Missouri Gov. Mike Kehoe is expected to soon sign utility legislation that proponents say is needed to enhance the state’s economy and energy grid as demand soars.

Opponents estimate it could increase Missourians’ utility bills by more than $1,100 a year. 

The omnibus bill is one of the first to pass both chambers of the Missouri General Assembly this session. It covers issues and programs related to water, electricity, gas and other utilities.

The most controversial part of the bill would allow utility companies to request rate increases for “construction work in progress,” also known as CWIP. The legislation would allow utilities to increase ratepayers’ bills — with regulators’ approval — to help finance the construction of power plants even before they come online. 

Rep. Josh Hurlbert, a Smithville Republican who carried the bill in the Missouri House, said the change was needed to promote the state’s economic competitiveness.

“I’ve got big projects in my district, and we’ve lost some projects in my district because we didn’t have the energy available for what they were needing,” said Hurlbert, whose district is home to a new data center for Meta, formerly known as Facebook.

Sen. Mike Cierpiot, a Lee’s Summit Republican who carried the bill in the Senate, said that while CWIP increases rates, it spreads that increase out over the course of construction, preventing a more sudden and dramatic increase that ratepayers might see once a new plant goes online.

It would also cost ratepayers less overall in the long run, Cierpiot said. He likened it to making extra payments on a mortgage so you don’t have to make payments later. 

Critics counter that the legislation shifts the economic risk of utility construction from the utility to customers more quickly than before.

“It is guaranteed energy inflation,” said Gretchen Waddell Barwick, director of the Sierra Club’s Missouri chapter. “That means that the risk of these construction projects, instead of going to people who are going to then see the profits, just goes directly to the people — the ratepayers.”

Renewing old nuclear worries

The bill would overturn a ban on CWIP rate increases that Missouri voters approved through an initiative petition in 1976 out of concern about the impact to ratepayers of financing new nuclear power plants.

Hurlbert said he understood Missourians’ concerns in the 1970s. At that time, the Missouri Public Service Commission approved a CWIP rate increase for the Callaway nuclear plant before the project’s completion date was known. This time is different, he said.

CWIP “is not going to be used on anything nuclear like we’ve seen with some projects in Georgia and South Carolina,” Hurlbert said, referring to those states’ over-budget nuclear plant projects. “The Georgia one was about $15 billion, and that’s what Evergy’s total valuation is: $15 billion. They can’t float the cost to build a nuclear power plant when it’s worth more than their whole company.”

Opponents of the bill argue ambiguity in the language leaves space for other kinds of power plants — including nuclear ones — to utilize CWIP, too.

“A lot of utilities have been talking about the need to move to more nuclear energy, and right now, it’s just not financially feasible,” said Waddell Barwick. “But if utilities aren’t needing to take that risk on themselves or their shareholders and (can) instead put it on the backs of ratepayers, then it becomes a lot more possible for the future.”

“It’s not good for ratepayers who can barely afford to buy eggs,” she added.

Cierpiot said he had heard these concerns, but believed the bill disincentivized using CWIP to build new nuclear plants in Missouri.

“If (a plant) gets canceled, the companies have to pay the consumers back with interest (under this bill),” Cierpiot said. “That’s fine for gas turbines, because gas turbines don’t get canceled. But for a nuclear plant, if they spend four or five billion dollars on a nuclear plant and then they cancel it, all that money is coming back to the consumers. I think that means no company is going to take that risk with the clawbacks we have.”

Even so, Ameren Missouri — which operates the state’s only nuclear power plant, located in Callaway County — recently updated its long-term planning documents to explore ways to build more nuclear power plants in the state and double its nuclear power generation over the next two decades.

A new nuclear plant built with CWIP would have a considerable impact on the price Missourians pay for their electricity, according to Sandra Padgett, executive director of the Consumers Council of Missouri.

The Consumers Council estimates the legislation could increase overall utility costs — including gas, water, and electricity — by an average of $1,115 annually per household. That number includes the expected rate increase associated with the construction of a new nuclear power plant.

“I think that’s crap,” Cierpiot said. “If you look at (the council’s) numbers, (they’re) putting in another nuclear plant. We don’t have another nuclear plant. Nothing’s on the drawing board. (They) just made that up out of whole cloth. Why don’t you put three nuclear power plants and make it $3,000 a year? I mean, it’s just made up. Nobody knows.”

Padgett said the inclusion of a nuclear plant in the council’s calculations was based on Ameren’s plans and the fact that under Senate Bill 4, the company — as well as the state’s other electric utilities — would be able to use CWIP to build such a facility.

The rate increase from a CWIP-funded nuclear plant accounts for about half of the council’s estimated rate increase. The remaining half was estimated based on several other policies in the bill.

Fights over future utility bills

One policy would allow utility companies to base their rate increase requests on “future test years.” 

Currently, when going before the Public Service Commission to request a rate increase, utility companies must present previous years’ expenses, which are then audited by the regulator to determine which expenses are “prudent” and can reasonably be passed along to ratepayers. 

Under the new policy, water and gas companies can present the Public Service Commission, or PSC, with predictions of what costs will look like in the year ahead and request that rates be raised based on those estimates.

For instance, if a gas company wants to build a new pumping station in the coming year, it could present the expected cost to the PSC and determine before construction starts whether the commission finds the project prudent, Cierpiot said.

“At the same time, all the consumer groups could come in and say, ‘This is the stupidest idea I’ve ever heard. It is not prudent,’ and encourage the PSC to turn it down, which they can, and then nobody spends any money and they go about their business,” he added.

On the other hand, if the PSC finds a utility company’s proposal prudent, it can approve it and a corresponding rate increase, which allows the company to get some of its costs back before the project is finished.

Then, after a project is completed, the company will have to go back before the PSC and share updates on the outcome and cost, and advocacy groups can also come and testify that the company spent too much and should not have the full cost covered by a rate increase, Cierpiot said.

But according to Waddell Barwick: “It can be incredibly difficult to prove after the fact that you didn’t really need all that money. It actually gives an incentive to utilities to spend the budget they said they were going to so they don’t have to then not ask for a rate increase in the future or give money back to folks.”

While Hurlbert and Cierpiot argue the policy will provide more stability, Waddell Barwick said it could make utility companies less thoughtful about their projects. 

She said that under the current system, “utilities aren’t guaranteed to get all of that money back, so they’re being very thoughtful about where they’re spending money, and they’re being very thoughtful about their construction projects to make sure there’s going to be a good return on investment.”

“But if ratepayers are responsible, all of a sudden, that budget and that reasoning to continue to spend (only a) little amount of money or to really try to make sure that what you’re investing in is going to be really prudent and necessary goes completely out the window,” she added.

Waddell Barwick said the bill would allow utilities to “look into a crystal ball and base rates on a hypothetical point in the future.”

But according to Hurlbert, “Nothing in this bill changes what the Public Service Commission’s north star is, and that is to protect ratepayers from any sort of exorbitant increases from the investor-owned utilities.”

If a utility company underestimates its financial needs for the year, he said, it cannot go back to the PSC and request a midyear rate increase. And if it overestimates its needs, it will have to refund ratepayers.

Ameren and Spire, two of the state’s major utility companies, both testified in favor of Senate Bill 4. They are also in the top seven utility companies with the highest number of customer disconnections nationally, according to Waddell Barwick. Padgett said Ameren disconnected more than 90,000 Missouri households in 2024.

While the bill includes an assistance program for people overburdened by energy costs, Padgett is concerned it won’t be enough to meet growing demand that has already weighed on support programs.

“If you just continue to increase the utility costs and don’t have a safety net in place to help people who are really having a lot of trouble keeping up with those bills, I’m really concerned about what could occur,” she said.

For households without access to utilities like electricity, gas and water, heat waves and winter storms can become more deadly. Disconnections can also drive evictions, as many leases require renters to keep their utilities turned on.

The bill divided the Democratic and Republican parties in both chambers of the Missouri General Assembly, which Hurlbert attributed to individual members’ interests in renewable energy, consumer protection and the creation of construction jobs to build new power plants.

Waddell Barwick said that while she understands members’ desire to create more construction jobs in their districts, “I hope that the unions that advocated for this bill are able to get the jobs they were promised, but I’m not going to hold my breath,” because the bill lacks language guaranteeing that local workers will be used for projects. 

With the bill having passed both chambers, Kehoe has two weeks to decide whether to sign or veto it. Cierpiot said the governor has expressed support and is expected to sign it.