News

4/27/2009

CEC stance on re-regulation

The following letter was given to Missouri State Senators Kevin Engler and Jason Crowell, as well as State Representatives Joseph Fallert, Steven Tilley and Scott Lipke on April 21, 2009.

As you well know, two of Citizens Electric Corporation's industrial customers - specifically, Mississippi Lime Company and Holcim (US) Inc. - have been pushing legislation which would place Citizens back under full regulation by the Missouri Public Service Commission (MPSC). The purpose of this letter is to provide you with Citizens' official position on this issue and a list of Citizens' concerns related thereto.

Citizens has provided oral testimony in opposition to the pending re-regulation bills in the Missouri House (HB 599) and Senate (SB 545). Citizens' position on these bills in their original form1 is only one of concern for our member-consumers and the ultimate effect these bills will have on them. Citizens would like to share with you the following points in support of its opposition:
1. As stated in the House of Representatives' Report of the Interim Committee on Electric Service Territories and Economic Development dated January 2009, while Citizens' rates have increased, it is not related to Citizens' release from full jurisdiction of the MPSC in 2003.
2. Placing Citizens back under full regulation of the MPSC will only add another layer of oversight above its existing oversight of the Federal government and member-elected Board of Directors.
3. Citizens' past difficult decisions regarding the procurement of its power supply would not be any different if it were re-regulated.
4. Should Missouri's Legislature determine that full re-regulation of Citizens is necessary, the costs to Citizens' member-consumers will be:
a. Approximately $500,000/year2 in annual dues assessment, annual rate case filing expenses, and related consultants' fees and internal labor expenses; and
b. Significant regulatory lag costs3.
5. Since it operates on a not-for-profit basis, Citizens believes full re-regulation will only add costs without providing any financial benefit to its member-consumers.
6. Citizens contacted six of its other large industrial customers4 to request their thoughts regarding the proposed re-regulation. You should know that all six of these customers felt re-regulation of Citizens would not provide any financial benefit to their businesses.
7. At its April 16, 2009, Annual Meeting5, Citizens requested input from those shareholders present on whether Citizens should be fully re-regulated. Of the approximately 100 shareholders present, 32 voluntarily participated in the Re-Regulation Questionnaire. Of the 32 participants, 29 indicated they were in favor of re-regulation, 2 indicated they were neutral on the issue, and one failed to indicate his preference.
8. As such, Citizens believes a majority of its member-consumers are opposed to the added re-regulation costs if there is no added benefit.

Citizens' Board of Directors has a fiduciary responsibility to do what is in the best interests of all its member-consumers - residential, commercial and industrial alike. Similarly, our locally elected legislative officials have a fiduciary responsibility to all of their constituents (our members).

Since this proposed legislation will have an immediate and long-term impact - either positively or negatively - on all of Citizens' member-consumers, we respect that it is your prerogative, as our locally elected officials, to weigh the concerns expressed by these consumers as well as
Citizens and make the final determination as to the fate of re-regulating Citizens.

Should you require any further information on this matter or have any additional questions, please do not hesitate to contact any one of our Board of Directors or a member of our staff. I can be reached by phone at 573.883.5339 ext. 103 (office) or 573.517.2049 (cell) or by e-mail at tcampbell@cecmo.com.

Best regards,
Anthony S. Campbell
Chief Executive Officer

cc: Citizens Electric Board of Directors

1 Should HB 599 and/or SB 545 be amended in any manner, Citizens preserves its right to challenge the amendment(s) if said amendment(s) further negatively impact its member-consumers.
2This figure assumes that Citizens is given authority by the MPSC to implement a Purchased Power Adjustment Clause.
3This assumes the MPSC does not allow Citizens to implement a Purchases Power Adjustment Clause.
4These six additional customers comprise 95 MWs of Citizens' 235 MWs of total load and employ over 3,500 Missouri workers.
5Every shareholder of Citizens was mailed three separate notices of its 2009 Annual Meeting. Of its 21,558 shareholders, fewer than 100 shareholders were present at Citizens' Annual Meeting.

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