AIM opposes bill that would allow costs in utility rates before energy is produced
April 27, 2022 - AIM president and CEO Ray McCarty today joined representatives from Missouri companies to oppose HB 1684, a bill by Rep. John Black, that would eliminate a provision of Missouri law that prohibits costs from being passed to energy consumers until energy is produced. The provision is called "construction work in progress," or CWIP, and it was adopted by voters through initiative petition in 1976 to protect consumers from paying for expensive electricity generation equipment before it is completed and placed in service, providing electricity to customers.
"Associated Industries of Missouri opposes removing the prohibition against utility companies using 'construction work in progress' to pass costs of projects to consumers through rates before the project produces any energy," said McCarty. "This bill could cause Missouri utility consumers, including commercial and industrial ratepayers, to be liable for costs of projects undertaken by utilities but never put into production. Current law allows recovery of such costs only AFTER the project begins producing energy. This flawed approach hurt ratepayers in Florida, Georgia and South Carolina. In fact, the CEO of South Carolina's SCANA Corporation was convicted for intentionally defrauding ratepayers and creating what one U.S. Attorney described as an '$11 billion nuclear ghost town."
Proponents say they would like this removed to make it possible to build small modular reactors (SMR) which are still being developed. However, we know the length of time it takes to build one of these facilities is around 5 years - much shorter than the 15 years it takes to build a full-sized nuclear facility. It is our opinion that the financial costs to ratepayers to carry the project for 5 years is much less than the risk posed to ratepayers by allowing the costs to be paid as they are incurred, particularly if there are major cost overruns or the facility is never finished and placed in production because of this relatively short time-span between beginning construction and completion of the project.
We also wrote an article on this bill before it passed the House which contains more details about the South Carolina experience and links to some articles. You may find that article here: https://www.voiceofmobusiness.com/post/bill-allowing-construction-work-in-progress-cwip-recovery-in-utility-rates-advances-in-house
No action was taken on the bill at today's hearing. The 2022 Legislative Session ends May 13, 2022.