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 progress (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.

The post Nuclear Energy and Construction Works in Progress (CWIP) appeared first on Show-Me Institute.

Last legislative session, Missouri lawmakers took a swing at addressing anxiety over data centers increasing electricity rates with the passage of Senate Bill (SB) 4. This bill requires that customers with loads over 100 megawatts (MW) pay their share of costs associated with connecting to the regulated grid (the Missouri Public Service Commissions recently expanded that rule to 75 MW). For reference, 100 MW is roughly equivalent to the electricity needs of 80,000 U.S. households.

There has been confusion about whether average Missourians’ rates would increase due to data centers. It’s understandable that people might be confused about some language in the bill. For example, what exactly does “any unjust or unreasonable costs arising from the service to such customers” or “pay their share of costs” mean?

A recent hearing at a St. Louis Board of Alderman committee meeting brought some needed clarity to the matter. When questioned, Ameren’s manager of economic development clarified that “all Ameren customers, including residential customers, pay for expanding the grid through building new power plants through rate increases, and that may be needed to accommodate large-load customers.”

In plainer English, average Missouri ratepayers would pay for new power plants constructed to meet data center demand—which could be a hefty bill if Missouri does indeed need new power plants.

Major technology companies (Amazon, Google, Meta, Microsoft, xAI, Oracle, and Open AI) are meeting with President Trump to sign a pledge that they will supply and pay for their own power for artificial intelligence data centers.

So average Missourians won’t be paying for new data centers at all?

Potentially, but it depends on the deal that is finalized with the major tech companies.

While there is some uncertainty about who will pay for what, Missouri could bring clarity by allowing consumer-regulated electricity (CRE).

CRE offers a private, parallel pathway to energy abundance, and gives data centers a private partner (CRE utility) to meet their own energy needs with less red tape, more certainty, more control, and more freedom to innovate. A CRE utility would develop and operate generation on behalf of large-load customers that prefer not to own and operate power plants themselves.

SB 4 was a good start, but Missouri can go further in protecting ratepayers and attracting investment. Allowing CRE could create a clear, structural pathway that could not only further protect ratepayers, but also provide attractive, tangible benefits to the developers paying for their own energy needs.

The post Who’s Paying for What with Data Centers? appeared first on Show-Me Institute.

The investigation and review are intended to protect ratepayers, assess Missouri’s future energy needs, and manage Missouri’s natural resources effectively. These are good objectives, but the hard question is finding a policy solution to match all those goals.

One option I have written about, consumer-regulated electricity (CRE), is worth considering. (If you’re unfamiliar with CRE, you can click the link to learn more.)

Instead of placing new data centers on the existing regulated grid, we could match data centers with an independent CRE utility (CREU). Furthermore, if electricity demand for these data centers falls short of its sky-high projections, then the excess capacity will have been a poor investment. This protects ratepayers by putting private companies on the hook for that risk instead.

There are benefits to data center developers as well. A CREU can be structured around the developer’s reliability needs and preferred energy resources. Projects could also require less transmission, as new generation facilities could be built near their customer base. CRE could be a reliable, economical, and sustainable energy solution to meet current and future energy needs.

Speed to operation is vital in today’s economy, and data center projects have experienced difficulties securing permissions from the various layers of government. While many hurdles would still remain (like local zoning), CRE projects would not require permissions from the Missouri Public Service Commission since they would not be connected to the regulated grid. At the federal level, Senator Tom Cotton recently introduced the DATA Act, which would exempt CREUs from federal regulations not designed for on-site, self-contained power systems. While still early, this legislation is worth monitoring and could further increase the speed to operation.

The governor has made it clear that he wants to meet growing energy demand in a way that protects ratepayers and addresses Missouri’s current and future energy needs. CRE is a policy approach that matches those objectives.

The post Consumer-Regulated Electricity (CRE) and Data Centers appeared first on Show-Me Institute.

Rising electricity demand and retiring coal plants put Missouri at risk of higher prices and unreliable power.

The Solution

Create a nuclear advisory council and explore consumer-regulated electricity (CRE) to position Missouri for next-generation nuclear power.

Key Facts

• Nuclear energy is reliable, powerful, and clean.
• 71% of Americans agree that the United States should “definitely build more nuclear power plants in the future,” up from 47% in 1998.
• Businesses rank energy availability among their top priorities in site-selection decisions.

The Growing Demand for Nuclear Energy

Nuclear power has played a pivotal role in meeting historical energy needs. Today, electricity demand is growing and the primary drivers are well known: data centers, artificial intelligence, and industrial manufacturing.

Amid rising demand, nuclear energy has emerged as a rare point of political agreement, as both the Biden and Trump administrations have endorsed more nuclear power—with the latter issuing pivotal executive orders to bring long-needed reform. Outside the Oval Office, the ADVANCE Act (for nuclear energy) flew through the Senate (88-2) and the House (393-13) before being signed by President Biden.

Missouri has long possessed unique strengths to lead in nuclear energy, but now, national-level momentum and reform have created new opportunities.

A Missouri Nuclear Advisory Council

Tennessee’s nuclear advisory council has seen tremendous success since its creation by executive order in 2023.

Missouri could form a similar council to unite the state’s brightest minds in the energy sector to identify regulatory, workforce, and educational challenges and strengths while highlighting opportunities such as coal-to-nuclear transitions—at no cost to taxpayers.

The council could reduce risk and uncertainty for both international and domestic developers by providing centralized and accessible information, as well as clearly signaling the state’s resolve and intentions to be a dedicated partner in nuclear development.

Bringing the Free Market into Energy

Consumer-regulated electricity (CRE) is an emerging policy that would allow off-grid electricity providers to build their own power plants and transmission lines to serve new customers faster and with less red tape. To be free from Missouri Public Service Commission (MPSC) regulations, CRE providers would need to be unconnected to the regular grid and only serve new, large industrial and commercial customers. These providers would still be subject to federal regulation from the Nuclear Regulatory Commission and other federal agencies.

CRE could help Missouri meet demand growth, attract investment by companies quickly seeking stable energy, lower costs for utilities and ratepayers, and spur innovation.

To allow CRE, Missouri would need to modify state statute such that new off-grid electricity providers are not subject to monopoly regulation (assuming they are unconnected to existing infrastructure, do not cross state lines, and only serve large customers). New Hampshire moved forward with CRE in 2025. Missouri could do so as well.

Policy Recommendations

• Establish a Missouri Nuclear Advisory Council.
• Through CRE, inject market forces into the energy sector by exempting off-grid electricity providers from MPSC monopoly regulation.

The post Nuclear Energy appeared first on Show-Me Institute.

While I will avoid any spoilers, the new movie, Mission Impossible: The Final Reckoning, has an eerie resemblance to current events. The seventh and eighth films in the franchise revolve around a rogue artificial intelligence (AI) entity taking over cyberspace, with different nations racing against the clock to capture this entity and dominate the rest of the globe. The plot today may be different, but the emerging battle for AI-supremacy seems similar.

Recently, President Trump issued four executive orders aimed at unleashing nuclear energy to establish America’s “energy dominance” and maintain national security amid a potential global AI arms race. These orders could lead to the repeal or reform of burdensome regulations that have constrained the American nuclear industry in past decades. Did I expect national security to be a key driver of nuclear energy reform? Not exactly, but this is not an unprecedented scenario.

From the Battlefield to the Home Front

At the height of World War II, nations began working to apply atomic physics to wartime technology. This led to America achieving the world’s first self-sustaining nuclear reaction under the stands of Stagg Field in Chicago. While nuclear technology’s first use was in the atom bomb, its debut as an energy source came soon after with the launch of the USS Nautilus in 1954.

Since then, the technology has had a prominent role in both military and civilian affairs. Nuclear reactors are used to power submarines and aircraft carriers, and 19 percent of the United States’ electricity generation comes from nuclear power plants. National security had a role in its origin story—and now, it may be a factor in the nuclear industry’s resurgence as well.

An Opportunity for Missouri

To win an AI arms race, speed and time are of the essence. Missouri could position itself as a strategic partner by finding ways to more quickly connect new nuclear power to energy-intensive AI data centers.

One policy that could shorten the time of construction of nuclear power plants and also protect Missouri consumers from price hikes is consumer regulated electricity (CRE).

In theory, CRE would allow private investors to create new, independent electric power systems (encompassing both generation and transmission) using their own capital. These private grids would be scaled to meet new demand growth from large consumers. In order for a CRE entity to operate appropriately, it would need to be free from restrictions placed by the Missouri Public Service Commission (MPSC). That means CRE systems would need to be unconnected to the regular grid and serve only new industrial and large commercial customers—like AI data centers.

CRE could not only attract investment but also relieve strain on the primary grid and ratepayers. Rather than relying on ratepayers to fund new power plants to accommodate rising electricity demand (driven by large consumers), CRE could provide a targeted solution. New Hampshire passed a CRE measure this year, and Missouri may benefit from evaluating how its statutes could be amended to allow for such innovation.

By connecting it directly with national security, the Trump administration has made the development of nuclear-energy infrastructure an urgent priority. The mission for Missouri—if our policymakers choose to accept it—is to position the state to take part in the revitalization of nuclear power and reap the accompanying economic benefits. Adopting CRE is one important way in which Missouri could help meet the nation’s needs while benefiting in the process.

The post Mission Impossible and Nuclear Energy: President Trump’s New Executive Orders appeared first on Show-Me Institute.

SB 4 allows utilities to recover construction costs gradually during the construction phase, rather than waiting until the project is complete and operational. This will only be explicitly allowed for natural gas projects, although there is potentially a pathway available for nuclear and other resources through the Missouri Public Service Commission (MPSC). This alternative financing strategy should be useful for future capital-intensive projects, as it would reduce financial risk for utilities and possibly lower total project costs by allowing firms to rely more on revenue instead of loans, which accrue interest.

CWIP offers benefits for needed power plant construction, but the interest of ratepayers is still vital. A blank check for a monopoly utility could lead to cost overruns and cancellations (which are issues partly tied to the monopoly system itself).

Further Ratepayer Protections and Compensation

The MPSC will still oversee utility rates, and it should continue to weigh potential safeguards to protect Missouri ratepayers. SB 4 already includes two key provisions—cost caps (limited by the estimated cost and completion date) and a refund mechanism—if the plant is not put into operation.

The State of Virginia also recently passed CWIP reform, and it instituted additional safeguards that should be considered for future projects. These include:

• A limit on the number of eligible projects;
• Excluding 20% of development costs from early recovery;
• Mandatory evaluation of federal funding opportunities from the Department of Energy; and
• Establishing a cap on residential monthly bill increases ($1.40 per 1000 kWh).

Additionally, the MPSC should evaluate how ratepayers could be compensated appropriately for early contributions and their role in risk-sharing, such as treating CWIP financing more like a bond system.

This could involve limiting or disallowing pre-operation profits or aligning profits with the operation and provision of power. Another approach might be reducing total cost recovery for utilities after the plant is put into operation, since it is a riskier investment that relies on ratepayers earlier. Potential mechanisms include offering credits for reduced rates post-operation (that could function like a principal in a bond) or shortening the depreciation period post-operation to account for profits earned during the pre-operation phase. If this strategy leads to cost savings for a project, ratepayers should receive a portion of those savings.

These provisions could help strike a balance between protecting ratepayers and facilitating needed power plant construction. Utility companies argue that CWIP is required to build more energy generation in Missouri. If that’s the case, adequate safeguards for state ratepayers are needed.

The post SB 4: Missouri’s Energy Challenge and the Push for CWIP Reform appeared first on Show-Me Institute.

There is a proposal to sell the Sugar Creek water and sewer systems to Missouri-American Water on the April 8th ballot. The company is offering Sugar Creek $5 million for the systems and guaranteeing an $8 million investment into improvements.

Sugar Creek needs to make improvements to its water and sewer systems. Sewer rates just went up this month, and water rates will likely increase, too. The question for voters is whether the city will fund those improvements via debt or whether Missouri-American will pay the city for the asset and fund the improvements itself.

Studies have shown that private utilities generally operate more efficiently than public utilities. Privatization of these two systems could result in a substantial infusion of money for the city, and placing the water and sewer facilities on the tax rolls would expand the tax base. That large payment plus the broader tax base could lead to tax cuts elsewhere in Sugar Creek.

The residents of Sugar Creek currently receive their gas and electricity from private utilities closely regulated by Missouri’s public service commission. Getting their water from Missouri-American Water would be no different, and this sale would greatly benefit the people of Sugar Creek.

The post A Sweet Deal for Sugar Creek appeared first on Show-Me Institute.

Managing this problem in the current system that is dominated by monopolies is difficult. But what if market forces could be infused into our current system to help address new demand?

An Introduction to Consumer Regulated Electricity (CRE)

One potential policy solution that could complement Missouri’s current system is consumer regulated electricity (CRE). While still a developing idea, CRE is worth considering as Missouri navigates an uncertain and potentially very costly energy future.

In theory, CRE would allow private investors to create new, independent electric power systems (both generation and transmission) using their own capital. These private grids would be scaled to specifically meet new demand growth from large consumers. In order for a CRE entity to operate appropriately, it would need to be free from restrictions placed by the Missouri Public Service Commission (MPSC). That means CREs would need to be unconnected to the regular grid and only serve new industrial and large commercial customers.

It should be noted that these CRE entities would still be subject to federal regulations, such as the Nuclear Regulatory Commission for nuclear projects. These entities would still need to meet federal safety standards.

Considering the Benefits of CRE in Missouri

Travis Fisher of the CATO Institute argues that these private grids—partly free of the massive regulatory red tape for utilities—could be developed more quickly, infusing needed competition and innovation into the energy sector. As “private energy islands” for new, large energy consumers, CREs could potentially relieve strain on the primary grid and ratepayers. Rather than relying on ratepayers to fund new power plants to accommodate rising industrial demand, the market could provide that solution.

This idea aligns with growing momentum in the private sector to pair small modular reactors with corporations (Google, Microsoft, Meta) urgently seeking energy sources tailored to their needs. CRE could allow the free market to guide this practice, and potentially, more quickly match demand with supply as companies would not be subject to current MPSC regulations that limit competition. This could be a boon for economic development in Missouri.

In theory, CRE would not tear down Missouri’s existing framework, but rather, complement it and allow private developers to target growing energy demand from the largest consumers, which are causing the most concern about reliability.

How Could We Potentially Bring this to Missouri?

Bringing CRE to the Show-Me State would likely require a modification of state statute to declare that CRE entities—if they are not connected to existing infrastructure and only serve large, industrial customers—are not subject to state regulation. New Hampshire is one state considering this concept. While further study is needed, CRE is a compelling idea that our lawmakers ought to consider.

The post Weighing Consumer Regulated Electricity to Meet Energy Demand Growth appeared first on Show-Me Institute.

Sugar Creek doesn’t operate its own water utility, which makes this proposal a little different from other privatization proposals. Sugar Creek buys water from the Independence municipal utility (which should also be privatized along with the Independence electric utility, but that’s another story).

Privatization, however, is still a very good idea for the residents of Sugar Creek. The main problem with public utilities is that customers are also voters, and politicians are hesitant to raise rates on their voters. This leads to an underinvestment in the system. As the City of St. Louis said in 2024 when it finally increased water rates:

Major I-64 Water Main Break Highlights Need for Long Overdue, Much-Needed Investment in City’s Water System

This was the city’s own water system it was talking about! Cheap rates have harmful consequences down the line.

Beyond that problem, studies have demonstrated that private utilities are generally more efficient than municipal utilities. In 2000, economist B. Delworth Gardner of Brigham Young University determined that private water utilities in Utah charged lower rates for water than comparable public utilities despite the large advantages in taxation and regulation that government utilities have. A recent comparison of public and private electric utilities in Florida concluded that private utilities outperformed public utilities in nine of 14 categories.

Missouri American Water is offering $5 million for the system and has promised to invest $8 million in upgrades over five years. The equipment would also go onto the tax rolls, expanding the property tax base for Sugar Creek. Most importantly, it would put water services in Sugar Creek in the hands of a more efficient private operator, which is closely regulated by the Missouri public service commission. The idea that Missouri American Water could use its monopoly power to keep raising rates is incorrect.

This policy change would be a very good move for the people of Sugar Creek.

The post The Salad Days in Sugar Creek appeared first on Show-Me Institute.

If you clicked on this post without reading Part 1, I encourage you to go back and read Part 1. In that post, I defined some of the energy jargon used in this debate. This post will focus on the provisions of SB 757.

Does SB 757 address capacity factor and dispatchability?

The bill does not explicitly mention capacity factor or dispatchability. Here is a passage from the bill text:

The new replacement reliable electric generation shall be equal to or greater than the full nameplate capacity of any existing electric generating power plant and shall be certified as an equal or greater amount of reliable electric generation by the Missouri public service commission and the regional reliability organization in which the electric utility company operates. (emphasis added)

Unless the public service commission comes up with its own system of power accreditation, it seems this bill will hinge on the actions of our regional reliability organizations.

While I will not go into all of the specific details, the two main regional energy organizations in Missouri—Midcontinent Independent System Operator (MISO) and Southwest Power Pool (SPP)—have outlined their resource accreditation process for rating power sources and individual power plants (you can read MISO’s method here). MISO’s plan “informs long-term investment and retirement decisions by accurately representing the capacity value of a resource in the prompt year.”

What a statement like that means is that MISO (and SPP also) account for capacity factor and value on the grid by examining different yearly, monthly, and daily variables—all with declared intentions to “maintain reliability.”

However, we should still be cautious, as utilities also can miscalculate or serve other agendas. For example, California has dramatically increased its amount of renewable energy sources in the past 10 years, which now account for up to 42% of its net electricity generation. In the same timeframe, California has cut its nuclear supply by over half, down to 8%. As a result, the dispatchability problem has reared its ugly head in recent years, as in 2020 California had power outages due to insufficient energy for the first time in over 20 years. Sadly, 2020 wasn’t the end of California’s power struggles, as problems have continued. California’s regional reliability organization, California Independent System Operator (CAISO), has even at times called for residents to “use less power between 4 and 9 p.m.” Whether it was due to miscalculation or prioritizing other agendas, Californians are struggling because of a lack of dispatchability and reliability.

That brings me to my main questions concerning SB 787. Can Missouri citizens confidently rely on these regional reliability organizations (MISO, SPP) to protect their energy needs? Will these organizations continue to prioritize both capacity and dispatchability? Is there a way to ensure that other agendas are not prioritized over our energy needs?

On its face, this bill appears to add protection for Missourians, but these questions are worth answering. If there is any possible room for interpretation, shouldn’t it be made clear that both nameplate capacity and dispatchability must be taken into account?

The post Show-Me Energy: Decommissioning Power Plants Part 2 appeared first on Show-Me Institute.

These privatization deals are a wonderful thing that should be encouraged and expanded in Missouri, including for our largest cities and their water divisions. More stringent health, environmental, and other regulations (both necessary and not) are making it harder for local communities to operate their water and sewer systems properly. The Post-Dispatch article mentions right at the start how bad the water in Eureka is currently: “It’s the worst water I’ve ever tasted in my life,’ said Eureka resident Thomas Ferrari.”

The main complaint about privatization is that rates will increase. Yes, they often do, and that is typically a necessary thing. Municipal utilities frequently underprice water, electric, and gas rates because those pricing decisions are made by politicians who want to keep voters happy. That may help with re-election, but it makes necessary system investments more difficult. From the Post-Dispatch story:

Arnold sold its sewer system to Missouri American in 2015 for $21 million. “The system was not in good shape. It was not well maintained,” said City Administrator Bryan Richison. “And city council members were running on not raising rates, so it put us in a bad position.”

The water in the City of St. Louis may taste great (it does), but the city water division there has done a poor job of reinvesting in its system and incorporating new technology into service. As astounding as it may be, the City of St. Louis water division has still never installed water meters in most homes to measure water usage and bill accordingly. You get charged for water based on a variety of physical factors, so if you want to water your lawn for 12 hours a day you pay no more than your neighbors. That’s terrible public policy and results in inefficient, wasteful use of water.

Water and wastewater privatization is very good public policy that we need more of in Missouri. Private utilities adopt technology more quickly, expand the tax base, invest in their systems more reliably, and are regulated by the state’s public service commission on their rates. More municipalities with their own water, electric, and gas utilities should follow Eureka and Arnold’s lead and privatize for everyone’s benefit.

The post Eureka Water Privatization Is a Very Good Thing appeared first on Show-Me Institute.

While such goals are often introduced as environmental necessities, a new report from the Manhattan Institute calls for a reality check on the environmental impact of such green energy goals. The report highlights “the inescapable reality that every product and service begins with, and is sustained by, extracting minerals from the earth.”

But what does this have to do with green energy? While wind and sunlight are renewable, wind turbines and solar panels are not. Further, energy-storing batteries require large amounts of non-recyclable materials. In fact, all three are quite resource intensive and producing them can have serious environmental consequences.

The report notes that, compared to a natural gas plant, wind and solar power plants require 10–15 times as much steel, concrete, and glass to generate the same amount of energy. Manufacturing a single 1,000-pound electric vehicle battery requires mining, moving, and processing 500,000 pounds of materials.

These machines wear out, too. Wind turbines and solar panels last between 20 and 30 years, and electric vehicle batteries last around seven.

Those concerned about large amounts of unrecyclable waste should be equally concerned about the afterlife of these machines. According to the International Renewable Energy Agency, current solar growth policies will result in roughly 51–67 million tons per year of unrecyclable waste by 2050. While not a perfect comparison, this is nearly twice the current annual level of unrecyclable plastic waste. If wind energy grows as the International Energy Agency predicts, turbines will contribute another 3 million tons per year of unrecyclable plastic waste by 2050. Lastly, the Manhattan Institute report calculates that more than 10 million tons of batteries per year will become unrecyclable waste by 2030 under current projections.

None of green energy’s environmental drawbacks change the fact that fossil fuels negatively impact the environment as well. However, every energy source has environmental impacts, and currently there is no magic bullet for truly “clean” energy production. As Missourians are asked to support green energy programs at the state and federal level, they should recognize the tradeoffs involved. While green energy’s environmental impacts may be out of sight, they should not be out of mind.

The post Green Energy’s Environmental Impacts: Out of Sight, Out of Mind appeared first on Show-Me Institute.

Last year, Ameren filed for approval to install six charging stations between St. Louis and Jefferson City along 1-70 in order to alleviate the “range anxiety” EV drivers suffer with the current number of stations available.  Instead of approving or denying the request, the Missouri Public Service Commission (PSC) postponed its decision on the matter because it was unsure of whether it even had jurisdiction to regulate the emerging technology.

Some background: utilities such as electricity are often delivered to consumers through monopolies because of how expensive competing delivery infrastructure would be—it is rarely feasible for a startup to lay new pipes or string new wires.  To keep current monopolies in check, regulatory bodies (like the PSC) monitor and approve the prices utilities can charge to cover expenses while still protecting consumers from exorbitant prices.

Many private citizens and businesses already own and operate charging stations, so approving Ameren’s expansion into the market is controversial.  Daniel Hall, the PSC’s chairman, said “. . . it’s unclear whether or not it should be a regulated industry or whether it should be an open, unregulated, competitive market. . . . Where there is a competitive market, I’m not sure that that is a role for the commission.”

Hall’s uncertainty about the PSC’s role makes sense.  If the PSC were to approve Ameren’s project, it’s possible that all of Ameren customers (whether they own an electric vehicle of not) would have to chip in to cover the cost of construction for the new stations. 

Communities around the nation are debating whether the public-utility model would stifle competition, or if it is a necessary kick-start to EV adoption. Kansas’ regulatory body recently denied Kansas City Power & Light’s request to charge ratepayers for a $5.6 million charging station initiative, arguing the proposal was anti-competitive and that it would be unfair to require all ratepayers to subsidize a handful of EV drivers.   Meanwhile, Oregon has ruled (see p. 8) that utilities may own charging stations and cover costs through all ratepayers if they prove an area is in need and would not otherwise receive investment.

Ameren is proposing to construct stations in an area that is currently underserved, but electric cars are relatively new, and technological improvements could soon make them more prevalent than they are today. Missouri’s PSC has been confronted with a difficult decision, and they deserve credit for not blindly jumping into the unknown.  If a free-market model could improve customer choice and spur innovation, then we should be wary of expanding a monopoly where it may not be necessary.

The post Policymakers Wisely Look Before They Leap appeared first on Show-Me Institute.

The PSC serves to regulate utilities in the state so that Missourians receive safe and reliable services while the utility companies charge rates that allow them to earn a reasonable rate of return on their investments after they recoup project costs.

However, the PSC recently instructed its staff to prepare an order granting Noranda (an aluminum company in Southeast Missouri) a reduced rate on the electricity it consumes. The reasoning behind this decision is to allow Noranda to save on costs so that it can improve its financial position and avoid financial difficulties in the future.

This is yet another attempt by the state to help improve Noranda’s bottom line. Noranda already pays the lowest electricity rates in Missouri. Since it is the largest consumer of electricity, I can understand why that would be the case (bulk discounts for large purchases aren’t uncommon). However, the state also specifically passed legislation that allows Noranda to shop for its electricity provider. No other person or business in the state has such a privilege.

Now the state wants to lower Noranda’s rates even further. Why? That’s simple: to save jobs, which is a noble sentiment, but this is not the role of the PSC. This order amounts to the government picking winners and losers, just through a different means than what we’re typically used to seeing.

I want Noranda to stay in business, but it’s not the PSC’s job in order to guarantee that. If we work to keep the cost of doing business low in Missouri, everybody, including Noranda, will benefit.

The post Power Play: State to Give Special Electricity Deal to Favorite Business appeared first on Show-Me Institute.

1) Claims that Ameren has been overcharging its customers from what the PSC allows it to receive in profits, and

2) Demands for mandated lower rates for Noranda itself, the state’s largest electricity consumer.

As to claim No. 1, if that is correct, then the PSC will take appropriate action. While rates themselves don’t directly compare to returns, in fairness to Ameren, the most recent annual electricity rate survey just showed Saint Louis as having the second-lowest residential electricity rates in the survey (which included much, but not all, of the country). The same survey showed Ameren having among the lowest commercial rates as well. So, while it may be possible to over-earn while charging comparatively very low rates, Ameren is hardly holding its customers (at least its Saint Louis customers) over the barrel.

As for Noranda’s demands for even lower rates, they already pay the lowest rates in the state. Furthermore, the Missouri General Assembly has already given Noranda the unique right to shop for electrical providers, unlike any other person or business in the state. I don’t begrudge Noranda any of this. As the largest user, I understand why their bulk discount is so high. Also, while I may want to give more customers the same right to shop that Noranda has, I certainly don’t want to take that option away from them.

That said, there has to be a limit on having the state solve Noranda’s electrical cost issues. If they can’t negotiate an even better deal from Ameren, Noranda does have the right to switch providers. Indeed, that is how they switched to Ameren in the first place. That is more than enough special treatment from the state.

Noranda’s efforts to curb its power costs goes back years. Noranda used to purchase electrical power from the rural cooperative by its smelter. But with the help of a law passed solely for its benefit by the Missouri General Assembly, Noranda was allowed to switch electricity providers. As of 2005, it has purchased electricity from Ameren at a cheaper rate than the cooperative had offered.

It is the role of the PSC to regulate private utilities, but it is not the role of the PSC to fix Noranda’s bottom line. We all want Noranda to successfully continue operating in Missouri, but it is not the role of state government to aggressively interfere in an attempt to guarantee that.

The post Power Play In Southeast Missouri appeared first on Show-Me Institute.

First, the city could raise a large amount of money through the sale of its sewer system — possibly millions of dollars. This could be used to pay down debt, invest in needed public services, or lower taxes. The city of Florissant used the revenue from the 2002 sale of its water utility to finance several public improvements and establish a $10 million reserve fund.

Second, privatization would turn the sewers into a taxable asset. This means additional revenue for the municipality, possibly easing the tax burden on existing residents and businesses.

Third, privatization often results in lower costs, higher efficiency, and better service. For instance, Oklahoma City partnered with Veolia Water for wastewater treatment in 1984, and by 2001 had reduced treatment plant costs from $14 million to $11 million dollars. As long as efficiency gains such as those in Oklahoma City are passed on to consumers, lower costs can lead to customer savings. And although government regulations tend to erode efficiency gains over time, the immediate benefits should not be ignored. 

Make no mistake: Arnold’s wastewater system is aged and in need of extensive overhaul and repair. Privatization will not change that. Over the next few years, a significant portion of the sewer system will reach the end of its usable life. When this happens, significant costs will be incurred to renovate the system. These costs will occur whether or not the sewer system is privatized, but privatization could help keep renovation costs as low as possible. Sewer user-fees have gone up twice in the last three years – and that is with government ownership of the system. 

Private utility ownership is common throughout Missouri. In neighboring Saint Louis County, almost every resident purchases water, gas, and electricity from private companies. Although sewer privatization is less common, it is not unheard of; Missouri American Water, for instance, has several thousand sewer system customers throughout the state. 

The possibility of public repossession of the sewer system is an important option to remember. In the sale contract, Arnold can reserve the right to take the sewers back if certain standards are not met. Such a provision can protect residents from the danger of quality degradation and monopolistic fees. Another protection is the Missouri Public Service Commission, which regulates fees charged by private utility companies.

Arnold’s privatization option appears to be an opportunity for comparatively lower sewer rates and additional city revenue. The city will have more money, sewer costs will be handled more efficiently, and any concern about the quality and price of service can be addressed in the sale contract. Selling the sewers appears to be a situation where both the government and the people it serves can benefit.

Bruce Stahl is a research assistant at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Selling the Sewers: The Sweet Smell of Success appeared first on Show-Me Institute.

The state of Missouri, like many governments around the world, has decided that utilities are to be treated differently than other industries. For the most part, Missouri long ago granted monopoly powers to utilities, along with price regulations. Private, investor-owned utilities are granted monopoly jurisdiction within certain areas of the state, and their prices and fiscal structure are subject to strict regulation by state law and the Public Service Commission (PSC). This system works fine in some capacities, but current regulations are preventing the development of increased nuclear capacity — something that could greatly benefit the citizens and economy of Missouri. It is time for the General Assembly to relax the restrictions on utility financing that prevent a second nuclear reactor from being constructed in Callaway.

Ideally, we would have less regulation, more competition, and more choice in all aspects of utility provision in Missouri, but it is necessary to deal with current realities. The state’s laws and regulations make it prohibitively difficult for Ameren to construct an expanded nuclear power facility. The primary obstacle is the construction-work-in-progress (CWIP) law that prohibits utilities from charging current energy customers for expenses incurred during a construction phase. Even if such construction would bring more electrical power, environmentally cleaner power, and potentially lower rates over the long run, the law prevents the project from moving forward unless Ameren can fund the entire project itself without passing on any charges to customers until after the operation is completed and running. This requirement is so restrictive that it has succeeded in preventing any nuclear power expansion in Missouri since it was passed in 1976 — which is exactly what its backers intended.

Thankfully, utilities do experience some degree of competition. Regulated gas, cable, and water companies still compete with propane, satellite television, and well or septic systems. But consider the regulatory obstacles that face one of these monopolies when it plans to begin a major capital project. Companies that compete in a free market, on the other hand, have the option of raising their prices to help pay for such projects. That type of funding strategy may or may not be a smart move, depending on numerous factors, but at least they have the option. Ameren does not, because the interests of anti-nuclear activists in the 1970s still dominate our discussions in 2011.

The citizens of Missouri now know a great deal more about the risks of nuclear power in Missouri then they did when CWIP was passed. Nationwide, support for the increased use of nuclear power is strong. A March 2010 Gallop poll found that 62 percent of Americans favored the use of nuclear power, with only 33 percent opposed.

If completed, an expanded nuclear power plant in Callaway County would benefit all of Missouri, not only Ameren customers or shareholders. Because of the way the electrical grid is maintained, the increased baseload power generated at Callaway would be put to safe, efficient, and clean usage throughout the state and country. For that reason, it is fair that other regulated power utilities participate in financing the plant and that their customers pay a portion of the costs.

A pending bill, S.B. 50, would exempt the second Callaway plant from some of the CWIP regulations, and has received early bipartisan support. Unlike the failed proposal to amend CWIP two years ago, this bill addresses the use of CWIP only for nuclear power plant expansion. The bill’s sponsors deserve credit for that. Support for or opposition to this bill should now be based on the merits of nuclear power, rather than on tangential issues.

Nuclear power still has significant shortcomings that need to be settled, such as long-term waste storage. France has demonstrated that reprocessing of nuclear waste can work, and that might be one answer for the United States. A few powerful federal politicians have been able to prevent the installation of one workable storage idea: Yucca Mountain. But even though technological solutions are being temporarily held hostage to narrow political interests, that is hardly a reason for Missouri to halt the power expansion it requires for economic growth. History has shown that technological progress will win out in the end, to the benefit of its pioneers.

Missouri needs increased generation of environmentally friendly energy, and nuclear power is currently the most effective way to provide it. Removing CWIP restrictions from this project is a necessary maneuver. It’s important to remember that end-consumers of energy will pay the final costs either way, whether by financing construction or by purchasing less-efficient energy. A second Callaway plant is one instance in which the benefits of an increased supply of clean, efficient energy in the future are worth the costs of higher consumer prices in the present.

David Stokes is a policy analyst for the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

The post Changes to Utility Financing Regulations Necessary for Cleaner, More Efficient Energy appeared first on Show-Me Institute.

Rather, my purpose is to show how the system works with private companies. Private utilities in Missouri are closely regulated by a variety of actors. Water utilities report to the PSC, the Missouri Department of Natural Resources, and local county health departments. (The bulk of the regulations are at the state level — and this does not include the Environmental Protection Agency (EPA), because I believe state agencies enforce EPA guidelines.)

I am not automatically opposed to every aspect of the regulated utility system we use in Missouri. Technological improvements have demonstrated the absurdity of treating telephones and cable television like utilities and/or monopolies, and the legislative environment has properly adapted. I can at least understand the historic purpose behind telephones being regulated as utilities. Treating cable as a utility, though, was always idiotic, and often just a device for corruption. I believe electricity will eventually (in the long run) be deregulated as a utility, too.

As for water and natural gas, infrastructure issues will make it more difficult to move away from monopoly. They may be the best examples of natural monopoly, because the up-front investment costs alone make competition unprofitable. As David Henderson writes:

Economists tend to oppose regulating entry. The reason is as follows: If the industry really is a natural monopoly, then preventing new competitors from entering is unnecessary because no competitor would want to enter anyway. If, on the other hand, the industry is not a natural monopoly, then preventing competition is undesirable. Either way, preventing entry does not make sense.

My paper on privatizing the St. Louis water division dicusses one way to bring competition to the water industry on p. 17. Absent that price competition, I understand the reasons for some types of price regulations.

Back to the original subject. The PSC moved pretty quickly in addressing this potential issue. In fairness, the private company states that it attempted to move quickly, but could not move quickly enough. (The issue here could well be one of utility size, rather than a question of public vs. private.) I hope people don’t read a story like this and think the problem lies with private utilities. The problem in this case has been addressed. Fines may be imposed after the full details emerge. If there was a company failure, the company will be held accountable — the key word here being “if.” Private water, like other private utilities, works just fine under our system in Missouri.

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