Ameren goes where no utility has gone before in Missouri

Legislative battle over nuclear energy unfolds in the ‘show me’ state

Nuclear energy utility AmerenUE (NYSE:AEE) has finally left earth orbit and set sail for an uncharted region of the economic and political space seeking strange new alliances in a hostile universe. It is entering the throes of a bellwether battle between ratepayers rights and the need for new zero emission power plants that could set a precedent for the nation.

A bill (S.B.228) introduced in the Missouri state legislature on Jan 18 by Sen. Delbert Scott (R-Lowry City) and Sen. Frank Barnitz (D-Lake Spring) would set aside a three decade old law that prevents utilities from recovering construction costs for a new reactor while the plant under construction.

The law in question, which bans construction work in progress charges (CWIP), was passed in 1976. The new legislation, if passed, would pave the way for a $6 billion Areva EPR providing 1,600 MW of electricity to the state’s ratepayers by 2018. That brings in the plant at $3,750/Kw. AmerenUE is too small to build the plant on its own using a merchant model. It has market capitalization of $7 billion and income for the year ending September 2008 of $2 billion.

Sen. Scott says the proposed law addresses two issues which are having enough electricity to meet demand and keeping costs down. He argues that if consumers force the utility to adopt a merchant business model, then the costs of waiting all that time to repay investors, and the related interest, will be passed on to ratepayers.

As far as the 1976 law is concerned, Scott says, “the time that voters passed it was a time for anti-nuclear forces. Those days are over.”

Consumer groups have attacked the proposal with the ferocity of a Klingon warrior bearing down single handedly on a Federation starship. Mark Hamm, Chairman of Missourians for Safer Energy, told the St. Louis Business Journal, “It is not fair to ask rate payers to pay before the power plant is completed and producing power. It transfers risks from stockholders to ratepayers who would be better off having that money in their pockets.”

Rough surprise as lobbyist switches sides

Hamm is in for a rough fight because one of the leading environmental lobbyists in Missouri just switched sides. The St. Louis Post Dispatch reports that Irl L. Scissors, who previously represented a leading Missouri environmental alliance, announced Jan 22 that he is going to work on overturning the law that prevents AmerenUE from charging its customers for the plant’s costs while it is under construction. He’s supporting the bipartisan effort being led by Sen. Scott and Barnitz.

In an email to clients obtained by the St. Louis Post Dispatch, Scissors wrote, "Knowing the economic and political climate of the country and Missouri, I do not feel the effort to stop CWIP is viable and I am not comfortable leading this effort in Jefferson City," he wrote.

Scissors, age 38, once served as a policy advisor to former Democratic Governor Bob Holden. For the past three year, he’s represented environmental groups on issues such as renewable energy, including solar and wind, and environmental regulation of large farming operations.

Kathleen Logan Smith, executive director for the Missouri Coalition for the Environment, called the decision a “huge and unfortunate surprise.”

Here’s another surprise for green groups. A large coalition has formed to support the utility’s effort to change the law including other major utilities in Missouri, large employers, organized labor, and some faith based groups. AmerenUE released a study that showed if the plant is built it will generate 2,500 construction jobs and 400 permanent jobs.

House leader stands up for nuclear energy

On the House side Speaker Ron Richard (R-Joplin) has placed repeal of CWIP at the center of his agenda for the legislative session. He told the St. Louis Post Dispatch he dismisses charges that he benefitted from campaign contributions made by AmerenUE during the November elections. The firm reportedly made $300,000 in campaign contributions to legislative candidates in 2008.

“I don’t care if they give me a dollar or a million dollars. If you can’t take their money, and eat their chicken, and say no, you’ve got no business being around here.”

Richard Mark, VP at AmerenUE, says that the utility feels it is doing the right thing for consumers by pursuing a change to the law.

“Power plants of all kinds are expensive to build and we also have an obligation to our customers to find the most cost-effective ways to pay for them,”

AmerenUE submitted a COL application to the NRC last summer, but won’t make the formal decision to build a new nuclear plant until 2011 when the regulatory review is done. It also said it submitted an application for federal loan guarantees. If the utility gets them, the coverage will also help reduce the cost of building the plant. Assuming the utility gets a green light from the NRC in 2011, the new plant could be in revenue service by 2018.

Other states, like Kentucky and Wisconsin, which have laws on the books banning outright construction of new nuclear power plants, are likely watching developments as they unfold in Missouri. If the toughest set of skeptics in the U.S., the ratepayers in the 'show me' state, can change their minds, then much else becomes possible elsewhere.

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