Legislation Aims to Allow CWIP Billing by Missouri Utilities
By Andrew Guevara
Show-Me Institute
COLUMBIA — Two recent pieces of legislation, Senate Bill 228 and House Bill 554, have brought Missouri’s electric base rates to public attention. People are clamoring for cheaper and cleaner sources of energy at a time when the state’s energy demands are expected to grow by 30 percent during the next two decades, so future base rate levels will likely remain uncertain until alternative sources of energy can help meet the constantly growing demand for electricity.
Renewable sources of energy like wind and solar power may provide a solution, but the dependability of these resources is not assured. The Nuclear Energy Institute (NEI) reports for 2007 that the average capacity factors — the percentage of output that an energy source produces on average — for wind and solar energies were only 30.4 and 19.8 percent, respectively.
On the other hand, one of the most reliable sources of power in the United States is nuclear, which has a 91.8 capacity factor and supplies energy continuously without creating carbon discharge as a byproduct. Additionally, the NEI reported that during 2006, nuclear plants prevented the release of carbon dioxide almost equivalent to all automobiles in the United States in a single year. Other nations have had a successful track record with nuclear energy. France, for example, supplies close to 80 percent of its energy needs through 59 nuclear reactors, and has one of the lowest overall energy bills in Europe.
Although nuclear energy has clear benefits, many — such as the Missouri Coalition for the Environment (MCE) and the Sierra Club — oppose its use as an energy source because of concerns about issues of waste disposal, radioactivity, and meltdown safety. The Nuclear Information and Resource Service reports that one nuclear reactor annually generates approximately 20–30 tons of high-level nuclear waste, which is stored within the same unit. Opponents worry about the safety of transportation and long-term disposal of this waste after it is removed from nuclear facilities. Furthermore, many have questioned the suitability of proposed nuclear dump sites, like Yucca Mountain in Nevada and Skull Valley in Utah, citing the possibility of leakage and permanent ecological damage. And, although safety mechanisms have seen immense improvements in subsequent years, concerns about the potential for a devastating nuclear meltdown — like the one at Chernobyl in 1986 — loom large in the public consciousness.
Callaway I, a 1,190-megawatt electric generating nuclear plant near Fulton, was completed back in 1984 and accounts for 19 percent of AmerenUE’s total energy output. AmerenUE has filed a construction and operating license application (COLA) with the Nuclear Regulatory Commission (NRC), hoping to gain approval by June 2011 to begin construction on Callaway II, a 1,600-megawatt nuclear facility. This is one of 25 COLA requests that the NRC has received from around the nation. If Callaway II were built, it could generate electricity for more than 1.2 million households in AmerenUE’s service area, in addition to the 780,000 that Callaway I currently serves.
The construction of Callaway II would carry a cost, however. During 1976, Missouri’s voters and legislature passed a law banning “construction work in progress,” (CWIP) which prohibits utility companies from recouping construction costs by adding them to customers’ rates before the plant actually begins producing. This would likely make it more difficult to secure financing.
In the case of Callaway II, AmerenUE would need to find backers who are willing to bear the risk of lending the forecasted $6.53 billion that it would take to complete such a large-scale project. Even if the plant were completed, however, the return on investment would not be guaranteed — unforeseeable actions by the Public Service Commission (PSC) could prevent full reimbursement to AmerenUE.
“The more risk you put on the project, the greater the risk premium,” Warren Wood, president of the Missouri Energy Development Association, commented. The more risk being carried by AmerenUE, the greater the likelihood that plant construction would halt. This is why a group of Missouri legislators is now backing efforts, through SB 228 and HB 554, to nullify the anti-CWIP provisions passed more than three decades ago.
Some, such as environmental groups like MCE, are protesting the legislation. According to a Feb. 6 “e-alert” released by MCE, “CWIP is patently unfair because it allows a monopoly utility like St. Louis-based AmerenUE to transfer risk from investors to consumers.” Furthermore, the group suggests, “We should instead be investing in real solutions. Renewables and energy efficiency are faster, cheaper, and cleaner options.”
Currently, however, the market cannot profitably support renewable sources of energy as viable, efficient options in meeting growing energy demand. In addition to the weak capacity factors currently associated with wind and solar energy, enormous facilities would be required in order to generate power equivalent to Callaway I, which itself occupies 1.4 square miles. To generate the same amount of power as Callaway I, 280 square miles of wind turbines or 78 square miles of photovoltaic solar cell panels would need to be constructed.
AmerenUE notes that it is working with alternative sources of energy and efficiency programs, but Mike Cleary, a public relations spokesperson for the utility, comments that these methods “won’t replace baseload generation in the foreseeable future.”
Missouri’s anti-CWIP resolution was passed at a time when anti-nuclear fervency was strong and popular fears equated nuclear energy with nuclear proliferation. Grassroots groups sided with consumer protection organizations in passing the bill, in order to prevent utilities like AmereUE from spending exorbitantly on construction costs without heeding consumer interests. Nearly three decades later, new legislation may bring Callaway II one step closer to completion. Time will tell how much public sentiment has changed since 1976.
Andrew Guevara is an intern with the Show-Me Institute and a student at the University of Missouri–Columbia.