HB 835 Modifies provisions relating to utilities.

Current Bill Summary

- Prepared by Senate Research -


HCS/HB 835 - This act modifies provisions relating to utilities.

TAXATION OF PROPERTY ASSOCIATED WITH THE PRODUCTION OF ENERGY (Sections 137.123 & 153.030):

Beginning January 1, 2022, for purposes of assessing all real and tangible personal property associated with a project that uses wind energy directly to generate electricity, 40% of the original costs, as such term is described in the act, shall be used to determine the true value of such property.

This act is similar to HCS/HB 845 (2021), SB 379 (2021), HB 2454 (2020), and to provisions contained in HCS/SCS/SB 616 (2020).

ASSESSMENT OF CERTAIN PUBLIC UTILITY PROPERTY (Sections 153.030 &

153.034):

Beginning January 1, 2022, this act provides that any real and personal property owned by a public utility company that was constructed using chapter 100 financing shall, upon the transfer of such property to the public utility company, be assessed upon the local tax rolls. Any property consisting of land and buildings shall be assessed pursuant to current law relating to the assessment of such property in general, and all other business or personal property shall be assessed pursuant to the depreciation schedule provided under current law.

These provisions are similar to SCS/SB 92 (2021) and substantially similar to HB 2680 (2020).

SEWER DISTRICTS (Sections 204.300 & 204.610):

Currently, the trustees of a common sewer district may be paid a reasonable compensation for their services if approved by a resolution of the board of trustees, and the trustees of a 10-member board cannot receive any compensation. Under the act, subject to provisions of law regulating conflicts of interest and lobbying, trustees may be paid reasonable compensation by the district for their services outside their duties as trustee. Further, this act allows the trustees to be paid up to $100 per meeting, with limits as set forth in the act.

Currently, the trustees of a reorganized common sewer district receive no compensation for their services. Under the act, subject to provisions of law regulating conflicts of interest and lobbying, trustees may be paid reasonable compensation by the district for their services outside their duties as trustee. Further, this act allows the trustees to be paid up to $100 per meeting, with limits as set forth in the act.

These provisions are similar to HCS/HB 804 (2021).

COMMON SEWER DISTRICTS (Section 204.569):

Under current law, when an unincorporated sewer subdistrict of a common sewer district has been formed, the board of trustees of the common sewer district shall have the power to issue bonds, and the issuance of such bonds shall require the assent of 4/7 of the voters of the subdistrict on the question. This act states that as an alternative to such vote, if the subdistrict is a part of a common sewer district located in whole or in part in certain counties, bonds may be issued for such subdistrict if the question receives the written assent of 3/4 of the customers, as such term is defined in the act, of the subdistrict.

This provision is identical to SB 558 (2021) and to a provision contained in the perfected SS/SB 44 (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 0.38% of the total gross intrastate operating revenues of such utilities.

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

RENEWABLE NATURAL GAS PROGRAM (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.

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.

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

WHOLESALE POWER (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 the perfected SS#2/SCS/SB 202 (2021) and similar to SB 335 (2021).

CONSTRUCTION WORK IN PROGRESS (Section 393.135):

Current provisions of law prohibiting any charge made or demanded by an electrical corporation for service, or in connection therewith, which is based on the costs of construction work in progress, as such term is defined in the act, shall not apply to a clean baseload generating plant or a renewable source generating facility, as such terms are defined in the act.

This provision is identical to a provision contained in the perfected HB 261 (2021) and SB 832 (2020).

ELECTRICAL CORPORATION RATE ADJUSTMENT (Section 393.137):

This act provides that the Public Service Commission shall have the authority to adjust the rates of utility corporations that do not have general rate proceedings pending as of the effective date of the act to reflect the effects of any tax legislation passed by the U.S. Congress or the General Assembly. As an alternative to the rate change, an electrical corporation may make deferrals to a regulatory asset, provided that good cause is shown.

These provisions are identical to HCS/HB 1415 (2021).

CONSTRUCTION OF ELECTRIC TRANSMISSION LINES (Sections 393.170 & 523.262):

Under this act, the Public Service Commission shall not issue a certificate of convenience and necessity for a merchant line, as such term is defined in the act, until the entity requesting the certificate has provided the Commission with a resolution of support passed by the county commission of each county through which the merchant line will be built.

Additionally, no entity, which is defined as a utility company that does not provide service to end-use customers or provide retail service in Missouri, or does not collect its costs to provide service under a regional transmission organization tariff, regardless of whether it has received a certificate of convenience and necessity from the Public Service Commission, shall have the power of eminent domain for the purpose of constructing above-ground merchant lines. This provision applies to any property or easement acquisition started on or after August 28, 2021. Further, this provision does not apply to rural electric cooperatives, or certain other corporations operating under a cooperative business plan.

This act is identical to HCS/HB 1415 (2021) and the perfected HCS/HB 527 (2021), and similar to SB 508 (2021), SCS/SBs 597 & 604 (2020), HCS/HB 2033 (2020), HCS/HB 2094 (2020), HB 1877 (2020), and SCS/HB 1062 (2019).

SPECIAL RATE FOR ELECTRICAL CORPORATIONS (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).

COMPETITIVE BIDDING (Section 393.358):

Currently, water corporations with more than 1,000 customers are required to use a competitive bidding process for no less than 10% of the corporation's external expenditures for planned infrastructure projects on the water corporation's distribution system. Under this act, such competitive bidding process shall be used for 20% of the corporation's external expenditures for such projects.

This provision is identical to a provision contained in the perfected SS/SB 44 (2021).

NUCLEAR CLEAN POWER ACT (Section 393.1250):

The act also creates the Missouri Nuclear Clean Power Act to enable the construction of clean baseload electric generating plants within the state or facilities that utilize renewable sources to produce energy. The Missouri Nuclear Clean Power Act shall not apply to clean baseload electric generating plants or renewable source generating facilities that are in commercial operation before August 28, 2020.

The Public Service Commission may authorize an electrical corporation to make or demand charges for service based in whole or in part on additional amortizations to maintain the electrical corporation's financial ratios that will, in the Commission's judgment, better enable the electrical corporation to cost-effectively construct a clean baseload generating plant or a renewable source generating facility.

This provision is identical to a provision contained in the perfected HB 261 (2021) and SB 832 (2020).

WATER AND SEWER INFRASTRUCTURE (Sections 393.1500-393.1509):

The act establishes the Missouri Water and Infrastructure Act, which specifies that a water or sewer corporation that provides water or sewer service to more than 8,000 customer connections may file a petition and proposed rate schedules with the Public Service Commission to create or change a water and sewer infrastructure rate adjustment (WSIRA) that provides for the recovery of pretax revenues associated with eligible infrastructure system projects.

The WSIRA shall not produce revenues in excess of 15% of the water or corporation's base revenue requirement approved by the Commission in the corporation's most recent general rate proceeding, with certain exceptions.

The WSIRA and any future changes shall meet specific requirements set forth in the act.

The Commission shall not approve a WSIRA for a water or sewer corporation that has not had a general rate proceeding decided or dismissed in the 3 years before the filing of a WSIRA petition unless the water or sewer corporation has filed for or is the subject of a new general rate proceeding.

In the event a water or sewer corporation is collecting infrastructure system repalcement surcharge revenues that were approved before August 28, 2021, when a WSIRA is filed, the approved infrastructure system replacement surcharge revenues shall be included in the new WSIRA filing. In no event shall a customer be charged both an infrastructure system repalcement surcharge and a WSIRA.

At the time the water or sewer corporation files a petition for a WSIRA, it shall submit proposed WSIRA rate schedules and supporting documentation, and the corporation shall also serve the Office of Public Counsel with a copy of the petition, rate schedules, and documentation. Upon the filing of a petition, the Commission shall conduct an examination of the proposed WSIRA, as specified in the act.

The Commission may hold a hearing on the petition and any associated WSIRA rate schedules. If the Commission finds that a petition complies with the requirements set forth in the act, the Commission shall enter an order authorizing the water or sewer corporation to implement the WSIRA. A corporation may petition the Commission for a change in its WSIRA no more than two times in every 12-month period.

The act lists what information the Commission may consider in determining the appropriate pretax revenues and how the WSIRA is calculated. If this information is unavailable and the Commission is not provided such information on an agreed-upon basis, the Commission shall utilize the overall pretax weighted average cost of capital last authorized for the water or sewer corporation in a general rate proceeding regarding a WSIRA or an infrastructure system replacement surcharge. At the end of each 12-month calendar year that a WSIRA is in effect, the corporation shall reconcile the differences between the revenues from a WSIRA and the appropriate pretax revenues found by the Commission for that period and submit the reconciliation and proposed WSIRA to the Commission for approval to recover or credit the difference.

A water or sewer corporation that has a WSIRA shall file revised WSIRA schedules when new base rates and charges become effective following a general rate proceeding that includes the WSIRA eligible costs in the base rates. Once the eligible costs are included in the water or sewer corporation's base rates, the corporation shall reconcile any previously unreconciled WSIRA revenues to ensure that revenues resulting from the WSIRA match as closely as possible the appropriate pretax revenues.

A water or sewer corporation's filing of a petition to establish or change a WSIRA is not considered a request for a general increase in the corporation's base rates and charges.

Commission approval of a petition to establish or change a WSIRA shall in no way be binding upon the Commission in determining the ratemaking treatment to be applied to eligible infrastructure system projects during a subsequent general rate proceeding when the Commission may undertake to review the prudence of such costs. If, during a subsequent general rate proceeding, the Commission disallows recovery of costs associated with eligible infrastructure system projects previously included in a WSIRA, the water or sewer corporation shall offset its WSIRA in the future as necessary to recognize and account for any such overcollections.

Nothing in the act impairs the authority of the Commission to review the reasonableness of the rates or charges of a water or sewer corporation, including review of the prudence of eligible infrastructure system replacements made by a water or sewer corporation.

The Commission may take into account any change in business risk to the water or sewer corporation from implementation of the WSIRA in setting the corporation's allowed return in a general rate proceeding in addition to any other changes in business risk experienced by the corporation.

These provisions shall expire on December 31, 2031.

These provisions are substantially similar to the perfected SS/SB 44 (2021) and similar to HB 397 (2021), SB 592 (2020), HCS/HB 2094 (2020), SB 377 (2019), and HCS/HB 633 (2019).

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.

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.

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

Finally, the act repeals a provision establishing the Task Force on Wind Energy.

JAMIE ANDREWS


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