PSC grants AmerenUE 10-percent electricity rate hike

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.

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.