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SECOND REGULAR SESSION
HOUSE BILL NO. 3455
103RD GENERAL ASSEMBL Y
INTRODUCED BY REPRESENT A TIVE BOYKO.
7379H.01I JOSEPH ENGLER, Chief Clerk
AN ACT
T o repeal sections 393.135 and 393.150, RSMo, and to enact in lieu thereof two new sections
relating to the regulation of public utilities.
Be it enacted by the General Assembly of the state of Missouri, as follows:
Section A. Sections 393.135 and 393.150, RSMo, are repealed and two new sections
2 enacted in lieu thereof, to be known as sections 393.135 and 393.150, to read as follows:
393.135. 1. Except as provided in subsection 2 of this section, any char ge made or
2 demanded by an electrical corporation for service, or in connection therewith, which is based
3 on the costs of construction in progress upon any existing or new facility of the electrical
4 corporation, or any other cost associated with owning, operating, maintaining, or financing
5 any property before it is fully operational and used for service, is unjust and unreasonable,
6 and is prohibited.
7 2. [ (1) An electrical corporation may be permitted, subject to the limitations in this
8 subsection, to include construction work in progress for any new natural gas-generating unit
9 in rate base. The inclusion of construction work in progress allowed under this subsection
10 shall be in lieu of any otherwise applicable allowance for funds used during construction that
11 would have accrued from and after the ef fective date of new base rates that reflect inclusion
12 of the construction work in progress in rate base. The commission shall determine, in a
13 proceeding under section 393.170, the amount of construction work in progress that may be
14 included in rate base. The amount shall be limited by:
15 (a) The estimated cost of such project; and
16 (b) Project expenditures made within the estimated construction period for such
17 project.] Base rate recoveries arising from inclusion of construction work in progress in rate
EXPLANA TION — Matter enclosed in bold-faced brackets [thus] in the above bill is not enacted and is
intended to be omitted from the law . Matter in bold-face type in the above bill is proposed language.
18 base are subject to refund, with interest on the refunded amount at the same rate as the rate of
19 interest for delinquent taxes determined by the director of revenue in accordance with section
20 32.065, if, and to the extent the commission determines, in a subsequent complaint or general
21 rate proceeding, that construction costs giving rise to the construction work in progress
22 included in rate base were imprudently incurred or [ if the project for which construction costs
23 have been included in the rate base is not placed in service within a reasonable amount of
24 time, as determined by the commission ] otherwise unrea sonable . Rate base used to
25 determine return deferred under subdivision (2) of subsection 3 of section 393.1400 shall
26 include an of fset for rate base that has been used to determine return included in base rates as
27 a result of construction work in progress inclusion in rate base under this subsection. The
28 of fset shall apply from and after the in-service date of the asset that has been used to
29 determine return included in base rates as a result of construction work in progress inclusion
30 in rate base under this subsection.
31 [ (2) This subsection shall expire on December 31, 2035, unless the commission
32 determines, after a hearing conducted in 2035, upon a submission from an electrical
33 corporation of an application requesting and demonstrating that good cause exists to extend
34 the ef fectiveness of this subsection through December 31, 2045. The secretary of the
35 commission shall notify the revisor of statutes when the conditions set forth for the extension
36 of this subsection have been met.]
393.150. 1. Whenever there shall be filed with the commission by any gas
2 corporation, electrical corporation, water corporation or sewer corporation any schedule
3 stating a new rate or char ge, or any new form of contract or agreement, or any new rule,
4 regulation or practice relating to any rate, char ge or service or to any general privilege or
5 facility , the commission shall have, and it is hereby given, authority , either upon complaint or
6 upon its own initiative without complaint, at once, and if it so orders without answer or other
7 formal pleading by the interested gas corporation, electrical corporation, water corporation or
8 sewer corporation, but upon reasonable notice, to enter upon a hearing concerning the
9 propriety of such rate, char ge, form of contract or agreement, rule, regulation or practice, and
10 pending such hearing and the decision thereon, the commission upon filing with such
11 schedule, and delivering to the gas corporation, electrical corporation, water corporation or
12 sewer corporation af fected thereby , a statement in writing of its reasons for such suspension,
13 may suspend the operation of such schedule and defer the use of such rate, char ge, form of
14 contract or agreement, rule, regulation or practice, but not for a longer period than one
15 hundred and twenty days beyond the time when such rate, char ge, form of contract or
16 agreement, rule, regulation or practice would otherwise go into effect; and after full hearing,
17 whether completed before or after the rate, char ge, form of contract or agreement, rule,
18 regulation or practice goes into ef fect, the commission may make such order in reference to
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19 such rate, char ge, form of contract or agreement, rule, regulation or practice as would be
20 proper in a proceeding initiated after the rate, char ge, form of contract or agreement, rule,
21 regulation or practice had become ef fective. In any proceeding under this section wherein
22 testimony is prefiled, each party shall be af forded an opportunity to respond to any rebuttal
23 testimony and exhibits of other parties through prefiled testimony .
24 2. If any such hearing cannot be concluded within the period of suspension, as above
25 stated, the commission may , in its discretion, extend the time of suspension for a further
26 period not exceeding six months, the last day of which period shall be considered the
27 operation of law date. At any hearing involving a rate sought to be increased, the burden of
28 proof to show that the increased rate or proposed increased rate is just and reasonable shall be
29 upon the gas corporation, electrical corporation, water corporation or sewer corporation, and
30 the commission shall give to the hearing and decision of such questions preference over all
31 other questions pending before it and decide the same as speedily as possible.
32 3. [ (1) Beginning July 1, 2026, the test year for proceedings under this section shall,
33 if requested by a gas corporation, water corporation, or sewer corporation, be a future year
34 consisting of the first twelve full calendar months after the operation of law date determined
35 in subsections 1 and 2 of this section for schedules stating new base rates filed by a gas
36 corporation, water corporation, or sewer corporation under this section, unless the
37 commission makes a determination that using a future test year under this section is
38 detrimental to the public interest. For ratemaking purposes, the average of the projected
39 month-end total rate base amount during the future test year shall be used to establish new
40 base rates. Unless otherwise ordered by the commission, new base rates shall not go into
41 ef fect before the first day of the future test year .
42 (2) W ith respect to gas corporations, water corporations, or sewer corporations that
43 elect to utilize a future test year and notwithstanding section 393.270 to the contrary , within
44 forty-five days of the end of the future test year , such gas corporation, water corporation, or
45 sewer corporation shall update its base rates that were approved by the commission in its
46 report and order issued under subsections 1 and 2 of this section to reflect the total rate base,
47 annualized depreciation expense, income tax expense, payroll expense, employee benefits
48 (other than pensions and other post-retirement benefits), and rate case expense at the end of
49 the future test year . The total ending rate base and expense items reflected in this update shall
50 not be greater than the total ending rate base and expense items approved by the commission
51 in its report and order establishing base rates. The commission and parties to the case shall
52 have sixty days to review the updated information provided by a gas corporation, water
53 corporation, or sewer corporation, unless any party who was a party to the rate case files a
54 request for a hearing at which point the commission shall suspend the filed tariff s and order a
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55 procedural schedule. The commission shall order the corporation to file new tariff sheets that
56 reflect any update approved by the commission.
57 4. A gas corporation, water corporation, or sewer corporation that requests a test year
58 under subsection 3 of this section shall not recover the costs of any plant investments made
59 during the test year period under any of the mechanisms provided for in section 393.1000,
60 393.1003, 393.1006, 393.1009, 393.1012, 393.1015, 393.1500, 393.1503, 393.1506, or
61 393.1509.
62 5. For a gas corporation, water corporation, or sewer corporation that elected to use a
63 future test year , a reconciliation of the rate base at the end of the future test year shall be
64 provided to the commission within forty-five days of the end of the future test year . If the
65 actual average month-end total rate base amount during the future test year is less than the
66 average month-end total rate base amount used to set base rates in the prior general rate
67 proceeding under subsections 1 and 2 of this section, and notwithstanding section 393.270 to
68 the contrary , the portion of the annual revenue requirement comprising the average total rate
69 base dif ference shall be returned to customers. The revenue requirement shall be calculated
70 using rate base, depreciation expense, income tax expense, and the pretax rate of return from
71 the prior general rate proceeding under subsections 1 and 2 of this section. The dif ference in
72 revenue requirement shall be placed into a regulatory liability to be returned to customers in
73 the next general rate proceeding with such regulatory liability to accrue carrying costs at the
74 utility's weighted average cost of capital.
75 6. ] The commission may take into account any change in business risk to the
76 corporation resulting from implementation of [ the ] any adjustment mechanism in setting the
77 corporation's allowed return in any rate proceeding, in addition to any other changes in
78 business risk experienced by the corporation.
79 [ 7. For a gas corporation, water corporation, or sewer corporation that elected to use a
80 future test year , a reconciliation of depreciation expense, income tax expense, payroll
81 expense, employee benefits except for pensions and other postretirement benefits, and rate
82 case expense incurred during the future test year shall be provided to the commission within
83 forty-five days of the end of the future test year . If the actual amounts for these expenses are
84 less than the amounts used to calculate the revenue requirement in the prior general rate
85 proceeding under subsections 1 and 2 of this section, and notwithstanding section 393.270 to
86 the contrary , the dif ferences shall be returned to customers. The dif ference in revenue
87 requirement shall be placed into a regulatory liability to be returned to customers in the next
88 general rate case with such regulatory liability to accrue carrying costs at the utility's
89 weighted average cost of capital. Expense dif ferences to be returned to customers resulting
90 from this reconciliation shall not be used to of fset additional capital spending in the
91 reconciliation described in subsection 5 of this section.
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92 8. The commission shall promulgate rules to implement the provisions of this section
93 no later than July 1, 2027. Such rules shall include a procedure allowing any party to a rate
94 proceeding that utilizes a future test year as provided in subsection 3 of this section to
95 undertake a meaningful review of the update provided by the gas corporation, water
96 corporation, or sewer corporation under subsection 3 of this section and the reconciliations
97 provided by the gas corporation, water corporation, or sewer corporation under subsections 5
98 and 7 of this section, and to ar gue for the disallowance of any costs included in the total rate
99 base, depreciation expense, income tax expense, payroll expense, employee benefits (other
100 than pensions and other postretirement benefits), and rate case expense at the end of the future
101 test year that dif fers from the projected values upon which the commission relied in issuing its
102 report and order to approve new base rates under subsections 1 and 2 of this section. Any rule
103 or portion of a rule, as that term is defined in section 536.010, that is created under the
104 authority delegated in this section shall become ef fective only if it complies with and is
105 subject to all of the provisions of chapter 536 and, if applicable, section 536.028. This section
106 and chapter 536 are nonseverable and if any of the powers vested with the general assembly
107 pursuant to chapter 536 to review , to delay the ef fective date, or to disapprove and annul a
108 rule are subsequently held unconstitutional, then the grant of rulemaking authority and any
109 rule proposed or adopted after August 28, 2025, shall be invalid and void.
110 9. For purposes of this section, the following terms shall mean:
111 (1) "Base rates", rates or char ges for public utility service other than rates or char ges
112 under any rate adjustment mechanism including, but not limited to, those approved under the
113 provisions of sections 386.266, 393.1000, 393.1009, 393.1030, 393.1075, and 393.1500;
114 (2) "Revenue requirement", the amount of retail revenues from base rates char ged to
115 retail customers for public utility service needed for a public utility to recover its cost to
116 provide utility service including reasonable and necessary expenses, prudent investments, and
117 the cost of capital.]
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