MEASURE WOULD DEREGULATE ELECTRIC UTILITIES

State Sen. Peter Kinder wants to deregulate the electric utility industry.

Such a move could plug consumers into lower utility bills as occurred with deregulation of the telephone industry, he said.

The Cape Girardeau Republican has introduced a bill that would deregulate retail electric service by Jan. 1, 2000.

The Senate's Commerce and Environment Committee held a hearing Tuesday on Kinder's bill, Senate Bill 728, and a more restrictive deregulation measure sponsored by Sen. John Scott, D-St. Louis.

Kinder said the hearing kicked off discussion in the Legislature on deregulating the electric utility industry. But he said the issue isn't a high priority with the House and Senate leadership this year.

"We are not going to solve it this year. We are not going to pass a bill," he said Thursday.

Kinder said he sponsored SB 728 because he wanted to start legislative efforts to move the state toward deregulation.

Kinder said there is a nationwide trend toward deregulating electric power at the retail level.

At least 11 states have already moved to restructure their electric utilities, including Illinois, he said. Illinois passed a deregulation bill last year. Kansas and Iowa are considering deregulation legislation this year.

Kinder said his bill would allow retail consumers to buy power directly from any supplier.

The bill would require the Public Service Commission to adopt a plan for restructuring the electric industry. The commission could order the divestiture of power plants.

All utility companies, including municipal-owned utilities and rural electric cooperatives, could participate in retail competition.

Local utility distribution companies would have an obligation to connect and provide delivery of electric service to all retail customers within their service areas.

Electric utilities could recover "stranded costs" associated with moving from a monopoly to a competitive situation. The bill would allow recovery of no more than 50 percent of such costs in most cases.

Those costs would be paid by consumers in their electric bills. But Kinder's measure wouldn't allow any electric bill to exceed the retail kilowatt-hour price for electric power that would be in effect on Aug. 28 of this year.

Officials from various businesses and industry groups testified Tuesday in support of Kinder's bill.

Larry Stahlman, public affairs manager for the Procter & Gamble plant in Cape Girardeau County, said deregulation could mean lower-cost power for the company's operations throughout Missouri.

P&G operates three manufacturing plants in Missouri, a regional sales office and a regional distribution center.

The Cape Girardeau plant is the largest diaper manufacturing plant in the world, Stahlman said.

The company's Missouri facilities employ more than 1,900 people and have annual wages approaching $90 million.

P&G spends more than $150 million a year on supplies and materials for its Missouri facilities.

"Electricity is the only commodity that we cannot buy in the United States in a competitive marketplace," Stahlman said.

Several other states have deregulated their electric utilities, providing a competitive advantage for businesses in those states, he said.

"To stay competitive, we need electricity to be competitively priced," he said.

Kinder's bill also has the backing of Solutia, formerly the chemical companies division of Monsanto, and a health-care company that operates 11 hospitals in the state.

AmerenUE doesn't like Kinder's bill. It prefers Scott's measure. That bill would establish a regulated, electric power exchange.

Power companies would pay a fee to join the exchange. The exchange would be administered by a board of directors.

The bill would establish the exchange by Dec. 31, 2003.

The exchange would purchase power and then sell it to users at the lowest possible price, said Susan Gallagher, a spokeswoman for AmerenUE in St. Louis.

Gallagher said mechanisms would be in place to ensure reliability and that power is provided to all customers.

She said Kinder's bill would benefit industrial users at the expense of commercial and residential customers.

"It doesn't address consumer protection issues," she said.

Under Kinder's bill, utility companies could "cherry pick" the most profitable customers, Gallagher said. Small businesses and residential customers could be left holding the bag, she said.

Gallagher said that problem occurred with deregulation in a pilot program in New Hampshire. Electric companies didn't want to serve the less desirable customers, she said.

Gallagher said local governments stand to lose franchise and other tax revenue under deregulation.

"It is not that we are opposed to competition," she said. "We feel we need to address reliability issues, tax issues and the fairness of serving all electric customers."

Today, U.S. electric utilities are linked within one of three interconnected transmission grids. This allows utilities to draw on a larger pool of generation in an emergency.

Deregulation could threaten such a coordinated system, she said.

Gallagher said AmerenUE understands the industry will be deregulated in the future. But she said there isn't a need to rush into deregulation in Missouri where electric rates are lower than the national average.

"AmerenUE's alone are 15 percent below the national average," she said.

Kinder isn't surprised by AmerenUE's opposition to his bill.

"Investor-owned utilities like the situation the way it is now," he said. "They have grown up as regulated monopolies. They want to stay that way."