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Utility deregulation

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by Karen E. Culp

SBJ Staff

Impending deregulation of the electric industry continues to be a concern in Missouri.

The Missouri Public Service Commission put together a task force to study the effects of deregulation of the electric industry earlier this year. The group which includes Duane Galloway, of City Utilities, Gary Fulks, of Associated Electric Cooperative Inc., and Sen. Roseann Bentley, from Springfield issued its report in May.

The PSC also issued a staff report on retail choice June 24 that deals with how deregulation might be implemented in the state.

"On the whole, the task force document addresses most of the concerns of those of us in the electric industry, but it does so in a way that is not a plan itself. It does not recommend a structure for the deregulated industry, and that is something that has to be addressed," Galloway said.

The document will be a guide for the Missouri legislature, if it should choose to draft deregulation legislation this year. Four deregulation bills were introduced during the 1998 session, but none made it out of committee.

One of the concerns of the city of Springfield is the potential loss of gross receipts taxes once competition begins.

"That was one of the recommendations of this document; that loss of revenue needs to be addressed prior to competition," Galloway said.

Mayor Lee Gannaway said he is concerned about the loss of revenue from CU's payment-in-lieu-of-taxes, which is the vehicle used by the city to provide revenue equivalent to business licenses or franchise fees.

"If CU loses some of its revenue as a result of competition, then that could mean loss of revenue to the city," Gannaway said.

Since the city owns its utility, the utility pays the city 3 percent of its revenue to the city, said Fred Fantauzzi, city director of finance.

"If competition does open up in the next few years, we will have to find a way to compensate for the loss, if there is a loss. There is no real way to know how much that would be at this point," Fantauzzi said.

Under current state law and local ordinances, if non-local electricity suppliers are allowed to sell electricity to Missouri consumers, those non-local electricity suppliers will not be required to pay municipal business license taxes or franchise fees, according to the task force document.

The report offers some suggestions for changing the current system.

The suggestions range from enacting state laws to allow municipalities to impose replacement taxes after Hancock votes, or amending the constitution to allow cities to impose a compensating tax.

Including an agreement to pay gross receipts taxes as part of certification to do business in Missouri is also among the suggestions.

Other key issues in the task force's report include consumer protection, which recommends that consumer protection laws be maintained and strengthened, and reliability issues.

The report provides examples of three market structures, all of which "can be implemented without sacrificing safety or reliability."

The PSC staff report deals only with investor-owned utilities and not with cooperatives or municipally owned utility companies. The document recommends formation of a statewide power pool and a four-year transition period to retail competition, among its provisions.

Whether this session will yield a deregulation bill is not certain, but Galloway said he still believes the time frame for when the utility industry will have choice is 2002-2003.

"It's anyone guess as to what could happen on the state level and the federal level in the coming months, but we will have retail competition. It's up to those of us in the business to start planning for it and be ready to move in what could be a tight time frame," Galloway said.

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