Court Decision Will Lead to 10% Increase in Electric Bills for Most Missourians – Legislative Fix Necessary

Bad news today from the Western District Court of Appeals where a three judge panel ruled that a one-percent cap on rate hikes for renewable energy isn’t really a cap at all.

In 2008, Missouri voters passed Proposition C, the Renewable Energy Standard which created new mandates for investor-owned utilities to meet certain renewable energy targets, but which purportedly capped any increased rates that would result from the mandates to “a maximum average retail rate increase of one percent.” §393.1030.2(1). The proposition was pitched to voters with the promise that rates would never increase rates more than one percent. This limitation was included in the actual ballot language –restricting to no more than 1% any rate increase to consumers for this renewable energy?

Unfortunately, the Public Service Commission created rules implementing the initiative which ignored the one percent cap and instead allowed for up to an approximately 11 percent increase by interpreting the one percent cap to mean a one percent increase every year over a 10 year period. Cole County Circuit Judge Dan Green ruled in the spring of 2011 that the one percent cap really meant one percent, not eleven percent. The PSC appealed. 

Yesterday, the Western District ruled that the PSC’s interpretation of the statute was reasonable. In issuing its decision, the Court sidestepped the cap language, holding that the cap language included in §393.1030.2(1) “is a forward-looking planning analysis not designed to determine the actual rate impact on customers.” See Decision at 11. In a footnote, the Court better explains that the cap language is ambiguous, and, though it requires averaging, it does not specify “the time period over which the averaging occurs.” Id. at Footnote 3. The Court then rules that, given the ambiguity, the PSC’s interpretation of the statute is reasonable.

I disagree with that assessment. If one reads the statutory language in a vacuum, the decision would be reasonable. However, because this statute was passed through an initiative petition, I believe the actual language that appeared on ballots is highly relevant. That ballot language, as set forth above, clearly stated that there would be a cap of one percent, not a sliding cap which would eventually increase to approximately 11 percent. If the language had said rates could be raised 11 percent over 10 years, the initiative likely would have failed miserably. 

This case will likely be appealed to the Missouri Supreme Court. However, I believe a legislative fix is in order. Missourians did not vote for renewable energy that would cost them 11 percent in increased electric rates. They voted for renewable energy that would cost just one percent. I plan on sponsoring to take the caps back to the hard cap explained in the ballot language and supported by voters.

That said, Republicans who do not believe Missouri should set up its own health care exchange should read this opinion which illustrates the tremendous power of whichever administrative agency is charged with carrying out the provisions of statutes, rules, and regulations. The decisions explains that the decisions of administrative agencies are “presumed to be valid,” are “to be sustained unless…plainly inconsistent with the statute,” and that agencies have “broad discretion” in interpreting statutes, which applies to rules and regulations in well. In other words, the regulator nearly always wins.