Power Engineering - Aquila chairman outlines initiatives to bolster economic development and improve energy supply in Missouri

JEFFERSON CITY, Mo., Sept. 16, 2003 -- Aquila Inc. Chairman and CEO Richard C. Green, Jr., on Tuesday urged utility executives, regulators and state legislators at the Missouri Chamber of Commerce's fourth annual Energy and Utility Conference to create an environment of certainty and robust energy supply that will drive economic development and protect Missouri energy consumers from disruptions in long-distance transmission.

"A reasonable-cost, ample supply of energy enriches the environment in our state for companies looking to establish new operations and expand existing Missouri facilities. This development activity brings additional jobs and opportunities to our state," said Green. "In addition to the quality of life benefits from increased economic activity, a strong supply base within the state will assure residential customers that lights go on when the switch is flipped."

Green commented that a cloud of uncertainty serves as a disincentive to investment in the state's energy supply base. "Money today is sitting on the sidelines because the risky and uncertain environment in the industry and in our regulatory framework makes our companies and projects less economically attractive for investors and lenders," he said. "As a result, we are not building for the possibilities of the future, and the customer is being left behind."

Aquila's chairman and CEO outlined two key areas for action--a regulatory system for predetermination of rates of return and a fuel adjustment clause--that would reduce the barriers to investment and provide meaningful benefits to Missouri energy consumers.

"Neighboring states have begun addressing barriers to development of further generating capacity--in particular the rate of return predetermination," said Green. "We should consider how their approaches might be adapted to meet our needs here in Missouri.

Predetermination enables regulators to determine such things as a rate of return or depreciation schedules prior to building of a power plant. This practice makes it easier for lenders and investors to determine a project's profitability before committing capital.

Second, he called on the Missouri General Assembly to authorize a fuel adjustment clause, which allows utilities to adjust customer rates for changes in underlying costs of energy sources, such as natural gas, used to operate electricity generation facilities. Missouri is one of four states in the nation that does not have a fuel adjustment rule. Green explained that this measure would create a more flexible pricing system that would pass on fuel cost reductions to consumers as well as provide information they need in periods of higher costs to help them make informed choices about energy use.

Green also challenged the industry to look beyond the needs of customers today and think about innovations that could enhance customers' quality of life.

"Even modest investments and ideas in industries such as airlines have brought us added convenience. Airlines took a mature ATM technology and are using it to shorten check-in lines," he said. "These are the types of actions we need in the utility industry to achieve the possibilities for the future that a robust and reliable-cost energy supply can yield for all residents of our state."

Excerpts from Green's remarks are available on Aquila's website, www.aquila.com. Click "Presentations & Webcasts" under the Investors category.

Based in Kansas City, Mo., Aquila operates electricity and natural gas distribution networks serving customers in seven states and in Canada and the United Kingdom. The company also owns and operates power generation assets. At June 30, 2003, Aquila had total assets of $8.4 billion. More information is available at www.aquila.com.

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