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Missouri faces higher household energy bills after new state law and federal proposals; report forecasts $640 annual rise by 2035.
Missourians are beginning to feel the effects of significant changes to state and federal energy policies, which are set to increase household utility bills and reshape the energy landscape. Recent legislation at both the state and federal levels has sparked debates about the future of energy costs and infrastructure in Missouri.
Earlier this year, Missouri Governor Mike Kehoe signed Senate Bill 4 into law. This legislation introduces a series of reforms, including allowing utility companies to charge customers for power plants that are still under construction and to base rates on anticipated future costs rather than past ones. At the federal level, the "One Big Beautiful Bill", signed into law by President Donald Trump, is expected to further drive up energy costs by incentivizing fossil fuel use while phasing out tax incentives for renewable energy sources.
According to a report by Energy Innovation, a nonpartisan clean energy think tank, the combined impact of these policies will result in average annual household utility bill increases of $640 by 2035. Wholesale electricity prices in Missouri are also projected to rise by 74% during the same period. The report attributes these increases in part to "the loss of low-cost renewables and the resulting increase in gas prices."
One of the key provisions of Senate Bill 4 allows utility companies to set rates based on a forward test year, using projected future costs instead of past financial data. Michael Sykuta, an economist and associate professor at the University of Missouri, explained the rationale behind this change: "It’s probably going to make the rates more accurate. Now, whether that means rates go up or down is difficult to say. We know that costs are going up across the board, so rates are probably going to go up."
While the forward test year system aims to provide more accurate pricing, it comes with safeguards. If utility companies overcharge customers, the law mandates that the excess money must be returned in some form. Additionally, all rate increases must be approved by the Missouri Public Service Commission, allowing time for public input. Sykuta highlighted this as a built-in mechanism for consumer engagement, stating, "Even though this bill has passed, how it’s actually going to play out is still a little bit up in the air, and there are mechanisms built into the system for people to participate in the process and share their opinions."
Another controversial aspect of Senate Bill 4 permits utilities to begin charging customers for construction projects before they are completed. While this results in higher short-term costs, Sykuta pointed out potential long-term benefits. "If you pay for a little bit of the construction as you go, then you don’t have to pay as much in interest charges", he said. "So long term, it saves customers money, but it gives them a little bit of an increase in price sooner than later for stuff that isn’t in service."
James Owen, executive director of Renew Missouri, expressed concern about the broader trend of rate hikes in the energy sector. "Rates always get raised", Owen said. "Utility companies are always going to be seeking rate increases from the state, and the state is going to usually be inclined to give it to them. I don’t think that should be how this works, but that’s what happens."
The economic repercussions of these policy changes are expected to be significant. Energy Innovation projects that Missouri could lose $1.4 billion in gross domestic product by 2030 and $3.5 billion by 2035 due to the energy price increases and the shift away from renewable energy incentives.
Infrastructure challenges also loom large. Sykuta explained that much of Missouri’s energy infrastructure is aging and will need to be replaced soon. "We have a lot of really, really old infrastructure that has to be replaced at some point, whether it’s transmission lines, generation facilities, distribution systems", he said. "You’re going to end up paying more just for having to do this stuff to keep the system running."
The rise of data centers, which consume vast amounts of energy to power artificial intelligence and cloud computing, is another factor contributing to concerns about Missouri's energy grid. Owen noted, "I think it’s the intention that the direct costs are going to be absorbed by the data center. However, when you’ve got one customer that’s using so much energy that’s going to put a strain on the grid altogether. That puts a strain on distribution lines, that puts a strain on transmission lines, that puts a strain on wires, poles, etc. That’s something that all customers are going to have to pay."
Sykuta added that while data centers could potentially drive up costs for consumers, technological innovations in AI may eventually reduce energy demands. "There’s a lot of talk about all these data centers, but we don’t know how many are actually going to be built", Sykuta said. "And then we don’t know how the technology for AI is going to change."
As Missouri moves forward under these new policies, the state faces a complex mix of challenges and opportunities. While costs are expected to rise, policymakers and consumers alike will play a role in shaping how these changes unfold in the years to come.
