Columbia senator drafts Callaway compromise

Sen. Kurt Schaefer spent the General Assembly’s spring recess trying to figure out how to pull off a high-stakes balancing act.
On one end: executives of the behemoth private utility AmerenUE, who say that the only way they can build a second nuclear plant in Callaway County is if the legislature repeals a voter-approved ban on charging customers for the financing costs during the construction.
On the other end: executives of the state’s largest industries and consumer groups, who argue that Ameren’s proposal would significantly raise rates during a recession, thus threatening jobs, and lacks restrictions on rate hikes for its 2.4 million electric customers.
The stakes for mid-Missouri are particularly huge: Ameren estimates the project would employ up to 2,500 contractors for six years and 400 permanent employees, and generate annual payrolls and tax revenues of about a half of a billion dollars. It would be the largest construction project in Missouri history.
“These are very powerful groups in Missouri,” Schaefer said during a CBT Power Lunch on March 27, four days before a Senate committee passed the substitute bill he drafted on a subject that’s come to be called Construction Work in Progress, or CWIP.
The bill, a substitute for one passed by the House, would give state regulators on the Public Service Commission more authority in deciding when AmerenUE and other utilities can charge customers for building power plants.
Schaefer predicted during the luncheon that the major players would be unhappy with the proposal.  They were. Representatives of industrial customers and consumer groups said the revised bill still favors utilities and still includes most of the anti-consumer provisions. The vice president of an aluminum manufacturing company called it “atrocious,” and a coalition of opposition groups threatened to put the issue before voters again if the bill passes in the full Senate.
“There is quite a bit of compromise and negotiation ahead in the Senate,” said another speaker at the Power Lunch, Warren Wood, director of the Missouri Energy Development Association, which represents AmerenUE and other private utilities.
Wood declined to take an immediate position on the new bill but praised Schaefer for jumping into the middle of the issue.
Schaefer said the issue boils down to this question: “How much do we change the current law in the state of Missouri to allow or not allow this plant to be built?”
AmerenUE estimates that it would cost $6 billion to build the plant with CWIP and $9 billion without it, so the pending legislation would allow an estimated $3 billion in consumer savings on Callaway II financing charges.

Timothy Herrmann, vice president and head of nuclear engineering at the Callaway Nuclear Plant, said it would simply be impossible to build the plant without CWIP. “Being only a $10 billion company, going out and trying to borrow $7 billion to $8 billion, that’s just not possible.”
Schaefer agreed. “Ameren doesn’t have the money up front to build it, which no (utility company) in this country really does, which is why there hasn’t been a nuclear plant built in this country in over 30 years.”
Schaefer said nuclear power will soon become more competitive because the price of operating coal-burning power plants, which now provide 83 percent of the state’s electricity, will become more expensive when pending federal regulations on carbon emissions are adopted.
“I personally think the plant should be built,” Schaefer said. “My two biggest reasons are, number one, we have a terrible economic situation right now, and those jobs, both the short-term and the long-term jobs, are exactly what we need in Missouri. And number two, from a public policy standpoint for our long-term energy needs, I think we need the plant.”
“Clean coal” technology is more than a decade away and renewable energy including wind and solar “are not going to produce the type of electricity supply that we need in this state.”

Diane Vuylsteke, counsel for Missouri Industrial Energy Consumers, said during the event at The Tiger hotel that the legislation needs to give the PSC more latitude to ensure that consumers would be protected from exorbitant rates.
Vuylsteke said her group of nearly 20 industries, including Anheuser-Busch and Monsanto, is in favor of the construction of Callaway II and even of ratepayer financing, but opposed to legislation that would leave the state regulatory agency “gutted.”

High rate increases “could kill more jobs than it (Callaway II) could ever create,” she said.
Schaefer said the major players
involved in the controversial issue have the ability to hinder the legislative process. “Pretty much everybody’s got a hand grenade in their pocket.”
But AmerenUE needs to proceed quickly to remain in the running for an estimated $800 million in federal tax credits being provided to hasten the process of building nuclear power plants, Herrmann said.
Other nuclear projects are in states where there are no bans on Construction Work in Progress, he said, and rank higher in the application process.
Schaefer said “it’s like there is a big pot of gold out there and it’s a footrace and whoever gets done with a nuclear plant in this country gets the money. Ameren is about third in line right now.”
The tax credits would be considered an asset of AmerenUE that benefit ratepayers in the regulatory process, he said.
But Schaefer said the House-passed bill was imbalanced toward AmerenUE. CWIP, he said, should not be banned, but should be “another tool in the tool box that the PSC can use.”
The state regulators, he said, should take over the balancing act.
“Have a rate case and let the PSC decide whether CWIP is appropriate,” he said. “They can all slug it out and put 50 lawyers in the room.”

Power Lunch Participants

Presenters:

• State Sen. Kurt Schaefer, R-Columbia
• Warren Wood, director, Missouri Energy Development Association
• Scott Bond, manager of nuclear development, AmerenUE
• Timothy Herrmann, vice president, nuclear engineering, Callaway Nuclear Plant

Guests:

• Ray Beck, former city manager
• Mike Crist, co-owner, Tatanka Resources
• Mike Downing, director, Missouri CORE
• Rick Gohring, president, Callaway County Market, The Callaway Bank
• Bruce Hackmann, executive director, Fulton Area Development Corp.
• J. Kraig Kahler, director, Columbia Water & Light
• Debbie LaRue, vice president, director of marketing/public relations, The Callaway Bank
• Al Lynch, assistant manager, Boone Electric Cooperative
• Gary Meyerpeter, president, Boone County Market, The Callaway Bank
• Laura Nauser, City Council Fifth Ward Representative
• Bob Roper, Columbia Energy Supply Task Force
• Karl Skala, City Council Third Ward Representative
• Diana Vuylsteke, counsel, Missouri Industrial Energy Consumers
• Jerry Wade, City Council Fourth Ward Representative