UTILITY BILL POWERS CONCERN; MUNICIPAL UTILITIES WOULD PAY HEFTY PRICE FOR NEW CUSTOMERS

Legislation passed this year could have a serious impact on the ability of municipal utilities to provide service to future areas annexed by their own cities.

Under the legislation, municipal utilities could be required to pay up to 400 percent of the annual bills in compensation for each customer they take over from a cooperative or investor-owned utility.

Officials with municipal utilities are expressing serious concern about the bill, which has not yet been acted on by Gov. John Ashcroft. In addition, officials of the city of Cape Girardeau point out that the legislation could prohibit the city from ever being able to replace Union Electric with a municipally operated service.

Also expressing concern are officials of the Southeast Missouri Regional Port Authority, who have been looking for an economic source of energy for companies that locate around the port. They fear the bill would limit their competitive options and basically force tenants to be served by Union Electric, regardless of energy costs.

Supporters of the bill suggest that it is unfair for companies not to be compensated for the loss of customers in annexed areas. Even most opponents of Senate Bill 221 agree that utilities need to be compensated for what they lose through annexation, but fear the bill gives a distinct and unfair advantage to cooperatives and investor owned utilities like Union Electric.

"It is a very big issue and a very big concern for all cities in the state of Missouri," said Jackson City Administrator Carl Talley. "It makes it almost impossible to convert someone on another system to yours. This will cause difficulties throughout the state."

Talley said municipal utilities worked hard to change or defeat the bill, but noted that the investor-owned and cooperative utilities have political power, money and influence that the municipal utilities lack.

"It looks like it's down to the governor now," said Talley.

Rep. Larry Thomason, D-Kennett, opposed the bill. "The situation now is unfair," he said.

"There needs to be some compensation." But Thomason said the law would enable the Public Service Commission to set a depreciated value on the power lines and poles and then provides for compensation of up to 400 percent per annual bill paid by lost customers.

But Rep. Joe Driskill, D-Doniphan, chairman of the House Commerce Committee and the lawmaker who handled the bill in the House, argues that concerns about the impact on municipal utilities are not justified.

"There is no provision of the bill that refers to that," said Driskill. "It was not my intention to preclude the formation of municipal utilities or to make it harder to form municipal utilities. This dealt specifically with annexation of areas by cities with municipal utilities."

Driskill added, "I don't agree that their concerns are justified. I agree that municipal utilities are very important providers of electric utilities in our state and I had no desire in any way, shape, or form to diminish that role."

But Thomason said even if that was not Driskill's intent, "under this kind of legislation it would be so expensive that it would be impractical for anybody to take over a utility, which is exactly what UE and the cooperative want. Is is fair? I don't think so."

Thomason called the bill "one of the real frustrations of the session for me," and noted that attempts to amend the bill in committee and on the floor failed. One reason for the failure, Thomason said, is that investor-owned companies like UE have a much more powerful lobby voice than the 92 municipal utilities in the state.

"If this bill is signed, Missouri will have the harshest law on this subject in the United States," declared Thomason.

The bill would close a loop hole in state law that now exempts municipalities and other governmental entities from the state "flip-flop law," which prohibits utility companies from providing electric service to anyone who is already serviced by another utility, unless service has been discontinued for at least 60 days prior to the switch.

Thomason said that Missouri would become the 11th state to make a provision for the flip flop and noted that the buyout provisions in the other 10 states range from zero to 350 percent. Thomason said he tried to amend the bill to make the range from 150 to 400 percent so an independent body like the Public Service Commission could make the decision.

He maintained that not all situations deserve equal compensation. For example, the loss of several residences to a utility doesn't have as great an impact as the loss of an industry that uses a large amount of electricity.

Driskill disagrees with Thomason's assertion that the law begins with the presumption that a lost customer is valued at 400 percent.

"Four hundred percent is what we say the price will be, but the PSC is given the power to consider other figures that are fair and reasonable compensation," explained Driskill. "I left a relief value that enables the PSC to consider other factors not included in this legislation. I did this by design."

Driskill explained the legislation requires a mandatory negotiation period between the two utilities to see if they can sit down and talk about lost territory and customers and reach an agreement. If the two parties are unable to agree, then the PSC can authorize the change and order an appropriate amount of money to change hands, or it can reject the change.

"Both of these actions would be based on what is in the public interest," said Driskill.

A catalyst for the drafting of the legislation was a lawsuit between Union Electric and the city of Jackson. Following an annexation, two residential customers of Union Electric asked to be included in the municipal utility and Jackson agreed. UE filed suit and a circuit court ruled that the flip-flop law did apply. Jackson then appealed and the decision was overturned in favor of the city.

Dick Inman, general manager of Sikeston's city utilities, fears the bill, especially the 400 percent provision, will be detrimental to future annexation efforts.

In dealing with the Scott-New Madrid-Mississippi Cooperative, headquartered in Sikeston, Inman said the customers in annexed areas have the right to choose. If they want to be served by the municipal utility, then the city and coop negotiate.

"Our practice has been in the past that when we take anybody over, we are willing to pay a reasonable cost; it is just a matter of conscience," said Inman.

But he conceded, not everyone has the same kind of positive working relationship as the Sikeston utility and their local coop.

Allan Maki, executive director of the Southeast Missouri Regional Port Authority, agrees that the bill is designed to protect the investment of existing utilities.

But what especially concerns Maki is that in trying to build a case for a new utility provider, the fact that cheaper rates could be obtained would not be considered a factor.

"It is fine to protect the investments of the shareholders of companies like Union Electric, but what about the rest of the people who are not shareholders of UE and pay the utility bills?" questioned Maki. "What are their options?"

Maki said this legislation moves away from the national trend to increase access to utilities and not maintain the status quo. He noted that improved productivity has not led to lower utility rates.

"Without a market-based incentive that comes from competition, I don't think you will see rates go down," said Maki.

With regard to the port authority, Maki said high utility costs will hurt economic development there. "I believe our rates now are relatively high," said Maki, maintaining that cooperative and UE rates in this area rank in the top third of the nation.

Maki also said that this legislation will give the city of Cape Girardeau little choice but to continue its franchise agreement with Union Electric.