Challenges Under Missouri's Regulatory Environment
Most businesses set their prices, or rates, based on how much it is going to cost them to run their business in the future. Under Missouri's current laws, we aren't allowed to do that. Our future rates are set based on what we've already spent on investments and operations. In an economy where costs continue to rise, by the time the Missouri Public Service Commission approves our rates, they're already out-of-date.
Regulations say we must first spend money on a project and put it into service for customers before we can recover our costs in rates, which is a process that can take years. This delay in recovery, or lag, leads to less cash flow for us to invest in future improvement projects and creates a greater need for us to borrow more money to finance projects. Increased borrowing leads to higher costs for the company, and ultimately our customers. This regulatory lag also reduces the amount of money we have to invest in future projects that benefit the reliability of our service and the entire state. More frequent rate cases help us recover our costs faster, therefore lowering overall operating costs.