Sponsored by Senator Dan Brown (R-MO), the Utility Transparency and Fairness Act aims to force Missouri’s investor-owned utility companies to disclose their earnings to the public.
“State utility commissions set the allowable profit that these utility companies are allowed to earn,” says Consumers Council of Missouri lawyer, John Coffman. “They’re for-profit, investor-owned utilities. In Missouri, and in a lot of states, there is a shroud of secrecy over how much utilities are earning.”
Coffman added that utility company earnings vary. They can earn too much or too little. When they earn less than the return on equity set by their state’s utility commission, utility companies are allowed to hike up prices. Conversely, when they exceed the specified return on equity, their service rates are supposed to decline.
“To lower rates is a much more difficult thing for consumer advocates to do,” said Coffman. “The Public Utilities Commission will have access [to earnings], but sometimes it helps if an outside organization…is able to get public information of what’s going on. If they can tell that the regulated utility is earning too much, then they can take action. The problem is,[consumers] do not always know when utilities are making too much profit, because the earnings reports are filed with the Public Service Commission in secret.”
Coffman added that the problem with utility companies keeping important information, such as trade secrets, confidential is that it oftentimes causes companies to keep all information, including earnings, private. While there are other ways to find out if a company is earning excess profits at the consumer’s expense, they take longer and delay proceedings to lower service rates.
“All the big electric companies have raised their rates about 35 to 45 percent over the last five years,” Coffman said. “That has caused a lot of public outrage and concern. After increases of that magnitude, it is pretty concerning if a utility is now earning millions and millions of dollars in excess of what they’re authorized.”
In addition to requiring companies to disclose their earnings to the public, the Act would also require the Public Utilities Commission to make facts regarding the impact of rates on the public easier to find for consumers.
The bill keeps the best interest of the consumer in mind, but it also addresses the utility companies’ concerns regarding sharing information. Under the Act, trade secrets and other confidential information will remain private when the companies have valid reasons. The legislation only seeks to make utility earnings public.
“If this legislation passes it’s not going to automatically lower rates, but it is going to provide for more open government, for more sunshine on these earnings, and it will help the economy. It will help lower rates in those situations where they are higher than they need to be,” said Coffman. “We cannot see why this should not be a good change to make, especially when you are dealing with regulated monopolies who do not want their earnings to be public record.”