McClure said.

Although there is strong bipartisan opposition to deregulation in Jefferson City, Mc-Clure said, Ameren and KCP&L have changed their positions.

What they proposed was "a modified approach" dubbed "GenCo" which would allow them to "take their generating units outside the regulatory scheme and put them in nonregulated subsidiaries."

The argument was that the GenCo concept would allow them to participate (more free-ly) in the wholesale (electric) market, but there was no guarantee that they were going to be able to buy the power needed to supply their customer base." McClure called the concept "dangerous."

Electric companies can participate in the wholesale market now, but "it's easier to do if you don't have to go in front of the regulatory commission on the state level."

McClure said "The fear of many people was exactly what was going to be the impact on the average customers the average ratepayer, not only for a cost standpoint but from a reliability standpoint."

If there is customer choice to the large users those that use two megawatts or more per day the thought was "these are the people that they think will benefit the most. Let's give them the customer choice, let them decide who will generate their power and leave everyone else as they are," McClure said.

The problem is, once those large customers no longer contribute to the rate base, "what does that then do to the cost that the rest of the customer base has to pay?" he added.

GenCo

Although two bills that proposed GenCos in Missouri this past year didn't go anywhere, it was the first time any restructuring bill made it out of committee, McClure said. There was no debate on the Senate floor, and "no sympathy at all to move the bill forward on anybody's part."

He said Ameren officials have said they won't push a GenCo bill this upcoming session, but the newly-named Great Plains will. "They're calling it asset transfer' it's probably the same thing with a new name ... but no one expects it to move anywhere," McClure said.

Those legislators who have proposed deregulation bills have, for the most part, done so just to generate debate in committees and to educate the 197 legislators who have hundreds of other bills to learn about, McClure said.

"There are probably a handful who understand the issue ... that is no indictment on anybody ... this is a very complex (issue) and people are watching it all the time."

Gov. Bob Holden appointed a task force in February to study deregulation, he said. The re-port issued in October "recommended the state be very, very cautious on restructuring."

Natural gas

The natural gas market has been deregulated successfully since the 1970s, McClure said. But, "the wholesale market has a lot of problems. Wholesale deregulation has been in place several years and (CU) has participated in the market, and we've done very well, and we've done it very cautiously."

The problem nationally with electric deregulation has been "it hasn't worked the way it was supposed to work," he said. "We're not seeing new generation plants built and we're not seeing the transmission system .... so you can not move power from one area to another. And unless and until it happens you're not going to have a functioning wholesale electric market."

Without a functioning wholesale market, McClure said, re-tail restructuring will not occur.

No new power plants are being constructed to keep up with demand because they are expensive. "It's difficult to built a coal-fired plant because of environmental concerns," al-though the United States has plenty of coal available.

Natural gas-fired units like CU's new McCartney Generat-ing Plant are the trend, but that "tends to change the whole dynamics of the gas and supply system and could have the impact of raising the price."

Electric

Transmission capability isn't being built because of the difficulty involved. Since the lines usually cross state lines, it becomes a "jurisdictional problem" and a site problem no one wants power lines running through their property. Gas pipelines have been in place for many years, he said.

The Federal Energy Regula-tory Commission has tried to come up with a solution to the jurisdictional issue, McClure said, and it has proposed five re-gional transmission authorities that would operate power lines day-to-day, while the ownership of the lines would be private.

But an even larger problem looms does FERC have the authority to create the regional authorities in the first place? Many states see it as a "federal power grab," McClure said. Congress may eventually have to decide.

He added that the wholesale market concept was working in California, until it stopped building new generating plants to keep up with demand.

The Northwest suffered a severe drought which reduced its ability to create hydroelectric power to sell to California, and the electric utilities weren't al-lowed to pass along increased rates to the consumer.

Los Angeles, as a citizen-owned utility, didn't have the problems the rest of the state did because it kept its generators.