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AmerenUE rate increase is not needed

Tuesday, June 8th, 2010

Common sense tells us Ameren rate increase is not needed

Source:

ST. LOUIS POST-DISPATCH

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.

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AmerenUE Gets 10-percent rate hike

Tuesday, June 1st, 2010

PSC grants AmerenUE 10-percent electricity rate hike

Source:

ST. LOUIS POST-DISPATCH

By Jeffrey Tomich
05/29/2010

AmerenUE on Friday got approval from Missouri regulators to raise electric rates by 10 percent, or $226.3 million a year.

The new rates are expected to take effect in late June. When they do, a typical residential customer who uses 1,100 kilowatt-hours a month will pay about $108 more a year, according an analysis by the Public Service Commission staff.

The increase is the third in three years for St. Louis-based AmerenUE, the state’s largest electric utility with 1.2 million customers.

The PSC voted 4-1 to grant AmerenUE more than half of the $402 million increase initially sought in July. At the time, the utility said it needed to boost revenue to compensate for rising fuel prices, higher financing costs and investments made to improve reliability.

AmerenUE had no immediate comment. The utility was still reviewing the 102-page order on Friday afternoon, spokesman Michael West said.

PSC Chairman Robert Clayton cast the lone dissenting vote.

“The increase was more than I thought the evidence allowed for,” Clayton said in an interview.

AmerenUE’s rate proposal met with a backlash from customers. Hundreds of people attended a series of public hearings across the utility’s service area last winter and wrote letters and e-mails to the PSC.

The response was at least partly the product of a public relations campaign funded and organized by the Fair Electricity Rate Action Fund, an ad hoc group organized and funded by some of Ameren’s largest customers. The group includes its largest customer, Noranda Aluminum Inc., which operates a smelter in the Missouri bootheel.

Clayton said the commission was mindful of hardships faced by customers as the economy crawls out of a deep recession.

Friday’s order included a $1 million pilot program to help low-income customers and reduced AmerenUE’s allowed return on equity, or profit, to 10.1 percent from a previous rate of 10.76 percent to reflect changes in capital markets.

“The (customers’) concerns raised were understood,” he said. “There’s no question that these are challenging economic times.”

More than half of the increase sought by AmerenUE was to cover higher fuel costs, including the cost of coal shipped from Wyoming. The rest was to cover higher financing costs and to fund reliability projects at power plants and its 25,000-square-mile network of poles and wires.

Prices for most types of energy have declined because of the recession. But AmerenUE buys coal under contracts that have terms of three to five years, so energy price increases from previous years haven’t been fully reflected in rates.

The commission approved $58 million for tree-trimming expenses and infrastructure inspection to help comply with new rules put in place after a series of widespread power outages in 2006 and 2007.

AmerenUE will also be allowed to continue to add a fuel surcharge to bills to help it more quickly recoup fuel expenses.

The PSC’s order comes a month after the Illinois Commerce Commission approved a $5 million electric and natural gas rate increase, slashing Ameren’s $130 million request by more than 95 percent.

The ICC granted Ameren’s Illinois utilities an additional $10 million earlier this month to correct errors in its original order.

On Friday, Ameren sought a rehearing in the Illinois case, noting that the approved rate increase is less than $16 million in pension and benefits expenses that were incurred and booked for 2009.

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Post Dispatch Says NO to AmerenUE Proposals

Saturday, May 8th, 2010

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

Source:

ST. LOUIS POST-DISPATCH

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.

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PSC twice denies AmerenUE

Friday, January 22nd, 2010

PSC twice denies AmerenUE

By Jeffrey Tomich

ST. LOUIS POST-DISPATCH

01/14/2010

Missouri regulators denied AmerenUE twice on Wednesday, including a proposal for a 1.7 percent interim electric rate increase that would have been part of an 18 percent hike requested by the utility.

The Public Service Commission also rejected what was viewed as an effort by AmerenUE to muzzle a public relations blitz organized by a consumer group that opposes the proposed 18 percent rate hike.

AmerenUE, the state’s largest electric utility, last month asked the PSC to clarify rules prohibiting parties in rate cases from trying to sway the commission or its staff outside of the formal hearing process.

The utility pointed to a campaign by a group calling itself the Fair Electric Rate Action Fund but denies it was trying to silence critics. The utility insists it just wanted a clearer idea of what communication was allowed leading up to and during a rate case.

“Suppressing free speech was never an objective of this request,” AmerenUE spokesman Tim Fox said in an e-mailed statement.

The group, FERAF, characterized Ameren’s request as an attempt to institute a gag order.

“We’ve said all along that our goal is to educate Missourians about this 18 percent rate increase,” FERAF spokesman Gregg Keller said. “We’re pleased that today’s ruling is going to allow us to continue.”

FERAF’s members are Noranda, the Missouri Retailers Association, AARP, the Missouri Association for Social Welfare and the Consumer Council of Missouri, Keller said. He wouldn’t disclose how much the group has spent fighting Ameren’s rate proposal.

The group organized last year to challenge plans to repeal a state law that prohibits utilities from charging customers for power plants while they’re under construction. Ameren, which wanted the law undone so it could build a second nuclear plant, unsuccessfully sued FERAF to force the group to pull television ads.

The group re-emerged last month, using radio ads, phone calls and social media sites such as Twitter and Facebook to mount a campaign against higher rates.

FERAF’s campaign caught the attention of the PSC not just because of questions raised by Ameren.

Commissioner Kevin Gunn was among those who received an automated phone call from the group, as did an administrative assistant for Commissioner Jeff Davis.

Keller said the calls to commission members and staff were mistakes and the group makes efforts to avoid communication with PSC members.

The commission voted 3-2 to deny the temporary $37 million, or 1.7 percent, increase.

“Granting a rate increase without benefit of a full audit on questions of disputed facts sends the wrong message,” PSC Chairman Robert Clayton III said in a statement.

AmerenUE filed a request in July to raise rates by $402 million a year, or 18 percent.

As part of that request, the utility sought approval of an interim rate increase to help recover costs of certain investments while the larger rate request was being decided.

Rate cases typically take 11 months to be decided, and Ameren argued that immediate rate relief was warranted to help offset the gap between its actual costs and historical costs on which rates are set. This so-called regulatory lag has been a frequent complaint by Ameren executives.

Interim increases aren’t unprecedented. But they typically have been approved in instances where utilities face financial distress.

Fox, the AmerenUE spokesman, said the utility is disappointed by the decision after presenting “sound justification” for the temporary increase.

A decision on AmerenUE’s full rate proposal is expected by early summer.

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Post-Dispatch says Do the Math

Tuesday, April 14th, 2009

ST. LOUIS POST-DISPATCH

Do the math on Senate Bill 228

Tuesday, Apr. 14 2009

Missouri’s largest electric utility wants to change state law so that customers
could be billed for finance charges while a new nuclear power plant is being
built in Callaway County.

No big deal, AmerenUE officials say. The result would be “a 1 percent to 3
percent annual increase in rates several years from now,” AmerenUE President
Tom Voss said in a letter to ratepayers. That sounds trivial.

If you do the math, a 3 percent annual increase, compounded annually, would
hike electric rates by 34.4 percent over 10 years. The average residential
customer, who now pays about $75 a month, would be paying almost $101 a month
at the end of that time.

Or it could be higher. Nothing in Senate Bill 228, the law AmerenUE is pushing,
would cap rate increases for what’s known as Construction Work In Progress
(CWIP).

A 5 percent annual rate hike would increase electric rates by 63 percent over
10 years, from $75 to $122.17. And that’s if rates don’t rise for other reasons.

These are rough estimates. In reality, rates probably would not increase by the
same amount every year. But the cumulative impact still would be significant.

Any increases would come on top of already-rising electric rates. AmerenUE got
a $163 million-a-year rate hike in January. But even before the new rates went
into effect March 1, company officials told investors they would ask for yet
another rate increase this year. They declined to say how much more they’re
seeking.

There’s also the distinct possibility that Congress will pass a carbon
cap-and-trade system later this year. That would increase costs for utility
companies, like AmerenUE, who generate most of their electricity by burning
coal. Added costs would be passed on to ratepayers.

Any way you slice it, electric rates are going up. The question for legislators
and ratepayers is how to minimize those increases.

AmerenUE says the answer is to repeal the state law against CWIP. But utility
experts from the Office of Public Counsel, which represents ratepayers before
the Public Service Commission, disagree. The PSC staff last month agreed with
the public counsel’s assessment.

The public counsel’s office says using a different financing arrangement called
“credit metrics regulation” would cost less. Such a system could allow AmerenUE
to accelerate depreciation on the new plant, thus reducing what it costs the
firm to borrow money.

AmerenUE says financing the new plant during construction would add between 10
percent and 14 percent to customer bills.

Both the public counsel and the PSC staff say it will add far more — as much as
40 percent, according to the public counsel. The PSC staff reckons the increase
at 55 percent.

The actual figure depends on certain assumptions built into the estimate. A
Maryland utility is building an identical nuclear power plant that carries a $9
billion price tag. AmerenUE estimates a cost of just $6 billion, because it
says it will find partners to help with the cost.

AmerenUE estimates it will take six years to build the facility. But Callaway I
took more than eight years and came in more than $500 million over budget.

Lawmakers are expected to take up SB 228 again soon, perhaps as early as next
week. They’d be well advised to do the math before they do. Their constituents
will be living with it for a long time to come.

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Protect electric customers, not utilities

Tuesday, March 31st, 2009

A Missouri Senate committee is to vote this afternoon on a revised — but still deeply flawed — utility bill that was written to benefit the state’s largest electric company.

AmerenUE has applied for a federal permit to build a new nuclear reactor in Callaway County. Whether you think that’s a good idea or not — whether you support nuclear power or oppose it — SB 228 is a bad bill, and not just for AmerenUE customers. are some of the whys:  Please click here to read the full text of The St. Louis Post-Dispatch editorial.

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Utility-Backed Legislation is the Worst Bailout Yet.

Sunday, March 29th, 2009

CWIP is among a host of consumer rip-off schemes currently pending in the Missouri Legislature. 

written by John Coffman

General Counsel, Consumers Council of

Missouri

 

Energy utility lobbyists have been exerting increasing influence over the Missouri state legislature, rewriting the laws that are supposed to protect consumers.  Since 2003, investor-owned utilities have successfully lobbied for measures that permit seven unfair surcharges to be added onto our utility bills.  Energy monopolies love surcharges because they allow rates to up without a full audit by the Public Service Commission, and even allows rates to go up for one item during a period when the utility’s overall costs are going down.

 

This onslaught of extraordinary new ways to raise rates for electricity and natural gas has not even stopped in the face of the current deep recession.  In fact, 2009 may be the year that politicians succeed in overturning the citizen-led ballot initiative that banned Construction-Work-In-Progress (CWIP).  The anti-CWIP statute was passed by voters by a nearly 2-to-1 margin in 1976 and remains one of our most important consumer protection laws, prevents electric utilities from raising rates for power plants that are not yet providing power.

 

SB 228 and HB 554 would overturn the will of the voters and put in its place a new ratemaking system, one that is heavily tilted against consumers.  Large power plants, such as the proposed $6-9 billion Callaway II nuclear plant of AmerenUE, could be “pre-approved” and then new CWIP surcharges could be added to electric bills every three months during the approximate ten-year construction period.

 

It is estimated that these charges alone could raise current electric rates by as much as 40% before that power plant has even proven it can be operational.  And get this—the proposed legislation would even allow the utility to collect these CWIP charges is the power plant is ultimately cancelled and winds up serving no one.

 

Although the utilities claim that pre-paying saves money for consumers over the life of the plant, their calculations are flawed.  Moreover, such overblown claims do not take into account the cost of money for the ratepayers to come up with the extra cash upfront.  Their claims also assume that each consumer charged will be around to benefit from the power of a plant that could take more than a decade to build.  The legislation violates a bedrock principle of fair ratemaking in that the consumers who are benefiting from a power plant should be the consumers who are paying for that plant.

 

This legislation is also being supported by Kansas City Power & Light Company and Empire District Electric Company, which will surely be swift on the heels of AmerenUE in taking advantage of such a new rip-off ratemaking scheme.  It is important to recognize that these proponents of SB 228 are privately-held, investor-owned monopolies that do not have to compete for consumers and are already assured of an opportunity to earn a healthy profit—an authorized return on common equity that is usually in the double digits.  These utilities have also rewarded their CEOs well.  AmerenUE CEO Gary Rainwater received a total compensation package of over $5 million last year.  KCPL CEO Michael Chesser’s total compensation for 2008 was $3.5 million.

 

The purpose for allowing such high returns to a monopoly is compensation for managing the risk of providing power.  But they want to continue to reap high returns while passing the risk onto the rest of us.  In my book, that is the very definition of a bailout.  If captive consumers are going to be fronting the money for such large investments, essentially being forced to act as investors, then consumers should, at a minimum, be granted a return for their contribution to future power.

 

In another outrageous affront to consumers, Missouri’s natural gas companies are pushing legislation that would allow its uncollectible accounts to be expeditiously charged back to everyone else.  SB 299 would redefine the bad debt of non-paying consumers as “gas costs” and then be flowed through the purchase gas adjustment charge, which is currently limited to the wholesale cost of natural gas.  So as the recession makes it hard for an increasing number of households to pay their heating bills, the rest of us must pick up their unpaid tab even more quickly.  The goal is ensure that utility profits do not suffer even a blip.

 

While all eyes are trained on Congress and its many bailouts, few citizens seem to be aware of these massive bailouts that are under consideration right under our noses in Jefferson City.

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MO senators consider bill to pay for power plants

Wednesday, February 11th, 2009

JEFFERSON CITY, Mo. (AP) — Senators grilled AmerenUE leaders during a hearing Tuesday on legislation allowing utilities to charge electric customers for the costs of new power plants before they come online.

Missouri law bars investor-owned utilities from passing the expenses of building a power plant to their customers before the facility starts producing electricity.

Ameren is considering construction of a second nuclear reactor at its Callaway County power plant and says repealing the 1976 state law is critical to financing the estimated $6 billion project.

A large crowd attended Tuesday’s Senate Commerce, Consumer Protection, Energy and the Environment Committee hearing on the legislation, which would apply to new plants powered by nuclear energy, renewable sources or new coal technology.  Please click here to read the entire AP story by Chris Blank.

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Missouri lawmakers debate a bad energy bill

Tuesday, February 10th, 2009

A state Senate committee is scheduled to begin hearings today on a deeply flawed bill that would remove key consumer protections for utility customers.

The measure, Senate Bill 228, would repeal a 1976 law that prohibits utilities from charging for the cost of building a new power plant until it starts generating electricity.

SB 228 is designed to benefit utility giant AmerenUE, which has applied to build a new nuclear plant in Callaway County. Whether or not you think that new plant is a good idea — whether you favor nuclear energy or oppose it — SB 228 is a bad bill. Click here and let the St. Louis Post-Dispatch editorial board count the ways.

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KSDK-TV coverage of AmerenUE’s request for rate increase for nuclear power

Saturday, January 24th, 2009

Click here to view KSDK’s story.

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