HB 734 Modifies provisions relating to utilities

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Current Bill Summary

- Prepared by Senate Research -


SS/SCS/HCS/HB 734 - This act modifies provisions relating to utilities.

ENERGY CONNECTIONS (Section 67.309):

Under this act, no political subdivision shall adopt an ordinance, resolution, regulation, code or policy that prohibits, or has the effect of prohibiting, the connection or reconnection of a utility service based upon the type or source of energy to be delivered to an individual customer. Utility services shall include natural gas, propane gas, electricity, and any other form of energy provided to an end user customer.

This provision is similar to a provision contained in the perfected SS/SB 141 (2021) and SB 230 (2021).

ASSESSMENTS AGAINST PUBLIC UTILITIES (Section 386.370):

Currently, the Public Service Commission can assess no more than 0.25% of the total gross intrastate operating revenues against all utilities subject to the jurisdiction of the Commission for the cost of regulating such utilities. This act changes the assessment rate to no more than 0.315% of the total gross intrastate operating revenues of such utilities.

This provision is identical to a provision contained in the perfected SS#2/SCS/SB 202 (2021) and similar to SCS/SB 280 (2021).

RENEWABLE NATURAL GAS (Section 386.895):

This act requires the Public Service Commission to adopt rules for gas corporations to offer a voluntary renewable natural gas program. The Commission shall establish reporting requirements and a process for gas corporations to fully recover incurred costs that are prudent, just, and reasonable associated with a renewable natural gas program. Such recovery shall not be permitted until the project is operational and produces renewable natural gas for customer use.

Any costs incurred by a gas corporation that are prudent, just, and reasonable shall be recovered by means of an automatic adjustment clause.

An affiliate of a gas corporation shall not be prohibited from making a capital investment in a biogas production project if the affiliate is not a public utility as defined in statute.

The Division of Energy shall provide a report on the program to certain members of the General Assembly by January 1, 2023. The report shall contain information as set forth in the act.

The renewable natural gas program shall expire 9 years after the program is established, unless reauthorized by the General Assembly; provided that any rate adjustment authorized by the act shall continue so long as the program remains in operation and produces renewable natural gas for customer use.

This provision is similar to the perfected SS/SB 141 (2021) and HCS/HB 892 (2021).

WHOLESALE ELECTRIC ENERGY (Section 393.106):

This act states that auxiliary power may be purchased on a wholesale basis, under the applicable tariffs of a regional transmission organization instead of under retail service tariffs filed with the Public Service Commission by an electrical corporation, for use at an electric generation facility located in Cass County, which commenced commercial operations prior to August 28, 2021, and which is operated as an independent power producer.

The act also creates definitions for "auxiliary power" and "independent power producer".

This provision is identical to HCS/HB 835 (2021), to a provision contained in the perfected SS#2/SCS/SB 202 (2021), and similar to SB 335 (2021).

RATEMAKING FOR UTILITIES (Section 393.355):

This act modifies the definition of "facility", to remove aluminum smelting facilities, for provisions of law allowing the Public Service Commission to approve a special rate, outside of a general rate proceeding, for certain electrical corporations.

This provision is identical to HB 154 (2021), SB 1040 (2020), and HB 2565 (2020).

CUSTOMER CLASS RATES OF ELECTRICAL CORPORATIONS (Section 393.1620):

Under this act, when determining the allocation of an electrical corporation's total revenue requirement among the electrical corporation's customer classes for the ultimate purpose of setting base rates for each customer class, the Public Service Commission shall only consider class cost of service study results that allocate the electrical corporation's production plant costs from nuclear and fossil generating units using the average and excess method or one of the methods of assignment or allocation contained within the National Association of Regulatory Utility Commissioners 1992 manual or a subsequent manual.

This provision expires on August 28, 2031.

This provision is identical to a provision contained in SS#2/SCS/SB 202 (2021) and similar to SB 406 (2021).

FINANCING ORDERS (Section 393.1700):

Under the act, an electrical corporation may petition the Public Service Commission for a financing order, which is an order from the Commission that authorizes the issuance of securitized utility tariff bonds; the imposition, collection, and periodic adjustments of a securitized utility tariff charge; the creation of securitized utility tariff property; and the sale, assignment, or transfer of securitized utility tariff property to an assignee. A securitized utility tariff charge shall be used to repay, finance, or refinance energy transition costs or qualified extraordinary costs and financing costs that are charges imposed on and part of all retail customer bills.

The time frame for proceedings on a petition for a financing order are set forth in the act. Judicial relief may be had as set forth in law for Commission decisions.

A financing order issued by the Commission shall include elements as set forth in the act.

A financing order issued to an electrical corporation may provide that the creation of the electrical corporation's securitized utility tariff property is conditioned upon, and simultaneous with, the sale or other transfer of the securitized utility tariff property to an assignee and the pledge of the securitized utility tariff property to secure securitized utility tariff bonds.

If a financing order is issued, the electrical corporation shall file a petition or letter at least annually applying the formula-based true-up mechanism requesting administrative approval to make applicable adjustments. The Commission has 30 days from receiving the petition or letter to approve the request or inform the electrical corporation of any mathematical or clerical errors in its calculation.

Once securitized utility tariff bonds are authorized the Commission may not amend, modify, or terminate the financing order by any subsequent action or make changes to securitized utility tariff charges approved in the financing order.

A financing order remains in effect, and securitized utility tariff property under the financing order continues to exist, until securitized utility tariff bonds issued pursuant to the financing order have been paid in full or defeased and, in each case, all Commission-approved financing costs of such securitized utility tariff bonds have been covered in full.

The securitized utility tariff bonds issued pursuant to a financing order shall not be considered to be debt of the electrical corporation other than for federal and state income taxes.

No electrical corporation is required to file a petition for a financing order. A decision not to file for a financing order shall not be admissible in any Commission proceeding or otherwise utilized or relied on by the Commission in certain proceedings.

Debt reflected by the securitized utility tariff bonds shall not be utilized or considered in establishing the electrical corporation's capital structure used to determine any regulatory matter.

The Commission may not, directly or indirectly, consider the existence of securitized utility tariff bonds or the potential use of securitized utility tariff bond financing proceeds in determining the electrical corporation's authorized rate of return used to determine the electrical corporation's revenue requirement used to set rates.

Electric bills of an electrical corporation that has obtained a financing order and caused securitized utility tariff bonds to be issued shall include specific information set forth in the act.

Securitized utility tariff property specified in a financing order exists until securitized utility tariff bonds issued pursuant to the financing order are paid in full and all financing costs and other costs of such securitized utility tariff bonds have been recovered in full.

If an electrical corporation defaults on any required remittance of securitized utility tariff charges arising from securitized utility tariff property specified in a financing order, a court, upon application by an interested party, shall order the sequestration and payment of the revenues arising from the securitized utility tariff property to the financing parties or their assignees.

Any successor to an electrical corporation shall perform and satisfy all obligations of, and have the same rights under a financing order as, the electrical corporation under the financing order.

The act contains several provisions related to security interests in securitized utility tariff property.

A security interest in securitized utility tariff property is created, valid, and binding and perfected at the later of the time:

• The financing order is issued;

• A security agreement is executed and delivered by the debtor granting such security interest;

• The debtor has rights in such securitized utility tariff property or the power to transfer rights in such securitized utility tariff property; or

• Value is received for the securitized utility tariff property.

The law governing the validity, enforceability, attachment, perfection, priority, and exercise of remedies with respect to the transfer of an interest or right or the pledge or creation of a security interest in any securitized utility tariff property shall be the laws of Missouri.

The act lists entities that may legally invest any sinking funds, moneys, or other funds in securitized utility tariff bonds.

REPLACEMENT RESOURCES (Section 393.1705):

An electrical corporation may file a petition concurrently with a petition filed for a financing order for investment in replacement resources, as such term is defined in the act, and the Commission shall approve such investment as set forth in the act. Such approval shall constitute an affirmative and binding determination by the Commission, to be applied in all subsequent proceedings respecting the rates of the electrical corporation, that such investment is prudent and reasonable, that the replacement resource is necessary for the electrical corporation's provision of electric service to its customers, and that such investment shall be reflected in the revenue requirement used to set the electrical corporation's base rates. The approval is subject only to the Commission's authority to determine that the electrical corporation did not manage or execute the project in a reasonable and prudent manner in some respect and the Commission's authority to disallow for ratemaking purposes only that portion of the investment that would not have been incurred had the unreasonable or imprudent management or execution of the project not occurred.

The changes in the electrical corporation's revenue requirement that shall be deferred to a regulatory asset or liability shall only consist of items listed in the act.

The time frame for proceedings on a petition to have investment in replacement resources approved is set forth in the act.

RATEMAKING PRINCIPLES AND TREATMENT (Section 393.1715):

An electrical corporation may petition the Commission for a determination of the ratemaking principles and treatment, as proposed by the corporation, that will apply to the reflection in base rates of the electrical corporation's capital and noncapital costs associated with one or more of the corporation's coal-fired facilities.

If the Commission fails to issue a determination within 215 days that a petition for a determination of ratemaking principles and treatment is filed, the ratemaking principles and treatment proposed by the petitioning electrical corporation shall be deemed to have been approved by the Commission.

The factors and circumstances to which such principles and treatment apply are listed in the act. If the electrical corporation determines that one or more major factor or circumstance has changed in a manner that warrants a change in the approved ratemaking principles and treatment, then it shall file a notice in the docket within 45 days of such determination.

A party that has concerns about the proposed changes in principles and treatment shall file a notice of its concerns within 30 days of the electrical corporation's filing. If a party believes that one or more factor or circumstance warrants a change in the approved principles and treatment and the electrical corporation does not agree, such party shall file a notice within 45 days, and such notice shall include information as listed in the act.

An electrical corporation shall be permitted to retain coal-fired generating assets in rate base and recover costs associated with operating the coal-fired assets that remain in service to provide greater certainty that generating capacity will be available to provide essential service to customers, including during extreme weather events, and the Commission shall not disallow any portion of such cost recovery on the basis that such coal-fired generating assets operate at a low capacity factor, or are off-line and providing capacity only, during normal operating conditions.

These provisions are identical to provisions contained in the perfected SS#2/SCS/SB 202 (2021).

UNIFORM COMMERCIAL CODE (Section 400.9-109):

Article 9 of the Uniform Commercial Code relating to secured transactions shall not apply to the creation, perfection, priority, or enforcement of any sale, assignment of, pledge of, security interest in, or other transfer of, any interest or right or portion of any interest or right in any securitized utility tariff property, except as expressly provided in the act.

This provision is identical to a provision contained in the perfected SS#2/SCS/SB 202 (2021).

RURAL ELECTRIC COOPERATIVES (Section 394.120):

The board of directors of a rural electric cooperative shall have the power to set the time and place of the annual meeting and also to provide for voting by proxy, electronic means, by mail, or any combination thereof, and to prescribe the conditions under which such voting shall be exercised. The meeting requirement may be satisfied through virtual means.

This provision expires on August 28, 2022.

This provision is identical to a provision contained in the perfected SS/SB 333 (2021) and in the perfected SS#2/SCS/SB 202 (2021).

JAMIE ANDREWS

SA #1: MODIFIES SERVICE TERRITORY AGREEMENTS FOR RETAIL ELECTRIC SERVICE SUPPLIERS.

SA #2: MODIFIES PROVISIONS RELATING TO THE ISSUANCE OF BONDS FOR CERTAIN COMMON SEWER DISTRICTS.

SA #3: MODIFIES PROVISIONS RELATING TO THE ASSESSMENT OF CERTAIN PUBLIC UTILITY PROPERTY AND PROVIDES A DEPRECIATION TABLE FOR THE PURPOSES OF ASSESSING ALL REAL AND TANGIBLE PERSONAL PROPERTY ASSOCIATED WITH A PROJECT THAT USES WIND ENERGY DIRECTLY TO GENERATE ELECTRICITY.


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