Finding no evidence of illegal activity on the part of localdistribution gas companies, Missouri Attorney General Jay Nixonstill wants the state’s system of natural gas regulation overhauledbecause it does not provide consumers with appropriate protectionsfrom “dramatic price increases.”

Nixon heard testimony in January and February fromrepresentatives of Laclede Gas Co. and Missouri Gas Energy, alongwith the Missouri Public Service Commission, the Missouri Office ofPublic Counsel, consumers and industry analysts. His four-pagereport recommends legislative action to compel gas companies toassume more of the burden of volatile gas prices and ensure thatconsumers pay the lowest reasonable rate.

“The gas companies have not broken the law,” Nixon said. “Thelaw is broken and does not provide adequate protection for theconsumer who is captive to the monopoly interests.”

Under the state’s current system, each local gas company mayfile for an adjustment to its rates if the price of natural gas atthe wholesale level is up, as reported on Nymex, even withoutshowing that the company bought gas at that market price. The PSCcan approve the price increase within 10 days of the filing.However, Nixon said that a PSC review to ascertain the exact pricepaid for the gas takes “at least nine months and if contested, cantake several years.”

He said, “under the current system, it takes only 10 days forrates to go up but it can take as long as three years for rates togo back down. That must change. The consumer needs the benefit ofthe lowest price at all times.”

Included in his recommendations to PSC for short-term changesare mandated prompt rate decreases when wholesale prices go down,and a requirement for public disclosure of the actual wholesaleprice paid and the volume of gas purchased at that price. Now,Missouri law protects public disclosure information. Ratepayersmust accept company claims that higher rates are required to coverthe wholesale cost of gas and are not used to make profit for thecompanies.

“Right now there is no way for the public to ascertain how muchthe company paid for the gas the consumer is currently using,”Nixon said. He also called for a complete analysis on how naturalgas is regulated and a requirement that companies assume moreresponsibility for their gas purchase practices.

Nixon’s report is available at www.ago.state.mo.us/022701b.htm.

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