Changes to utility financing regulations necessary for cleaner, more efficient energy

The state of Missouri, like many governments, has decided that utilities are to be treated differently than other industries. Private, investor-owned utilities are granted monopoly jurisdiction within certain areas, 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 prevent 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 County.

Missouri'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 by voters in 1976 -- which is exactly what its backers intended.

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 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.

If completed, an expanded nuclear power plant in Callaway 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.

A pending bill, SB 50, would exempt the second Callaway plant from some of the CWIP regulations. Missouri needs increased generation of environmentally friendly energy, and nuclear power is 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.