Missouri Senate

Senate Substitute

COMPLAINT PROCEDURE (Section 386.390) - Currently, certain organizations may make a complaint against a public utility by setting forth any act committed or omitted by a public utility, including any rule, regulation or charge established by the commission in violation of any law, rule, order, or decision. Under this act, the complaint shall set forth the act committed or omitted by the public utility in violation of any provision of law subject to the Public Service Commission’s authority, or of any rule, utility tariff, order, or decision of the Commission.

2017 TAX CUT AND JOBS ACT (Section 393.137) - Under this act, if an electrical corporation’s rates have not been adjusted to reflect the federal 2017 Tax Cut and Jobs Act, the Public Service Commission shall have a one-time authority to adjust such corporation’s rates prospectively. The Public Service Commission shall also require such corporation to defer to a regulatory asset the financial impact of such federal act for the period of January 1, 2018, through the date the corporation’s rates are adjusted, and such asset shall be included in the corporation’s revenue requirement in its next general rate proceeding.

Upon good cause shown by the electrical corporation, the Public Service Commission may, in lieu of the one-time rate change and deferral, allow a deferral in whole or in part of such federal act’s financial impacts to a regulatory asset starting January 1, 2018, through the effective date of rates in the corporation’s next general rate proceeding. Such deferred amounts shall be included in the corporation's revenue requirement in its next general rate proceeding.

This provision contains an emergency clause.

CERTIFICATE OF CONVENIENCE AND NECESSITY (Section 393.170) - Currently, no public utility shall begin construction of any plant or system without having first obtained the permission and approval of the Public Service Commission. Under this act, this requirement shall not apply to the construction of an energy generation unit that has a capacity of 1 MW or less.

This provision is similar to a provision contained in SCS/SB 1028 (2016).

PROPERTY TAX AND CYBER AND PHYSICAL SECURITY EXPENSE DEFERRAL (Section 393.1275) - This act allows electrical corporations that notify the Public Service Commission to defer any difference in state and local property tax expense incurred and those used to determine the corporation's revenue requirement in its most recently completed general rate proceeding, and any difference in prudently incurred cyber and physical security expense actually incurred and the expense for such protection that was used to determine the corporation's revenue requirement in its most recently completed general rate proceeding, to a regulatory asset or liability account. For purposes of the property tax deferral, this act sets forth a calculation for such deferral based upon when the electrical corporation notifies the Public Service Commission of its election to defer such taxes. For purposes of the cyber and physical security expense deferral, the Commission shall ensure that the amount deferred to a regulatory asset or liability does not include costs that were included in determining the electrical corporation's revenue requirement.

Such account balances shall be included in the corporation's revenue requirement and amortized over a reasonable period of time. This act also requires the Public Service Commission to adjust the rate base used to establish the corporation's revenue requirement to reflect the unamortized regulatory asset or liability account balances.

This section expires on December 31, 2028, except that an electrical corporation shall obtain an order by the Public Service Commission to continue to utilize the deferrals authorized under this act from January 1, 2024, to December 31, 2028.

This provision is similar to SB 702 (2014), and HB 2078 (2014).

PLANT-IN-SERVICE ACCOUNTING (Section 393.1400) - This act requires electrical corporations that notify the Public Service Commission to defer and recover depreciation expense and return for qualifying electric plant recorded to plant-in-service on the utility's books. An electrical corporation's election shall allow it to make such deferrals until December 31, 2023, unless the corporation requests, and the Public Service Commission approves, continuation of such deferrals until December 31, 2028. The balance in the associated deferred regulatory asset account, except any prudence disallowances, shall be included in determining the electrical corporation's rate base during subsequent general rate proceedings. Further, such regulatory asset balances shall include carrying costs at the electrical corporation's weighted average cost of capital as set forth in this act, plus taxes, and shall be amortized and recovered in rates over a period of 20 years.

This provision expires on December 31, 2028, except that an electrical corporation shall obtain an order by the Public Service Commission to continue to utilize plant-in-service accounting from January 1, 2024, to December 31, 2028. The Commission shall have the authority to grant or deny such approval based upon the Commission's evaluation of the costs and benefits of such continuation, but shall not be authorized to condition such approval or modify any deferrals or discounts authorized under this act.

This provision is similar to provisions contained in SB 310 (2015), HB 925 (2015), SB 909 (2014), and HB 2024 (2014).

5-YEAR CAPITAL INVESTMENT PLAN (Section 393.1400) - Beginning in 2019, this act requires electrical corporations that defer depreciation expense and return to file with the Public Service Commission a 5-year capital investment plan, and a specific capital investment plan for the following year, on February 28 of each year setting forth capital expenditures the corporation will pursue in furtherance of replacing, modernizing, and securing its infrastructure. Within 30 days of submitting such investment plan to the Public Service Commission, the electrical corporation shall hold a public stakeholder meeting to answer questions and receive feedback on the plan. After feedback is received, the electrical corporation may file a notice with the Commission to make modifications to the investment plan that it has accepted. Further, changes to the plan shall not constitute evidence of imprudence, and submission of the plan shall not affect the Public Service Commission's authority to grant or deny any certificate of convenience and necessity. This act also requires electrical corporations, in every year that such corporation submits a capital investment plan, to submit a report to the Commission detailing actual capital investments made the previous year.

This provision expires on December 31, 2028.

This provision is similar to provisions contained in SCS/SB 1028 (2016) and SS/HCS/HB 2689 (2016).

INVESTMENTS IN SMALL SCALE AND PILOT PROJECTS (Section 393.1610) - This act allows the Public Service Commission to approve investments in small scale or pilot projects if the project is designed to advance the electrical corporation's knowledge of deploying certain technologies, including gaining operating efficiencies that result in customer savings and benefits.

DISCOUNTED ELECTRIC RATES (Section 393.1640) - This act requires electrical corporations to make available discounted rates for qualifying customers upon application and upon a public announcement of a growth project through December 31, 2023, unless requested and approved by the Public Service Commission to offers such discounts through December 31, 2028. Any customer that receives local, regional, or state economic development incentives, that adds incremental load with average monthly demand of at least 300kW and a load factor of at least 55% within 2 years, and that meets criteria set forth in the electrical corporation's economic development rider tariff sheet, shall qualify for a 40% discount average for up to 5 years on all base rate components, and an additional 10% discount for 1 year after the expiration of the initial discount if the customer takes service from an under-utilized circuit.

This act requires the cents per kilowatt-hour realization from such discounted rate to be higher than the electrical corporation's variable cost to serve such accounts, and requires the discounted rate to make a positive contribution to fixed costs associated with such service. If in a subsequent general rate proceeding, the Public Service Commission determines the discounted rate is not adequate to cover such costs, the Commission will increase the rate prospectively to the extent necessary to do so. Any reduced revenues arising from the discounted rate shall be borne by all of the electrical corporation's customer classes.

This provision expires on December 31, 2028, except that an electrical corporation shall obtain an order by the Public Service Commission to continue to utilize plant-in-service accounting from January 1, 2024, to December 31, 2028, in order to continue to provide the discounts allowed under this act from such dates.

This provision is similar to a provision contained in SS/HCS/HB 2689 (2016).

CONTRACTOR PRE-QUALIFICATION PROCESS (Section 393.1650) - This act requires electrical corporations with more than 1 million Missouri customers to develop a qualification process for contractors seeking to provide construction services for distribution system projects. Contractors shall have the opportunity to register on the electrical corporation's vendor registration site and be evaluated for bid opportunities. The electrical corporation may specify the eligibility requirements that the contractor shall meet in order to qualify to participate in the competitive bidding process, and the electrical corporation shall not weight any contractor favorably or unfavorably due to an affiliation with a union, except when work is being performed under a project labor agreement. Contractors that meet the eligibility requirements shall be able to participate in the competitive bidding process, and the contractor making the lowest and best bid shall be awarded such contract.

Within 30 days of the effective date of this act, the electrical corporation shall file a verified statement with the Public Service Commission stating that it has in place a pre-qualification process. Any general rate proceeding filing thereafter shall be accompanied with a verified statement that the electrical corporation is using a competitive bidding process for installing no less than 10% of combined external installation expenditures in Missouri for construction services on distribution system projects. Nothing in this act shall require an electrical corporation to use a qualified contractor or competitive bidding process in the case of an emergency, or to terminate any existing contract prior to its expiration.

Under this act, the Public Service Commission shall prepare a report for the General Assembly annually, with the first report being submitted by December 31, 2020, on the process established under this act.

This section is similar to a provision contained in SS/HCS/HB 2689 (2016).

RATE BASE INCREASE REGULATORY LIABILITY AND LIMITATIONS (Section 393.1655) - This act requires an electrical corporation that elects to defer property tax and cyber and physical security expense, or defer certain depreciation and return for electric plant placed-in-service, to hold constant the corporation's base rates for 3 years for electrical corporations with more than 200,000 Missouri customers, except such rate may not be maintained if the Public Service Commission determines that a force majeure event has occurred. This limitation shall not affect the electrical corporation's ability to adjust its non-base rates that arise from Commission-approved rate adjustment mechanisms during such 3 year period.

If the difference between the corporation's average overall rate at any point, and the corporation's average overall rate as of the date new base rates are set in the corporation's most recently completed prior to the electrical corporation electing to make such deferrals, reflects a growth rate of more than 3%, the corporation is then required to establish a regulatory liability equal to $25 million for electrical corporations with more than 1 million Missouri customers, and $6 million for corporations with more than 200,000 Missouri customers, to be amortized over a reasonable period of time determined by the Public Service Commission. Such regulatory liability amount shall not be recoverable from customers. If the difference between the corporation's average overall rate at any point, and the corporation's average overall rate as of the date new base rates are set in the corporation's most recently completed prior to the electrical corporation electing to make such deferrals, reflects a growth rate of more than 3.75%, the corporation is also required to cease further deferrals. Additionally, if a change in rates charged under any existing Commission-approved rate adjustment mechanism would cause the corporation's rate to exceed the 3% limitation, the corporation shall reduce the rates charged under that adjustment mechanism in an amount to ensure such 3% limitation is not exceeded, and defer any unrecovered amounts to a regulatory asset to be recovered and amortized in base rates.

Further, if the difference between the electrical corporation's class average overall rate while this section applies to the electrical corporation, and the class average overall rate of the date new rates are set in the corporation's most recently completed prior to the electrical corporation electing to make such deferrals, reflects a growth rate of more than 2% for the large power service rate class, such increase shall be limited to 2%, with such reduced revenues arising from limiting the large power service rate class to be allocated to all other customers.

UTILITY-OWNED SOLAR FACILITIES (Section 393.1665) - This act requires electrical corporations to invest in utility-owned solar facilities. Electrical corporations with more than 1 million Missouri customers shall invest $14 million, corporations with less than 1 million but more than 200,000 customers shall invest $4 million, and corporations with less than 200,000 customer shall invest $3.5 million in utility-owned solar facilities located in Missouri or an adjacent state between the effective date of this act and December 31, 2023. If the rate impact of investment in such facilities would cause the electrical corporation to exceed a 1% maximum average retail rate increase, such excess costs shall be deferred to a regulatory asset, including carrying costs at the electrical corporation's weighted average cost of capital, and shall be recovered in rates.

Under this act, an electrical corporation's decision to invest in utility-owned solar facilities shall be deemed prudent, and permission from the Public Service Commission for construction of such facilities shall not be required.

This section shall expire on December 31, 2023, except that any regulatory asset balance created under this section shall be recoverable after such date.

SOLAR REBATES (Section 393.1670) - Beginning January 1, 2019, this act requires electrical corporations to make available solar rebates in amounts set forth in this act. Such rebates shall apply to new or expanded solar electric systems up to 25 kW for residential customers, and up to 150 kW for nonresidential customers. Such rebates shall also not exceed certain limitations set forth in this act, including that electrical corporations with more than 1 million Missouri customers shall not be obligated to pay rebates exceeding $5.6 million per year, or $28 million in the aggregate from 2019 to 2023. Electrical corporations less than 1 million but more than 200,000 customers shall not be obligated to pay rebates exceeding $1.6 million per year, or $8 million in the aggregate from 2019 to 2023. Electrical corporations with 200,000 or less Missouri customers shall not be obligated to pay solar rebates exceeding $1.4 million per year, or $7 million in the aggregate.

Under this act, the electrical corporation shall be permitted to recover the cost of all solar rebate payments through rates, and shall be permitted to defer and amortize the recovery of such costs, including interest at the corporation’s short-term borrowing rate, with such recovery not to exceed 5 years. If recovery of such costs would cause the electrical corporation to exceed a 1% maximum average retail rate increase, such excess costs shall be deferred to a regulatory asset, including carrying costs at the electrical corporation's weighted average cost of capital, and shall be recovered in rates.

Any reductions in electrical corporation loads as a result of the installation of solar systems not owned by the electrical corporation shall constitute conservation.

This section shall expire on December 31, 2023, except that any regulatory asset balance created under this section shall be recoverable after such date.

INFRASTRUCTURE SYSTEM REPLACEMENT SURCHARGE FOR GAS CORPORATIONS (Section 393.1012) - Currently, the Public Service Commission shall not approve, and a gas corporation shall not collect, an infrastructure system replacement surcharge (ISRS) for any gas corporation that has not had a general rate proceeding within the past 3 years. Under this act, gas corporations that become "participating gas corporations" by filing an initiating general rate proceeding, an annual true-up, and periodic rate review proceedings under the Rate Case Modernization Act are exempt from this provision.

This act requires gas corporations utilizing ISRS to develop and file with the Public Service Commission a pre-qualification process for contractors seeking to participate in competitive bidding to install ISRS-eligible gas utility plant projects. The gas corporation may specify the criteria that the contractor shall meet in order to qualify to participate in the competitive bidding process. Under this act, the gas corporation shall file a verified statement with the Public Service Commission stating that it has in place a pre-qualification process by July 1, 2020. Any ISRS petition thereafter shall be accompanied with a verified statement that the gas corporation is using a competitive bidding process for installing no less than 10% of ISRS-eligible gas utility plant projects. Under this act, the lowest and best bid in the competitive bidding process shall receive the contract to perform the project.

Under this act, the Public Service Commission shall prepare a report for the General Assembly annually, with the first report being submitted by December 31, 2021, on the competitive bidding process established under this act.

Nothing in this act shall diminish the authority of the Public Service Commission or certain individuals and groups to file a complaint alleging that the rates of the gas corporation are unreasonable or unlawful, provided that such complaint is governed exclusively by the Rate Case Modernization Act.

RATE CASE MODERNIZATION ACT (Sections 393.1700-393.1750) - This act establishes the Rate Case Modernization Act.

INITIATING GENERAL RATE PROCEEDING (Section 393.1715) - Under this act, a gas corporation may elect to become a participating gas corporation seeking to recover its cost of service through the Rate Case Modernization Act by filing an initiating general rate proceeding with the Public Service Commission. Under this act, a gas corporation participating in the Rate Case Modernization Act is referred to as a "participating gas corporation". The Public Service Commission shall prepare and approve a supplement that includes information required for the participating gas corporation's periodic rate review proceeding and certain foundational elements as set forth in this act.

If the gas corporation seeking to become a participating gas corporation has had new rates become effective in the past 2 years as a result of a general rate proceeding, the Public Service Commission shall conduct a proceeding to determine the foundational elements of the corporation's periodic rate review proceeding. Such proceeding shall be concluded within 5 months, and shall not result in any change in rates.

REVENUE STABILIZATION MECHANISM (Section 393.1720) - As part of a participating gas corporation's initiating general rate proceeding, this act requires the Public Service Commission to approve a revenue stabilization mechanism (RSM) to address over- or under-recovery of revenue due to weather and conservation-related changes in customer usage equal to 10,000 decatherms. Rates shall be adjusted by the amount necessary to return to, or recover from, customers over the subsequent 12-month period the difference between revenues billed and revenues authorized from the previous initiating general rate proceeding or periodic rate review proceeding. Certain revenue variations shall not be accounted and adjusted for as set forth in this act.

ANNUAL TRUE-UP (Section 393.1725) - Under this act, a participating gas corporation shall file tariffs, rate schedules, and minimum filing requirements to be used to establish the revenue requirement to be reflected in rates in the participating gas corporation's annual true-up at least 45 days prior to the end of each updated test year, as defined in this act. Such annual true-up filing shall be based on the most recent 3 quarters of information on the participating gas corporation's books, with a forecast for the remaining quarter. Such forecast shall be of sufficient detail to permit review by Public Service Commission staff, with updated results provided to the staff at least 30 days before the staff's recommendation is due.

Under this act, minimum filing requirements that are required to be included in the annual true-up filing include financial reports for the participating gas corporation's Missouri operations, accounting schedules, cost of service schedules, an earnings test schedule, and a complete calculation of the cost management accountability (CMA) mechanism. The earnings test required under the minimum filing requirements for a participating gas corporation's annual true-up shall determine if the return achieved exceeds or falls below a range of 0.50% of the updated return on equity. Such test shall determine the increase or decrease to the corporation's revenue requirement to bring the return back to the updated return on equity, subject to the annual rate cap. Under this act, "annual rate cap" is defined as a limitation on the amount of any rate increase that may be made under the annual true-up equal to 3% of the gas corporation's previous year's Missouri gross jurisdictional revenues, with excess amounts deferred and booked to a regulatory asset for recovery in a later period.

Further, as part of the earnings test, the updated return on equity shall first apply adjustments based on the results of performance measurement indicators and capital market changes. Performance measurement indicator adjustments shall compare achieved performance to the benchmark performance range of expected performance. For each instance where achieved performance is higher than the benchmark range, the corporation's updated return on equity shall be adjusted by adding 0.05%. For each instance where achieved performance is lower than the benchmark range, the corporation's updated return on equity shall be adjusted by subtracting 0.05%. For capital market changes, the updated return on equity for shall be adjusted by the amount of the difference between the starting benchmark capital market rate and any increase or decrease in U.S. Treasury Bond yields for the updated test year.

Within 4 months of filing an annual true-up, the Public Service Commission staff shall submit its recommendation verifying the participating gas corporation's revenue requirement calculations. If the parties to the annual true-up are unable to jointly recommend a revenue requirement to the Public Service Commission within 20 days of the Public Service Commission's staff report filing, the Commission shall establish a procedural schedule to resolve such differences within 5 months in order to make rates permanent. Any adjustments made to the revenue requirement by the Public Service Commission shall be reflected in the participating gas corporation's next annual true-up filing, and shall include a rebasing of all ISRS costs.

PERIODIC RATE REVIEW PROCEEDINGS (Section 393.1730) - Following the conclusion of the third rate year effectuating an annual true-up, the participating gas corporation shall file a periodic rate review proceeding at least 6 months prior to the corporation's next annual true-up. The Public Service Commission shall have the authority to set interim deadlines for interested stakeholders and the gas corporation to make their filings, but shall issue an order within 5 months of the filing date. Such determinations shall be used to set rates in subsequent annual true-ups, subject to judicial review.

ECONOMIC DEVELOPMENT AND EXTENSION OF GAS SERVICE PROGRAMS (Section 393.1735) - This act allows a participating gas corporation to file tariffs with the Public Service Commission authorizing programs to retain or attract businesses, jobs, and investment in Missouri or to extend gas service within 6 months of the effective date of this act. Such tariffs may provide for discounted rates or financing arrangements, and the rates approved by the Public Service Commission during the participating gas corporation's annual true-up shall reflect the actual revenues received under the discounted rate or long-term financing arrangement.

TERMINATION PROVISIONS (Section 393.1740) - This act allows a participating gas corporation to terminate its participation in the update process at the conclusion of any updated test year. Upon termination, rates set under this act shall remain in effect until new rates are set in a general rate proceeding.

PUBLIC SERVICE COMMISSION REPORT (Section 393.1745) - This act requires the Public Service Commission to prepare a report to the General Assembly on the impact of this act on or after December 31, 2025. Participating gas corporations shall cooperate in good faith to provide data necessary for the preparation of such report.

This act has provisions identical to SCS/SB 730 (2018). This act is similar to SB 190 (2017), SCS/SB 242 (2017), HB 628 (2017), SCS/HCS/HB 661 (2017), and HCS/HB 747 (2017).

KAYLA HAHN