Missouri, Kansas utilities back bills to reestablish monopoly on transmission projects
Ameren opposed the legislation in Kansas in 2016 when it stood to lose financially. Now that it stands to earn cash, it’s in favor.
Monopoly utilities in Kansas and Missouri want the right of first refusal to build transmission lines in their states. For 10 years, there has been a federal policy meant to create competition and lower prices.. (Robert Zullo/States Newsroom)
Missouri’s largest electric utility believes a bill aimed at reducing competition and giving monopoly providers an advantage in building transmission lines will avoid cost overruns and deliver better results for customers.
In its home state, where it stands to benefit, Ameren Missouri has offered its full-throated support to legislation aimed at giving the company the right of first refusal to build transmission lines, and argued opponents’ worries about limiting competition are “disingenuous at best.”
“Do you want local companies with roots in our state and communities, with a vested interest in our future, who build infrastructure for the long term interest in Missourians, who live here building these major transmission projects?” Warren Wood, Ameren Missouri’s legislative and regulatory vice president, asked in a Missouri House committee hearing earlier this month.
But in 2016, when Kansas considered similar legislation — which would have cut Ameren out of bidding in favor of that state’s utilities — the Missouri provider was opposed. It took a position diametrically opposed to its current one and strikingly similar to the arguments it called disingenuous.
At that time, Shawn Schukar, Ameren’s senior vice president of transmission business development, said competition had reduced costs in other parts of the country.
“Concerns about the ability of non-incumbent transmission developers to provide safe and reliable service to electricity consumers in Kansas are unfounded,” Schukar said. “Ameren’s operating subsidiaries have been providing safe and reliable transmission service across multiple states for years.”
Both Kansas and Missouri are considering what’s commonly called “right of first refusal,” or ROFR legislation. Supporters say a federal order opening transmission lines to competitive bidding hasn’t worked. Even a former federal official who voted for the proposal said it had failed.
Both Ameren and Evergy, which serves customers in Kansas and western Missouri, support the idea.
But opponents — an unlikely alliance of consumer and clean energy groups, right-leaning free-market organizations and transmission line developers — say eliminating competition would drive up costs of transmission projects. Those costs are then borne by customers in rate increases.
Lawrence Willick testified in opposition to the legislation on behalf of LS Power, which builds transmission lines across the country.
“Of course monopoly utilities aren’t happy with having to compete,” he told a Missouri House committee, “and you’re going to hear a lot of disparaging things about companies like ours, and I ask you to see them for what they are. They’re exaggerations and falsehoods, and really scare tactics.”
Ameren says the company’s thoughts on the right of first refusal legislation have changed since it opposed the idea in Kansas in 2016.
In a Missouri House committee hearing this year, Schukar said the policy issued by the Federal Energy Regulatory Commission that opened the transmission market to competition about 10 years ago had failed.
“This bill ensures that … we will be able to continue to make those investments and do it in a way that delivers that same safe, affordable and reliable power that we have for over 100 years,” Schukar said.
FERC is considering rescinding the policy, though it faces opposition by the U.S. Department Justice.
Asked during the hearing whether Ameren had taken a position on right of first refusal legislation in other states, Schukar told Missouri lawmakers the company had not. He later wrote to the committee apologizing for the error, acknowledging his previous testimony in Kansas and saying his thinking had evolved.
Missouri Rep. Ben Keathley, R-Chesterfield, who asked Schukar whether Ameren had testified on the bill before, said the company’s past position was consistent with concerns he has about the bill now.
“The fact that they testified against it certainly adds credibility to the fact that it’s going to be bad for the competitive market,” Keathley said in an interview.
He said there needs to be a compelling reason before the government interferes in a competitive market.
“I don’t believe that’s been demonstrated here,” he said.
Missouri Rep. Ed Lewis, R-Moberly, said in an interview that ensuring in-state utilities build transmission lines means the companies will be more respectful and responsive to the landowners whose properties the lines transect.
The bill also requires that utilities building new transmission lines co-locate the new lines with existing lines — when feasible — to avoid having to acquire new easements on landowners’ properties.
The counties Lewis represents will play host to Grain Belt Express, a high-voltage transmission line running across several states that Missouri legislators repeatedly tried to stymie. The project has become a lightning rod and spurred conversations about property rights and energy projects.
Lewis wasn’t worried that Ameren supported the legislation in a state where it stood to gain and previously opposed it where it didn’t. He said there’s no doubt Ameren will benefit from the legislation.
“What bothers me is if an out-of-state company takes private property rights away from the citizens both in my district but also in the state at-large,” Lewis said.
Evergy did not comment on Ameren’s turnaround. Its predecessor, Westar Energy, supported the Kansas legislation in 2016.
Evergy formed from the merger of Westar and Kansas City Power & Light.
Costs and delays
Both supporters and opponents of “right of first refusal” legislation claim their method delivers lower costs.
Ameren cited a report conducted by Concentric Energy Advisors saying projects performed under the competitive bid process experienced delays and cost overruns.
“It is not evident that lower costs and greater innovation have been realized on a broad scale,” the report says.
The report was paid for by Ameren and other energy companies in response to a report supporting competition in transmission construction paid for by LS Power, Ameren said in an email.
Evergy cited the same report in its testimony in support of the legislation, though it is not listed among the companies who requested the report be prepared.
As evidence of the issues current law creates for energy infrastructure, Evergy points to a line meant to connect the Wolf Creek substation in Kansas that it has proposed for five years is caught up in the competitive bid process. A bidder from Texas, the company says, proposed designs that wouldn’t work in Kansas. And replacement parts would have to come from eight hours away.
Evergy’s vice president of regulatory affairs, Darrin Ives, said in written testimony that the order to open transmission lines to competitive bidding issued by the Federal Energy Regulatory Commission was intended to “assure the lowest initial cost.”
“As we have now seen in our region, and nationally, it has been a race to the bottom based on misguided incentives and superficial and ineffective price caps,” Ives said.
He said bids on transmission projects are often “minimalist ‘low ball’ designs” meant to win the project by promising the lowest price. But often, the price caps on the projects fail to keep costs down.
Evergy’s Jason Klindt said the same in testimony on the Missouri bill.
“They are incentivized to bid low on the project in order to get the project,” Klindt said. “We’re incentivized to build something that makes sense for Missouri. In the simplest terms, it’s the difference between building a spec house and a house that you’re actually going to live in.”
Josiah Neely testified in opposition to the legislation on behalf of the R Street Institute, a nonpartisan, free-market think tank.
Neely, a senior fellow at the organization, cited research saying competitive bidding can create cost savings of up to 30%.
He said the bill would create a monopoly for the incumbent utility in each state.
“That’s bad as a matter of principle,” Neely said, “but it’s also costly to consumers because without competition, that check on the spending for these projects goes away.”
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