Missouri's co-ops face rising costs
but no power shortage
by Bob McEowen
It's often said
that anything new happens first in California and works its way to Missouri
months or even years later. That's fine when the subject is the latest
Hollywood fads but when it comes to skyrocketing energy prices and power
shortages we'd prefer Californians kept their trends to themselves.
associate dispatcher, keeps an eye on energy demand at Associated
Electric Cooperative's power dispatching center in Springfield. The
wholesale supplier of electricity to Missouri's co-ops has built new
power plants to meet ever-greater demand for power but still faces
increasing fuel and regulatory costs.
in the midst of a crippling electricity crisis. Some consumers have seen
their monthly bills triple while others have faced rolling blackouts.
The state's largest utilities face bankruptcy and the governor has entered
the power business, committing billions of taxpayer dollars to purchase
"It's been a great
thing for the people of Missouri to watch and not have to experience,"
says Nancy Southworth, manager of corporate communications at Associated
Electric Cooperative which supplies wholesale power to electric cooperatives
in Missouri and parts of Oklahoma and Iowa. "We're getting a real cheap
education about the utility business at California's expense. We see what
really can happen when you jump head long into deregulation."
Missouri lawmakers took a wait and see attitude, California led the nation
toward electricity deregulation. The bill they passed in 1996 required
utilities to sell off power plants, forcing them to purchase nearly every
kilowatt on the spot market. The bill also froze retail prices for most
consumers but placed no restraints on wholesale costs.
Two of the state's
largest utilities nearly went broke buying high-cost power much
of it power they once produced themselves to sell at prices far
below their costs.
"They really tied
one hand behind the back of the power producers," Southworth says. "They
were buying a day-ahead and hour-ahead power to supply a system the size
of California. That's absolutely nuts."
It's not likely
the same mistakes will be repeated in Missouri but a hopelessly flawed
deregulation plan is not the only culprit in California's energy mess.
themselves are at fault for failing to build new plants and transmission
lines. What power they did have was fueled, in large part, by natural
gas, which saw dramatic price increases this year. Fingers are also pointed
at environmentalists for regulations which make it almost impossible to
locate plants in California. Even ordinary consumers are blamed for crying
"NIMBY!" (not in my back yard) every time a new plant or transmission
line was proposed.
All of this forced
Californians to rely on power from other states. This year there just
wasn't as much electricity available as light rainfall limited power production
from hydroelectric dams in the northwest. When
power was available utilities had to compete for inadequate transmission
capacity. To top it all off, a new breed of independent power brokers
was more than willing to extract huge profits from every energy sale.
To borrow from
the concept of a recent movie, it was "The Perfect Storm" of energy markets
as many factors came together to produce a disaster. But
while Missourians watch in amazement what people here really want to know
is whether we're next?
"Could it happen
here? Probably not," says Jim Jura, CEO of Associated Electric Coopera-tive.
"Brownouts, blackouts you can never say never but I don't believe
we will have the reliability problems they're facing and the reason is
because, unlike California, we have planned and have acted to meet our
future load growth."
In recent years
the Springfield-based cooperative has spent more than a billion dollars
building new power plants to meet increasing demand and provide a reserve
cushion about 14 percent above current needs. By comparison, California
imposes rolling blackouts when reserves drop to 1.5 percent.
electric co-ops are not immune to the problems Californians face, says
Jura who once headed Oregon's Bonneville Power Administration.
"Some of what
is happening in California is already happening here," he says. "We are
seeing dramatic increases in the price of fuels as well as wholesale electricity
prices. The entire country is experiencing that."
All of Associated's
new generation facilities are fired by natural gas. While not as dependent
on gas as California utilities, the co-op has felt the effect of rising
cost of operating coal plants is increasing as well. Besides paying higher
prices for coal, Associated has spent $100 million on emissions upgrades
at its plants. Add in the cost of buying wholesale power on the open market
during plant shut-downs and you have a problem that, while not of California
proportions, does have an impact on Missouri's electric co-ops.
going to be alright but we're going to have some significant upward pressure
on prices," Jura says.
When and if those
pressures result in increased electric rates for cooperative members is
something Jura says his board of directors and the directors of local
co-ops will have to decide. But he's quick to put some perspective on
any talk of price hikes.
"In most cases
electricity has been a product that has not increased in price for the
last several years," he says. "In real terms people are paying a lot less
today than they were five, 10, 15 years ago. I think most consumers don't
One thing most
consumers do understand, though, is that Missouri does not want to follow
the trend set in California.
shares the Golden State's increased appetite for electricity, so far,
we've avoided the mistakes made by Calfornia's legislature. But even as
we watch California's crisis unfold at least four bills to deregulate
Missouri's electric industry are being debated in the General Assembly.
While not advocating
deregulation, Missouri's electric co-ops are attempting to educate lawmakers
on the issue and have put forward a bill that would protect residential
consumers and require the state's low-cost power to go first to Missourians.
At least one other bill presented to the legislature and supported by
large industrial power users would allow the state's power to be sold
wherever prices are highest.
Time and the legislative
process will tell when and if deregulation will ever come to Missouri
and whether it will be a boon or a bust for the state's co-op members.
A few things are
already clear however. Thanks to the forsight of Missouri's electric co-op
leaders we are better prepared to meet rising demand than our West Coast
cousins were. But we, along with all Americans, will begin to see upward
pressure on energy prices.