Central Electric Power Cooperative

Because of our enviable industry position, it is important that any plan advanced to change the current structure be carefully examined from a CONSUMER point of view. Any retail wheeling plans asking to change the present electric utility system should include appropriate consumer safeguards if advanced as viable alternatives. From the perspective of consumers in high cost states, Missouri users of electric power hold an enviable position. Under our present system consumers have access to abundant low cost electric power and benefit greatly from the extraordinary reliability of our generation, transmission and distribution systems.

System reliability is achieved through an integrated transmission system jointly owned and operated by the Missouri investor-owned, consumer owned, publicly-owned and federally owned utilities. This unique partnership results in huge consumer savings and maximizes system reliability. Through bilateral agreements of electric power generators in our state and region, utilities come to the aid of one another during emergency power plant shut downs and transmission outages.

As a result of this arrangement, Missouri consumers receive continuity of electric service under the most extreme conditions. A percentage of our states generating capacity is set aside under contract to achieve this high industry standard. Industry safety programs for those receiving electrical service and the safety of the general public meet the highest standards in the nation. Those who work on energized high voltage electrical power systems receive specialized training for the protection of themselves, their fellow workers, consumers and the general public.

Through existing regulation by the Missouri Public Service Commission and through member and public ownership, Missouri electric utilities are OBLIGATED to sell their low cost electric power to Missouri consumers.

To ensure safety for utility staff and consumers, electric distribution companies, electric cooperatives and municipal utilities should be required to exclusively own and service electric distribution facilities including required metering equipment. Any other approach would place utility personnel and the general public at risk from actions of unqualified persons working on the electrical delivery system.

Under any deregulation plan, investor-owned utilities, electric cooperatives and municipal electric utilities should remain obligated to provide Missouri consumers first choice of low-cost electric power generated in our state. Under any deregulation plan, the guidelines for obligating "spinning reserve generation" would follow those established by state or regional power pools. Participation in these reliability pools by all Missouri energy providers should be mandatory. The distribution systems should be required to meet or exceed those safety standards set by the Missouri Public Service Commission and/or the National Electrical Safety Code.

Presently an electric utility company, electric cooperative or municipal electric utility may combine electric power generation, transmission and distribution functions within one corporate entity.

Proponents of retail wheeling promise lower electric rates for all consumers and to all user classes. Individual residential users, farmers, small business owners, and difficult to serve consumers must benefit equally through any state retail wheeling plan.

Any retail wheeling plan should require the corporate separation of electric

power generation, transmission and distribution including metering to clearly

identify the costs of "unbundled" electric service. Such a segregated corporate structure will allow the retail consumer to clearly identify and compare prices quoted by electricity marketers and competing electric utilities under competitive market conditions. Under any retail wheeling plan, we must adopt a "universal service plan" to ensure that inner city and rural consumers alike would be guaranteed safe, reliable and equitable electric service.

Under any retail wheeling plan, stranded cost recovery for electric power generation, [if allowed], should be paid for by the stockholders and/or the customer base of individual investor-owned utilities; the owners and members of electric cooperatives and the owners and consumers of municipal electric utilities. Consumers should not be required to share in stranded costs of systems they presently do not receive service from. The authority to identify stranded costs and the approval of a recovery schedule should be the responsibility of existing regulatory authority. A formula for stranded cost recovery resulting from a large load leaving a distribution system should be established. [Some of these costs may be imbedded in a cooperatively owned transmission system]. The costs for investment recovery by the distribution system would be imposed on the vacating customer when and if it could be clearly shown that such a circumstance would result in higher electricity costs to incumbent distribution systems. The responsibility of identifying stranded distribution costs and the approval of a recovery schedule should be the responsibility of existing regulatory authority.

Under any retail wheeling plan, the Missouri Public Service Commission should regulate marketing companies to insure consumer rights. Marketing companies should be required to operate so as to give Missouri Electric consumers the benefits of Public Service Commission consumer protection rules. Marketing companies should be required to pay the incumbent utility a service continuity fee to insure uninterrupted service to consumers. The fee to be paid by the marketing company would be established by the Missouri Public Service Commission.

When a marketing company or competing electric utility supplier discontinues service to a customer for nonpayment, the incumbent utility should be given the right to charge a three month deposit based on the customers previous three month usage. Such an arrangement would discourage intended abuse of the system by those who would take

advantage of open competition to the detriment and added costs of incumbent consumers.

If marketing companies are allowed to do business in our state from an office in New York, California, Texas or any other state, strict bonding requirements should be required to insure their financial integrity for the protection of Missouri consumers. Marketing companies incorporated in Missouri should meet the same strict bonding requirements.

Foreign based marketing companies or those incorporated in Missouri should be required to meet the same financial and service standards as any other electric utility operating in our state under state, federal and/or municipal law.

Very specific law should be enacted to require marketing companies to honor promises they make to Missouri consumers. If they are allowed to sell electricity, an essential service, consumers will need protection to insure marketers deliver long term, fixed cost service as incumbent suppliers are required to do.

Under any retail wheeling plan, all sales promotion plans to compete for retail customers in our state should be submitted to the Missouri Public Service Commission for review and approval. Approval would be based on the advertising piece achieving a clear and simple sales message easily understood by the consuming public. The total costs of retail electric service, including taxes, should be presented in such a manner as to make it easy for the average consumer to make simple cost comparisons of competing plans.

Telemarketing for retail electric service should be strictly regulated for five years or for a longer period of time if the Public Service Commission determines it is in the best interest of the consumer to do so. Because explicit cost details would be required by those soliciting retail electric customers, telemarketing would truly be an annoyance until a certain level of public understanding could be achieved through consumer education.

Through "utility responsibility" all segments of the electric utility industry are required to deliver short and long-term electric power needs to their consumers. Under this unique service obligation, utilities must comply with specific "plant siting" laws and meet strict tests of "convenience and necessity" to locate, construct and operate electric power generating plants in our state. Long term planning responsibility and condemnation

authority accompany this obligation. In a deregulated climate, some electric utilities may no longer have the obligation to build new generating plants. The question of who will build new power plants and what accompanying authority they might need will have to be addressed. Consumers of electricity will need assurances that investments in new plant will be made on a timely basis to meet their long and short term needs.

Proponents of retail wheeling promise lower electric rates for all consumers. Before our state legislature acts, let’s make sure that is a promise we can keep. As Missouri consumers presently enjoy low rates and high service reliability, there is no legislative pressure to enact new law quickly.

There is no threat from Washington, D.C. to act in haste. The Congress is strongly included to allow individual states to address the retail wheeling issue. In addition, those bills being considered at the federal level do not call for immediate state action.

Missouri consumers will benefit because we can learn from those states that rushed into retail wheeling. When their state plans become fully operational, the resulting effect on rates, reliability and safety will no longer be pure conjecture. Our state plan can be enhanced because of what we may learn from actual operational experience. Missouri consumers will benefit most if your legislators proceed with deliberate caution in shaping state policy on retail wheeling.

Prepared by —

Missouri’s 47 consumer-owned electric utilities serving more than 500,000 consumers.

Revised January 2000