Last year, the passage of Senate Bill (SB) 4 allowed natural gas plants to raise rates to pay for construction before plants are put into operation, a process known as construction works in project (CWIP). Companies using CWIP under SB 4 would still be subject to cost caps (by estimated cost and completion date) and a refund mechanism (with interest) if the project is not finished. There was speculation about whether a provision in SB 4 would also allow its usage for nuclear projects.
A recent change to SB 838 would remove any ambiguity; the change explicitly prohibits nuclear energy projects from using CWIP.
But is preventing nuclear projects from being able to use CWIP really a good idea?
Some view CWIP as necessary for new nuclear projects to get a foothold in Missouri. Excluding nuclear from this flexible financing method could either drive up total costs (since loans would bear interest) or even eliminate potential projects altogether.
At the same time, the concerns surrounding CWIP are real and should not be dismissed. Charging ratepayers before a plant is operational raises difficult questions. Should utilities earn a return before delivering a service? Does this reduce incentives to control costs during construction? And what happens if a large, high-risk nuclear project is cancelled (which has happened in the United States before)?
These are not trivial concerns. However, a better solution for Missouri would be to improve the CWIP framework for all energy sources.
SB 4 already includes cost caps and refund provisions, but additional safeguards could further protect ratepayers while still allowing needed infrastructure to be built.
Virginia recently passed CWIP reform, and it instituted additional safeguards that Missouri could also adopt:
- Excluding 20% of development costs from CWIP eligibility
- Mandatory evaluation of federal funding opportunities from the Department of Energy
- Establishing a cap on residential monthly bill increases ($1.40 per 1000 kWh)
Additionally, the Missouri Public Service Commission could evaluate compensating ratepayers appropriately for early contributions and their role in risk-sharing, such as treating CWIP financing more like a bond system.
These improvements could even better protect and reward ratepayers, as well as facilitate needed power plant construction without targeting a specific technology—an effective compromise.
