Consumers Council of Missouri

Common sense tells us Ameren rate increase is not needed

By Judi Roman
06/08/2010

Two items in the Post-Dispatch recently present a fascinating dichotomy. First, Local 1 of the International Brotherhood of Electrical Workers agreed to reduce pay and benefits by 8.23 percent now and 8.73 percent in January for a three-year period. Second, AmerenUE received a $226 million rate increase, resulting in an 11.76 percent increase in residential electric bills.

Which action do you believe best reflects the public interest?

This year’s rate increase follows one in 2009 that totaled $162 million and already increased the average customer’s monthly bill by 8 percent. And another whopper is expected within the next year.My common-sense observations tell me that AmerenUE has little incentive to manage its business more efficiently rather than extract its 10.1 percent Public Service Commission-approved profit margin through rate increases.

Consider:

— Reflecting its monopolistic culture, AmerenUE asks for surcharges, for example, for the costs associated with complying with environmental regulations or for increased fuel costs. These surcharges amount to automatic rate increases granted without thorough review. Other companies that are not monopolies also have to comply with environmental regulations and other cost increases.

These non-monopolies don’t get an automatic pass on increased costs. They figure out new ways of operating and/or managing to absorb increased costs without simply passing them along. Consumers also do this. When the rent goes up and our budget won’t stretch any further, we cut out some other expenses. Or we move.

Why doesn’t AmerenUE do the same? It employs thousands of management people. Surely those managers are as competent and creative as managers in the non-monopoly companies that do not pass along all their increased costs.

I’m confident that AmerenUE will answer that it does operate efficiently. Indeed, it may say that, in response to the economic downturn, it eliminated some 300 positions and froze management salaries in 2009. Welcome to the real world. Keep it up. It makes me think of the grocery ads. Supermarkets pat themselves on the back for cutting the price of orange juice by a small percent, and I wonder why they have been charging me extra for so long.

— Most U.S. corporations would love to have a virtually guaranteed double-digit profit margin. But that’s not good enough for AmerenUE. No, to protect itself from inflation that it forecasts, AmerenUE asked to increase its approved profit margin to 11.5 percent. The PSC ultimately granted it 10.1 percent. What inflation? Look at interest rates. Look at anything. Where’s the inflation? Nowhere.

— Economic conditions remain tough — for almost everyone but AmerenUE. One in 10 Americans cannot find a job. The percentage among minorities is far higher. Still, AmerenUE seeks back-to-back rate increases. Bad PR? Undoubtedly. But when you’re a monopoly, what choice do customers have? Almost none, unless you have the capital to escape the grid.

— Utility consumers don’t receive as much help as we used to from Missouri’s official consumer advocate. Staffers at the Office of the Public Counsel are extremely hard working and able, and they do a lot with the lean resources that they are given. Still, compared to the scores of lawyers, financial and PR specialists AmerenUE employs for its rate cases, the Office of Public Counsel always has been understaffed. Not to mention the legions of lobbyists that prevented this advocacy office from receiving stable funding during this year’s legislative session. In 2005, it had 15 staff people. Today it has only seven. Folks, this is not a level playing field.

So, what can we do?If you agree with me, I invite you to join the Consumers Council of Missouri (www.moconsumers.org) and let your voice be heard. Together, we can make a difference.

Judi Roman is executive director of the Consumers Council of Missouri.

To utilities, “increased efficiency” means getting your money even faster.

By Editorial Board
05/04/2010

Suppose you wanted more frequent pay raises at your job — not just once a year, but every six months. Fat chance, right?

Suppose you wanted less scrutiny from the boss when it came time to figure your raise. That way, the boss would have less opportunity to spot your errors or bring in experts to examine the quality of your work. What are the odds that you’d get it?

Now let’s suppose that you’re one of Missouri’s big utility companies. Instead of pay raises, you’re worried about rate hikes. Right now, your odds of getting twice-a-year raises look a lot better.

All you’ve got to do is persuade the Missouri Legislature to pass an anti-consumer bill within the next two weeks. There are four bills from which to choose, each containing twice-a-year rate hike provisions.

The Legislature adjourns May 14. Traditionally, in the frantic final weeks of the session, lawmakers have less time to consider what is in the bills on which they’re voting and less time to hear from angry constituents. This is the time of year that many bad ideas are transformed into law.

Utilities say the changes would “increase government efficiency.” If one passes, look for utilities to develop a more efficient way of reaching into your pocket — as if they needed the extra St. Louis went up 8.1 percent in January 2009. Just seven months later, AmerenUE was back before state regulators asking for 18 percent more, or $402 million. That request is pending, but AmerenUE has indicated that it soon will ask for more.

Under current law, the Public Service Commission must settle rate hike cases within 11 months. That means utilities generally are limited to one request each year.

Under the proposed new law, rate hike cases could last no more than six months, meaning utilities could file two requests each year.

That’s not just two rate hike cases for each electric company, including AmerenUE. It also means extra rate cases for water companies, including Missouri American Water, which is seeking a 21 percent rate hike, and for gas companies, including Laclede Gas, which has a $52.6 million rate hike request before utility regulators.None of the four proposed bills would allow additional staff for the PSC, which analyzes and rules on these incredibly complex cases. No more staff is allowed for the Public Counsel’s Office, which represents consumers in utility rate cases. In 2005, that office had 16 staff members working on utility rate cases. Today, it has eight to handle what potentially could be twice as many cases.

More cases and less time to finish them means less scrutiny. The extra time means millions of dollars in potential revenue for utility companies — and in payments from customers.

Consider that 18 percent rate hike request from AmerenUE that is pending. PSC staffers who analyzed the details claim that it is 40 percent too high. The PSC staff says $161 million of the $402 million extra revenue AmerenUE is seeking is for expenses that shouldn’t be figured into rates paid by residential and business customers.

Lawmakers who vote to increase the number of rate hike cases filed by utilities will have to answer to angry voters in November. For their sake, and the sake of overtaxed consumers, they should not approve these changes.