Finance and Economic

Missouri regulators last month denied a Laclede Gas Co. proposal to recover much of its bad debt expense by raising fuel charges on customers.

But the St. Louis-based utility continues to press its case in Jefferson City; this time with the Legislature.

Laclede and other investor-owned gas utilities in Missouri are pushing a measure that would change the way they recover millions of dollars in unpaid bills.

Utilities already recover bad debt expense through base rates, but only after hearings and an extensive audit of its books — a process that can take 11 months.

The pending legislation, Senate Bill 299, would allow the utility to pass through about three-quarters of its bad debt expense by tacking the amount to the purchased gas adjustment — a special line item on bills that reflects fuel and related gas-transportation and storage costs.

Those expenses make up 75 percent of gas bills, so the same percentage of unpaid bills is related to the cost of natural gas, supporters say.

"It is a gas cost," said Mike Pendergast, Laclede’s associate general counsel. "We firmly believe that it ought to be recovered in the same manner that our other gas costs are recovered."

The proposed change would lead to more accurately tracking unpaid bills, he said.

Currently, regulators must estimate how much bad debt utilities will incur — a task that has become trickier with wild swings in energy prices witnessed over the past several years. If they guess too low, utilities absorb the loss. If they guess too high, shareholders get the benefit.

Efforts to change the law in Missouri reflect a nationwide increase in utility bad debt and customer shutoffs as higher gas prices and a sour economy left more customers unable to pay their bills cashadvance.

Utilities in at least 20 states are allowed to recover all or part of their bad debt expenses through fuel charges, according to Laclede.

The Missouri PSC rejected Laclede’s proposal in an April 15 ruling. The commission ruled that only expenses outside of the utility’s control, such as the price of gas, should be included in the fuel charge. Meanwhile, Laclede does have some control its bad debt levels through more aggressive collection efforts, the order said.

The PSC decision was a victory for consumer advocates who said bad debt expenses should be treated like any other cost, such as employee wages or the cost of office furniture.

Lewis Mills Jr., the state’s public counsel, similarly sees the legislation as bad policy that strips away consumer protections and reduces incentives for utilities to pursue unpaid bills.

"They’re trying to disguise this as a gas cost, and it’s not a gas cost," said John Coffman, a lawyer for the AARP and Consumers Council of Missouri.

Pendergast disagrees. He said the legislation would require regular audits and any over recovery of bad debt expenses would be refunded to customers in future months.

Meanwhile, the utility would still pursue collections of unpaid bills as vigorously as it already does because it would be on the hook for a fourth of the amount owed.

"Twenty-five cents on the dollar — that’s a pretty stout incentive," Pendergast said.

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