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11.6.20 - Missouri’s Gas IOU Spire Files For a $11M Program “Modeled after” PAYS®

Spire Update: Breaking news out of MO from our fellow PAYS Pals, Geoff Marke and James Owen: 

  • On October 30th, Spire Missouri, the largest natural gas utility in Missouri filed an application for a program that appears to be PAYS in all but name.  See attached the testimony and tariff sheets for reference! Geoff notes that Spire asked for an expedited ruling but expects that contention on certain details will delay the decision for a couple of weeks, but that an agreement is likely by the end of the year. 

  • Spire refers to it as an “on-bill financing” program “modeled after” PAYS. However, Spire’s tariff uses the Energy Efficiency Institutes’s model PAYS Tariff language to clarify that their proposed “on-bill financing” program is actually tariff-based. 

  • As we noted in our earlier PAYS Pals piece on lexicon, the term “on-bill financing” almost always refers to a loan and so this usage is particularly confusing since it’s referring to a tariffed-based investment and cost recovery system such as PAYS which is NOT a loan.

  • Spire’s plan requests an annual PAYS investment of $11 Million and estimates that they will upgrade 1,300 homes/year if they utilize the entire budget. This implies an average upgrade cost of ~$8,500 rather than the usual $7,500. It may instead be a slight error reflecting their first year budget which has $1M set aside for start-up, leaving $10 million for investment ($10M/$7,500 per upgrade = 1,333) and that in subsequent years it will actually be 1,466 upgrades per year ($11M/$7,500).

  • Spire is proposing to earn its full “approved cost of capital” (11.2%) on its net investment (i.e. subtracting recovered capital from the total). The 11.2% recovery would be split between the participant (4% cost of capital) and, implicitly, non-participants through a “new mechanism” (7.2% rate of return plus additions for taxes). Their exact description and the accompanying table from the appendix are as follows: “The on-bill finance charges will be designed to recover investments plus a 4% interest charge and will not exceed 80% of the value of the energy savings the investments generate. In addition, the payback period for an investment is set to 80% of the life of the investment, with a cap of 12 years. The difference between the participant finance charge and the Company’s approved cost of capital including a tax gross up and other associated charges such as property tax and O&M expenses will be recovered through annual filings of the new mechanism.”

Missouri is Still on Track to Become the First State Where All IOUs Operate PAYS!

  • You’ll recall that PAYS programs were approved as part of Evergy Missouri’s most recent MEEIA proceeding, as well as Ameren Missouri’s recent MEEIA extension filing. These approved programs have annual budgets of $15 million and $5 million, increasing to $10 million dollars respectively.

  • Geoff Marke also expects Empire District Electric (subsidiary of Liberty Utilities), an electric utility in Southwest Missouri to file a MEEIA within the next six months (likely much earlier) with PAYS as the main driver.  

  • If all of the stars align, that would mean PAYS programs beginning in some manner in 2021 for all the electric and gas IOUs in Missouri.

Feel free to share this post and invite others to sign up for PAYS Pals using this link!


Tariff West
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Tariff East
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Selinger
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Dean
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