Power Play

California's troubles slowed deregulation here, but Ameren is preparing to turn up the juice

When the power died in California, so did Missouri Sen. Peter Kinder's hope of passing legislation this year to deregulate Missouri's electric utilities.

Kinder, a Republican from Cape Girardeau, says California's well-publicized troubles opened the door to "demagogues of all stripes" who watched a textbook study of how not to deregulate an industry. Forget that Missouri's proposed deregulation bill was different than the legislation adopted five years ago in California; ignore the fact that Missouri's energy needs are different than California's: The bottom line was, with California in crisis, no utility-deregulation bill would pass the General Assembly in 2001. "It muddied the situation," Kinder says.

Just six months ago, it was a different story in the Show-Me State. Deregulation seemed to be on a fast track, with Missouri primed to join 23 other states that had already restructured the power business. Ameren Corp., parent of AmerenUE of Missouri, and some of the state's industrial giants, including the Anheuser-Busch Cos. and Boeing Co., were squarely behind S.B. 455, the dereg bill. Kinder, president pro tem of the Republican-controlled Senate, was the main sponsor; one of Jefferson City's top lobbying firms, John Bardgett & Associates, was peddling the bill.

What the utility and its allies were selling was straight Econ 101: Introduce competition to electric power, and consumers get more choices. Competition forces businesses to provide better service and become more cost-competitive. And if more competition worked for the once heavily regulated airline, railroad and telecommunications industries -- and that's a big if -- why not electric power?

The problem is that it hasn't worked -- in California. That state's bill -- Assembly Bill 1890, adopted in 1996 -- offered a partial restructuring of utilities: California utilities were forced to sell their generation facilities to independent power suppliers, then turn around and purchase electricity from suppliers at a deregulated wholesale price. The state stopped regulating wholesale prices, but to protect residential customers from price increases, California's utilities were bound by the legislation to charge a fixed rate approved by the Federal Energy Regulatory Commission until March 2002 or until they paid off their "stranded costs" -- debt from the building of power plants, power lines and other generation-related assets -- whichever came first. What California lawmakers didn't bank on was a sharp jump in wholesale costs, which rose by approximately 900 percent last year, fueled in part by climbing natural gas prices (nearly 40 percent of California's power generation comes from natural gas). Utilities also blamed tough environmental regulations -- California's restrictions are among the strictest in the nation -- for hindering the construction of plants to meet the state's growing demand for power.

California's utilities responded by rationing power; in late January, the state suffered its first major blackout since World War II. Unable to pass along wholesale price increases to customers, some utilities warned that they were heading to bankruptcy court, and, on April 6, the biggest, Pacific Gas & Electric, sought protection from creditors. California's Perfect Storm swept across the country, forcing a debate about energy policy and knocking deregulation off track in at least 16 states.

In Missouri, S.B. 455 never made it off the Senate's informal calendar, the graveyard for controversial bills going nowhere fast, and prospects in the House were even dimmer. "'Deregulation' in the Missouri House of Representatives -- regardless of Democrat or Republican -- is a dirty word," says Carolyn Smith, director of Missourians for Affordable Reliable Electrical Services, a Springfield-based consumer coalition.

Yet even with the deregulation bill dead in committee, Ameren's lobbyists were out in force during the waning days of the session, pushing a resolution re-authorizing a legislative study committee that's expected to provide the muscle for next year's final deregulation push. The stakes for Ameren are high -- deregulation would allow the utility to sell excess power generated by its Missouri plants to customers outside the state. It's a step that Ameren says will lead to construction of new plants, generating new jobs.

The Joint Interim Committee on Telecommunications and Energy was first established in 1997, but with the shift in power in the Legislature, some lawmakers and lobbyists already complain that the committee's membership will likely be tilted toward the interests of Ameren and its biggest customers. Kinder, a conservative newspaperman who writes a regular column for the Southeast Missourian, will name seven Senate members of the committee; House Speaker Jim Kreider (D-Nixa) will pick seven House members -- though it is unclear when Kinder and Kreider will select the 14 members of the committee.

Until Republicans took control of the Senate this year, Sen. Wayne Goode (D-Normandy) had headed the committee that overseeing utilities. Rep. Carol Jean Mays (D-Independence) chairs the equivalent House committee. Whereas Goode has been an outspoken critic of deregulation, the same isn't true of Mays, who sponsored the deregulation bill in the House. Critics say there's a reason for Mays' position.

According to the Missouri Alliance for Campaign Reform, a watchdog group supported mainly by research-foundation funds, Mays has been one of the biggest recipients of electric-utility contributions -- her 2000 campaign received $4,098, more than five times the average contribution of $790 given to House members. "It's putting it charitably to say she is unhealthfully close to the industry," says Patrick Harvey, alliance director. "If she winds up as the co-chair of the study committee, their work is likely to be really contaminated." The study alleges that electric-utility interests contributed $216,086 to House and Senate candidates in the 2000 election, with Ameren giving about 20 percent of that total. Mays says the utility contributions aren't significant enough to sway her. "It's totally ridiculous," she says. "If he [Harvey] had bothered to read my contribution list, he would have discovered that the utilities were not a large part of that donation list.... He's somebody who wants to make a mountain out of a molehill in order to support his own theory."

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