The Motley Fool, September 3, 2013

After receiving approval on July 17 from the Missouri Public Service Commission, Laclede Group (NYSE: LG) announced today it has completed the $975 million acquisition of Missouri Gas Energy, or MGE, from a subsidiary of master limited partnership Energy Transfer Partners (NYSE: ETP). The deal became final September 1, according to Laclede’s statement, and will be accretive to fiscal 2014 net earnings.

With the acquisition complete, Laclede said it is now “the largest natural gas distribution company in Missouri, now serving more than 1.1 million natural gas customers.” President and CEO of Laclede Suzanne Sitherwood said, “We’ve been working on the integration of the two companies since last year, and we are now fully ready to complete a seamless transition as we welcome Missouri Gas Energy employees and customers into the Laclede family.”

The sale of MGE, along with Energy Transfer Partners’ pending $60 million (less debt) sale of its New England Gas division, “is another important step in ETP’s efforts to streamline and integrate its asset portfolio through the divestiture of non-core assets,” the company said in its statement.

Liberty Tribune, August 31, 2013

The Missouri Public Service Commission has approved a request filed by KCP&L-Greater Missouri Operations Co. to change the fuel-adjustment charge on the monthly bills of its electric customers.

The FAC change reflects fuel and purchased power costs during the six month period December 2012 through May 2013. It also reflects the company’s annual FAC true-up. In that filing, GMO stated the true-up reflects an under-collection of approximately $314,400 from customers in the MPS rate district (Kansas City area) and an under-collection of approximately $357,600 from customers in the L&P rate district (St. Joseph area).

The change in the FAC will take effect Sunday, Sept. 1. It will mean an increase of approximately $0.78 a month for the average residential customer in the territory served by MPS and an increase of approximately $1.29 a month for the average residential customer in the territory served by L&P.

The fuel adjustment charge was authorized by the Commission for KCP&L-GMO in a regular rate case in 2007. The FAC tariff allows the company to pass increases or decreases in its net fuel and purchase power costs to customers outside of a general rate case.

The FAC allows the company to recover most — up to 95 percent — of its costs to encourage conservation and prudence in fuel use by the company. Any charges resulting from the fuel adjustment clause must appear in a separate category on customers’ bills.

Fuel adjustment charges are intended to help companies deal with volatility in fuel pricing. The FAC tariff requires regular adjustments to reflect changes in prices the company has incurred for fuel and for wholesale power purchased to serve customers.

KCP&L-GMO provides electric service to approximately 312,700 electric customers in Missouri.

St. Louis Post-Disptach, July 3, 2013

Laclede Gas Co. would not raise natural gas delivery rates for St. Louis area customers for at least two years under an agreement submitted this week to help the utility win approval of its $975 million purchase of Missouri Gas Energy.

The 43-page agreement, filed Tuesday with the Public Service Commission, was signed by Laclede, the Missouri Office of Public Counsel, the PSC staff and several other parties. [CCM note: The agreement includes Consumers Council of Missouri.]

It still must be approved by the five-member commission.

The agreement as submitted would bar Laclede from seeking a gas-delivery rate increase before Oct. 1, 2015, unless there’s an “unusual event” such as a terrorist act or severe downturn in financial markets that produces a net loss greater than

$5 million.

The utility also would not be allowed to recover any transaction-related costs from utility customers or any costs related to the acquisition premium.

But that doesn’t mean gas bills won’t rise during the next two years.

The agreement would permit Laclede to pass through changes in fuel costs, which make up about two-thirds of residential gas bills. The utility would also be allowed to seek increases in an infrastructure surcharge to raise money for the replacement of older cast iron and bare steel gas mains.

The agreement also allows Laclede to seek a rate increase for its MGE Division service area in western Missouri if it does so before Sept. 18. Otherwise, the utility cannot ask for higher rates until Oct. 1, 2015.

St. Louis-based Laclede in December agreed to a $1.04 billion purchase of two natural gas utilities. The centerpiece of the deal is Missouri Gas Energy, which serves about 500,000 customers in the Kansas City area.

The transaction would produce the fourth-largest gas distribution utility in the nation and almost double Laclede’s customer base in its home state.

Earlier this year, Laclede agreed to forgo a proposed $48.4 million rate increase to provide PSC staff additional time to focus on its analysis of the Missouri Gas Energy acquisition.

In a statement Wednesday afternoon, Laclede Gas President Steve Lindsey said the company is “pleased to have reached an agreement in principle with most of the parties to the Missouri Gas Energy acquisition case. This is a transformative transaction for Laclede, our shareholders and our customers.”

Laclede expects to close the transaction by the end of its fiscal year on Sept. 30.

Commentary in The Beacon, July 22, 2013

Many challenges face the future of the Universal Service Fund Lifeline telephone program, which extends affordable, discounted telecommunication service to elderly people, people with low incomes or disabilities, and those receiving government assistance. It has been successful in connecting and keeping millions of customers on the telecommunications network and thereby linked to 21st century life.

Unfortunately, Lifeline, as with many worthy programs that assist our society’s most vulnerable members, has been a victim of waste, abuse and fraud. As a result, the program must also contend with perceptions of it formed by half-truths, rumors and confusion, as evidenced in the recent commentary by M.W. Guzy.

Part of Lifeline’s problem has been lax policing, poor reporting and less than diligent accountability. Services to disadvantaged people often seem to be the target of opportunists and scam artists.

The program was begun in 1985 under the Reagan administration landline service. But as technology advanced, in 2005 the Bush II administration expanded it to include cell phone service. In January 2012, the Federal Communications Commission adopted comprehensive reform and modernization of the program.

Calls to end Lifeline are better directed to monitoring the FCC’s efforts and looking for new ways to address universal service and access to new technologies in the future.

The telecommunications companies that participate in the Lifeline program process the applications, verify eligibility by reviewing qualifying affidavits and documents and connect service. It’s a federal crime to misrepresent facts concerning eligibility.

To obtain the “eligible telecommunications carrier” designation, the wireless carriers who join the program offer a cell phone and a fixed number of minutes of use – 250 minutes a month — at a price discounted from normal retail price. The Universal Service Fund pays the cell carriers for the revenue they lose due to the discounted basic package, just as it does for landline carriers. Over the years, the payment has been about $10 a month per household.

Of course, the wireless companies do not want to miss an opportunity to “sell up.” Many of them offer additional minutes, upgraded plans and extra equipment to the Lifeline enrollees. But the extras do not qualify for USF reimbursement. Under the rules of the program, only one Lifeline landline or cell phone line is permitted per household. The customer may have one or the other, but not both.

Another confusing aspect of the program is the USF surcharge on telephone bills, which many customers read to be a federal tax. It is confusing because the telecom companies make it look like a tax and do little to clarify it. It actually is the USF’s assessment on the companies. But the companies pass it through as a direct surcharge on customers, which goes back to the companies. It appears on the bill with the service rate, taxes and other surcharges, thereby requiring customers to subsidize the full cost of providing the Lifeline program. The Federal Communications Commission and the USF Board allow the companies to present the pass-through as they do as a “business decision.”

Lifeline’s problem is also one of identity and public relations. Lifeline carriers are required to make diligent efforts to publicize the availability of their Lifeline plans. Mass media advertising, cold call telephone solicitations and internet ads for Lifeline intermix similar or similarly named services. That makes it difficult for customers to sort out which is a Lifeline provider and what are the authorized reimbursable benefits.

Companies have been known to give away a phone and call it “lifeline” or a government-issued cell phone. But that does not make it part of the USF Lifeline program. With the cost of a cell phone and service declining, a company can afford to charge $10 or give away a phone with the expectation that the customer will “buy up” by adding lines, texting and more minutes. Nothing prohibits a company from selling more minutes, texting or other upgrades in connection with its USF Lifeline solicitation or program since USF doesn’t pay for those items outside of the Lifeline benefits.

Companies that are not USF Lifeline providers or are just sharp operators have also been known to use a free phone giveaway to make it sound like the federal government is handing out taxpayer-paid cell phones to everyone who wants one. The internet is littered with websites with pitches that use the terms “lifeline,” “government program” and even set out the federal eligibility requirements. Of course, those companies include solicitations for more minutes and more expensive plans.

The Lifeline program is also haunted by internet rumors that it provides an “Obama Phone,” a free cell phone and free minutes given out to garner votes. The rumor is easily debunked as a myth. Street-corner and parking-lot phone giveaways that Mr. Guzy saw, and the internet rumors, would not be lawful under the USF Lifeline program. They have no eligibility screening and would not otherwise be anywhere close to compliance. They should be reported to the FCC because fraudulent enrollment is a federal crime.

A USF Lifeline lookalike is probably being offered by a company that resells someone else’s service, like AT&T’s or Verizon’s, and gives away a cheap phone with a small number of minutes. Credit cards or prepaid phone cards can be used to reload the phone with minutes for higher-than-normal rates, and the phone may be upgraded at an additional prepaid price.

Lifeline serves poor people — primarily rural, elderly and families with children — and promotes national interests by enabling them to more fully engage in productive lives.  -The program fulfills the congressional mandate of the Communications Act of 1934 to ensure the availability of communications to all Americans at just, reasonable and affordable prices. Since then, Lifeline has helped tens of millions of low-income Americans afford basic phone service that has enabled them to find jobs, stay in touch with their families and access emergency services.

Many assistance programs are plagued by people who game the system and ruin it for those who deserve benefits. Lifeline should not fall prey to the spoilers. It should meet accountability tests and continue to work to include all Americans in our hyper-connected society.

The authors:  Joan Bray is interim director of Consumers Council of Missouri. Mike Dandino is the retired chief legal adviser for the Missouri Office of Public Counsel and a former board member of  Consumers Council of Missouri.

Associate Press, August 1, 2013

JEFFERSON CITY, Mo. • State regulators have determined that Ameren Missouri owes its electric customers slightly more than $26 million for failing to include some revenue in its calculations.

The Missouri Public Service Commission on Wednesday approved an order for the St. Louis-based company to refund the money to customers.

But Ameren Missouri won’t be sending out checks. Instead, the $26.3 million will be applied by adjusting a fuel charge that customers otherwise would pay.

The PSC found that Ameren Missouri improperly excluded revenues from certain power sales agreements when calculating rates charged under its fuel adjustment clause.

Ameren Missouri called the decision disappointing but not surprising given a recent appeals court ruling on the matter. The company says it still believes its position is correct.

Ameren has 1.2 million electric customers in Missouri.

Today, Wednesday, July 10, Governor Jay Nixon vetoed the bill that would have cost consumers hundreds of millions of dollars more in our gas utility bills over the next five years.

Please THANK HIM NOW!

Click here to email the Governor to thank him.

Or call him at 573-751-3222.

By vetoing SB 240 Governor Nixon prevented gas utilities from adding more costly surcharges to consumers’ bills.  He also maintained the current balance in the rate process that gives consumers a fighting chance against the gas companies, which enjoy monopoly status and very healthy profits.

To read the Governor’s veto message, click here.

St. Louis Post-Dispatch, June 1, 2013

Gas-distribution rates would remain unchanged for Laclede Gas Co. customers under a settlement between the utility and consumer advocates that was submitted to the Public Service Commission on May 31.

The St. Louis-based gas utility had sought a $48.4 million rate increase in December that would have raised the typical residential customer bill an average of $4.93 a month.

But Laclede said it can live without an increase for now.

Instead, it is hoping PSC staff will focus attention on the company’s pending $975 million acquisition of Missouri Gas Energy, which requires regulatory approval.

“We believe we can continue to provide safe and reliable service for our customers without general rate increases at this time,” Laclede Gas president Steve Lindsey said in a statement.

The settlement was submitted to the PSC on Friday.

The commission has scheduled public hearings on Laclede’s rate request beginning Monday in St. Louis.

While customers’ overall bills would be unaffected if the settlement is approved, Laclede would be allowed add $14.8 million already being collected through an infrastructure surcharge to its gas-delivery rates.

Laclede also said it will continue to seek small adjustments to rates throughout the year to reflect changes in natural gas costs and to pay for additional pipeline safety upgrades.

The utility sells natural gas to 630,000 customers in the city of St. Louis and surrounding Missouri counties.

CCM Board Member Renee Marver presented the following testimony before the Public Utilities Committee of the St. Louis Board of Aldermen on Wednesday, July 2:

Good evening.  My name is Renee Marver.  I am a resident of the City of St. Louis and member of the Consumers Council of Missouri Board of Directors.

Consumers Council of Missouri is a statewide membership organization that focuses much of its advocacy on protecting utility consumers — consumers who deserve safe and adequate utility service at affordable and fair rates.  We represent the interests of individual consumers collectively, both in advocacy for public policy and in regulatory and legal actions.

We are pleased that the City of St. Louis is exploring ideas for achieving operational and economic efficiencies within its Water Division.  We are also pleased that the city is maximizing its options by seeking proposals from a variety of consulting sources.

However, other jurisdictions’ experiences with consulting services have provided some cautionary tales that have led us to pay close attention to the proposals you are reviewing tonight.  As you consider what is in the best interest of St. Louis water customers, we ask that you keep in mind the following principles of good government and public service:

1.     Paramount among the Consumers Council’s concerns is that the city not go down a path that would make the Water Division less responsive to the public.  St. Louis currently enjoys water quality that is of high quality.
To ensure that this level of quality is maintained, we hope that the city and its elected representatives will continue to be ultimately responsible for water quality, including treatment and testing.
Equally important is that the city continue to be ultimately responsible for setting the water rates that are paid by city residents.
The city should be wary of any contract that defers sits operational or rate-setting responsibilities to an unregulated and unelected entity.

2.      Seeking competitive bids is a good government practice for consultants, contractors and sub-contractors.  We urge the city to insist on this practice and to reject consulting proposals that do not employ this practice.

3.       One of the positive aspects of a municipal water system is that the utility rate structure does not contain private profits.  The city should ensure that its residents receive the economic benefit of future operational cost savings and that such savings not disappear into the coffers of a private entity.

In addition, please be wary of incentives or “shared savings” arrangements that unfairly divert too much of such savings away from the St. Louisans whom you serve.

Thank you for the opportunity to make these comments.  Consumers Council of Missouri will follow this issue with great interest.  We stand ready to assist in any way our expertise as consumer advocates may allow.

Excerpted from St. Louis Post-Dispatch Editorial, May 30, 2013

The Utility Handouts

Early in the session, before lawmakers were fully educated on the dangers of single-issue rate-making in the case of monopoly gas and electric utilities, the Missouri Senate passed SB 240, which would do two bad things for consumers. First, it would expand the existing ability of gas utility companies to charge consumers an extra surcharge to pay for underground pipes and other infrastructure. Consumers would extend free credit to the utility company.

Currently gas companies can impose a three-year surcharge of up to 10 percent of their base rates. Lawmakers upped that to five years and 13 percent, even though the monopoly gas companies (such as Ameren Missouri and Laclede Gas) haven’t made the case that the existing surcharge isn’t doing the job. Second (and worse), the bill also forces consumers to pay up to 90 percent of the bad debt written off by the gas utilities, taking away the existing incentive for the monopolies to collect their debts.

With this bill, consumers lose big. By the end of the session, a bipartisan group of senators had realized that. So there’s little danger that the governor’s veto would be overridden. He should kill the bill.

Although a tentative agreement on Laclede Gas Co.’s rate case has been reached witht he company, the Public Service Commission staff and the Office of Public Counsel, hearings are still scheduled to be held in the St. Louis Region.

Click here for the calendar of hearings.