The Missouri Public Service Commission (PSC) has proposed a surcharge for electric companies that would permit volatile fuel costs to be passed directly on to consumers without recognition of offsetting cost reductions. This type of surcharge is known as a Fuel Adjustment Clause (FAC).
This surcharge would be added to electric bills in addition to any other rate change as a result of AmerenUE’s current rate case.
The FAC is a type of unfair “single-issue ratemaking” and was struck down as unlawful by the Missouri Supreme Court in 1979. In 2005, the Missouri Legislature and Governor Blunt adopted a controversial law (SB 179) that gives the PSC the option of bringing back the FAC.
The proposed FAC is designed to operate similar to the purchased gas adjustment for natural gas companies. If you like how unpredictable your natural gas bill can escalate with fuel prices, you’ll love the FAC! Even though electric companies have the financial and operational ability to mitigate the volatility of fuel costs, they would rather simply pass this volatile risk directly onto consumers. Moreover, the FAC eliminates the utility’s incentive to drive the best bargain for its fuel contracts, because consumers would bear virtually all the risk.
It was generally understood that if the PSC ever adopted the FAC again, it would only do so with considerable consumer protections. Unfortunately, the FAC rules currently proposed by the PSC contains no consumer protections! The PSC needs to hear that a FAC is unfair and should not be allowed.
At the very least, the PSC should only be allowed if no more than 50% of fuel costs are permitted to be recovered through a FAC, with the remaining 50% recovered in the traditional manner.]
Here is where you can go to in St. Louis on Wednesday to provide public comments directly to the PSC on August 23 , click here.
