Brother, can you spare some dimes for AmerenUE?

By Editorial Board

To AmerenUE, $37.3 million isn’t much money, about $1.31 per customer per month.
As a lawyer for Missouri’s state’s largest electric company memorably put it last week, that “amounts to the change most people have on their dresser at home, or carry in their pockets.”
AmerenUE wants that change — and a lot more besides.
The company has asked utility regulators for a temporary $37.3 million rate hike. Think of it as a down payment, just enough to tide the company over until the state Public Service Commission decides whether to grant one more than 10 times higher — a $402 million rate hike the company asked for in July. The July request came just months after the PSC gave AmerenUE a $163 million rate hike in April.
AmerenUE’s spare change request comes under a special emergency clause designed to allow the state to prop up financially distressed utility companies.
Other Missouri electric companies are watching closely to see how that request fares. If AmerenUE succeeds, it’s a good bet they’ll ask for temporary rate hikes, too.Strictly speaking, AmerenUE isn’t financially distressed. Profits at its parent company were up 11 percent during the third quarter compared to the same period in 2008.
But AmerenUE is pleading distress because it has been unable to earn its “authorized rate of return.” That’s the maximum profit level allowed by utility regulators when they set rates.
Utility companies are monopolies, not subject to market pressures that encourage other companies to operate efficiently.
AmerenUE says that its failure to earn the maximum authorized rate of return makes borrowing for needed capital improvements more difficult and expensive. That increases costs for consumers.
Setting a maximum profit level provides an incentive for utilities to be efficient and well-run. If they are, they earn the authorized rate of return. If not, they don’t.
But allowing higher rates because a company didn’t earn as much as it could have might be said to reward inefficiency and poor management.Even if AmerenUE gets the temporary rate increase, company executives testified this week that they may ask state lawmakers for rules changes that would increase their bottom line.
Among them is placing a time limit on rate cases. That would make it more difficult for PSC staff and Public Counsel Lewis R. Mills, who represents electric customers, to analyze and respond to future utility rate hike requests.
The company may also renew its battle to overturn an important consumer protection called Construction Work In Progress, or CWIP.
That law, which was overwhelmingly approved by Missouri voters in 1976, prevents utilities from charging customers for new power plants until they begin generating electricity. It’s designed to encourage efficient construction practices by spreading risk between consumers and utilities.It’s ironic that AmerenUE should be complaining about its financial troubles. Its parent company’s then-three top executives got hefty bonuses in February based in part on the company’s performance.
Those Ameren Corp. executives — Gary Rainwater, Warner Baxter and Thomas Voss — received incentive payments of $771,656, $302,610 and $240,255, respectively. The payments are equal to 82 percent, 55 percent and 50 percent of their respective base salaries.
A company that can afford to hand out bonuses like that shouldn’t need to scrounge for spare change. Most of its customers aren’t doing nearly as well as AmerenUE.
Brother, we can’t spare the dimes. 

The Tribune’s View

Payday loans

Time for control?

By Henry J. Waters IIIThursday, November 19, 2009Rep. John Burnett of Kansas City has tried to rein in the activities of the payday loan industry in Missouri every year since he joined the Missouri General Assembly in 2002. Now he is joined in the crusade by our own Mary Still. The Democrats believe it’s time to reform Missouri law, which is almost alone in its laxity among all states in the union. Last year Still introduced a law, but House Speaker Ron Richard failed to schedule a hearing until an impossibly late minute, reflecting the general legislative disinterest in the issue. Taking it to the people, the two staged a hearing Monday here in Columbia.Still and Burnett swim against a strong libertarian current favoring a laissez faire approach. However, libertarianism, a blessed concept, has limits that have been broached in some practices allowed for payday loan entrepreneurs.The worst excess seems to be churning, in which companies are allowed to re-energize short-term loans repeatedly, which can produce annual interest rates of nearly 2,000 percent. Reformers believe these borrowers are vulnerable and deserve protection, as almost all other states have done. They want to set limits on how much lenders can charge and limit how often loans can be cycled. According to the state Department of Finance, in the year ending Sept. 30, 2008, in Missouri the average annual interest rate charged by these companies was 430.58 percent. On average, loans were recycled 1.7 times. None of the eight surrounding states allows any renewals at all, and all have much more stringent limits on the amount of interest that can be charged. The result is many more payday loan licenses in Missouri and many more complaints received by Missouri regulators than in other states.Still and Burnett take heart from a federal law sponsored by former U.S. Rep. Jim Talent limiting payday interest rates for military families to 36 percent a year and forbidding renewal rollovers altogether. Missouri law allows as many as six rollovers. Interest rate limits in surrounding states are not as strict as the federal rule but much more so than Missouri’s.The payday loan industry maintains a strong defensive line, so far impenetrable. Randy Scherr, representing Missouri payday companies, said at the hearing that customer surveys show the vast majority of clients understand the terms of their loans and are satisfied with the service, which meets short-term emergency needs not met by other financial institutions. He said publicly traded payday companies only earn about 6.6 percent on income, half that earned by International House of Pancakes. Scherr asked why, if payday lending is as wildly profitable as critics say, major banks aren’t in the business.Critics often cite moral issues, as if payday borrowers are inevitably hapless souls trapped and extorted by lenders. They liken needed reforms to usury laws, a good analogy. Usury laws are warranted, but only within limits. In a perfect free-market setting, one would leave borrowers and lenders alone to make and execute their deals.But when sellers have extraordinary advantage and buyers aren’t adequately equipped to fairly negotiate, rules are needed. Rules in Missouri concerning the payday loan industry are almost unique, at the fringe of the regulatory spectrum. The legislation to be introduced by Still and Burnett in the coming session deserves a full hearing, debate and passage in a form similar to laws in every other state in our neighborhood.HJW III