Will Missouri Move to a Deregulated Power Sector? What to Know Today.
As noted previously in the BrokerX blog, the United States operates as a veritable patchwork when it comes to the utility sector. State-by-state, the rules and regulations on how power companies operate, and namely who is allowed to operate, are set by those individual states. To date, less than half of states (representing less than 20% of customers) allow for open, or deregulated, markets. In deregulated markets, customers can opt to leave their local, default power provider for an approved alternative. They may opt to do this if the other option is cheaper, if it offers flexible rate design that fits their needs, if it has greater clean energy in the mix and that’s important to them, if they offer neat programs or offerings, or really any reason under the sun.
Previously we detailed the current status in Arizona, where the regulated market persists but a move to deregulated markets is being considered, which could bring Arizona to be the next U.S. state to be deregulated in the coming year. But Arizona is not alone, as Missouri is also flirting with the idea of opening up their power sector to competition.
Read on to get up to date on where that process stands today and how it may evolve in 2022 and beyond.
The Missouri Power Sector Today
The major utility in Missouri is Ameren Missouri, which serves 1.2 million customers over 64 counties and 500 communities. Currently, these Ameren Missouri customers are being hit with a rate increase of 8% to 12% in 2022, and those price increases were allowed by state regulators so customers who don’t like it have virtually no resource. They can write a letter to complain, which will probably not be effective, and otherwise the best they can do is use less energy.
That type of rate increase is unfortunately not terribly new to these citizens, as prices for electricity in the state of Missouri power have been particularly bad over the past decade:
“Since 2008, when nationwide electric demand largely stopped rising, Missourians’ electric bills have risen 19% even after inflation — the third-largest increase in the country. These prices have risen faster than salaries and the general cost of living, meaning households and businesses are spending more money on electricity with less left for other needs.”
The Push for Deregulation in Missouri
Whereas the key incentive behind the Arizona deregulation push seemed to come from the desire to choose more green power in the mix, Missouri customers may be motivated by clean energy as well but they are more so responding to these increasing prices that aren’t necessarily coming with improved services. To drive home the issues with rates in Missouri, during that same time period that saw drastic power rate increases in Missouri, the customers in deregulated states saw their bills decrease by 16%. This type of cost reduction trend represents the future that many Missourians want, and they want the right to choose these cheaper options, to retain retail choice that puts pressure on the legacy utilities to do better, and to not have power be such a high budgetary concern for everyday households.
Unfortunately, the story has played out time and again that the budgetary needs of ratepayers is less important to the regulated utilities than they are to those customers themselves. To drive that point home, historical data has found that any increase in utility company costs are much more likely to be passed onto customers in a regulated environment, but the converse potential benefit does not surface: when a fracking boom brought down gas prices and thus cost to generate electricity, customer in regulated services areas did not see those cost reductions passed onto them while those in deregulated areas did see rates go down because of the competitive environment.
What to Watch
The battle towards deregulation in the Missouri utility industry is no doubt still an uphill one, as leaders may be skeptical of deregulation, change can be scary for any stakeholders, and powerful utility influences are pushing back on any type of change that would obviously impact their bottom line. But there is reason for optimism that puts Missouri on the forefront of potential deregulation movement.
In 2020, the Missouri Senate took the opportunity to consider legislation that would have brought the deregulation debate directly to the ballot during the next election season, but that bill ultimately failed to pass and thus the state representatives rejected putting this important matter to the people for such a vote. This legislation, known as Senate Joint Resolution 34 (SJR 34), would have put to a popular vote a Constitutional Amendment regarding deregulation, and if the voters agreed then it would have formally opened up the markets. But as has been the story multiple times across the United States, the influential and well-funded pushback came from stakeholders (such as major utilities like Ameren) who stood to lose their potential customer base.
That said, the fight is far from over in either direction! Commercial Energy Consultants is one company that’s sought to fight the inherent influence of Ameren and other state major utilities. They are looking to mobilize Missourians to come together and get another legislation to the effect of SJR 34 on the bill. As they note in an official plea to the public:
Utility companies like Ameren, by law, have to supply power to everyone, including those who are unable to pay their bills. Plus. Ameren cannot make money on supplies, so they have no incentive to look for lower rates. Plus, they have to pass on supplies to consumers without markup. By picking a supplier, consumers are getting the exact same power with less overhead.
What this bit of insight highlights is that indeed deregulation in Missouri, as elsewhere, will require popular and grassroots support. In regulated jurisdictions, utilities are often some of the most powerful lobbyists and they have such high stakes in keeping their regulated monopolies. So, for the state to see a change towards retail energy choice it will need to be a movement by the people and for the people, and those are principles Missouri surely believes in. Given that, the utility sector will be one to watch in 2022 in Missouri.