CWIP – Must-pass legislation
Back in 1976, when fears about nuclear power generation were rampant, costs of plant construction were lower and no new construction project was imminent, Missouri voters approved a state law banning the use of utility rate proceeds for costs of power plant construction before customers actually were receiving electricity.
Now conditions have changed, and problems with this law are obvious. The Missouri General Assembly should repeal it.
The issue comes to a head as AmerenUE files paperwork with federal officials to build a second reactor at the site of its Callaway Nuclear Plant. Nuclear power now receives growing support as an alternative to fossil fuel. At $6 billion or more, Callaway 2 would be the largest construction project in the history of Missouri. Once in operation, the plant would employ many well-paid people and pay large amounts of state taxes. In the years since Callaway was built, nuclear power has achieved an enviable record for safety and efficient production.
But Missouri’s outdated Construction Work In Progress (CWIP) law stands in the way. Today’s capital cost for building a plant like Callaway are too large and the time needed for construction too lengthy to underwrite without rate increases along the way.
Critics say customers should not be required to pay higher rates until they actually receive benefits in the form of electricity, but on this basis many public improvements would be impossible or more expensive. We routinely underwrite investments in public utilities, roads, schools and other amenities before they are fully operational. That Callaway 2 happens to be a private project should not make a difference.
Allowing modest rate increases to fund work in progress would mitigate higher rates later. Even if Ameren could borrow enough money, huge deferred carrying costs would add greatly to the ultimate rates customers would have to pay, but in reality utilities can’t borrow such large amounts with no revenue to start repaying for so many years.
The general public welfare clearly would be served by allowing rate increases to pay for construction work in progress. Private utility regulation in Missouri is among the most demanding in the nation, standing ready to monitor legitimate rate increases to cover these costs.
Other nations make much better use of nuclear power, reducing dependence on oil. Reprocessing greatly reduces the amount of radioactive waste to store, easily handled in France, for instance. In this country, we finally are engaged in a valuable discussion about expanding the use of nuclear power. In Missouri, it’s idle talk unless we repeal our CWIP restriction.
