Missouri Public Service Commission is holding public hearings during the month of January on the $402 million rate request filed by AmerenUE.

More than 100 people attended the recent hearing in St. Charles County.  The St. Louis area hearings are scheduled of January 19 and 20.

Please check the Missouri Service Commission Website for locations and more details.

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

Consumers Council’s John Coffman will be attending the Financial Services Conference  presented by the Consumer Federation of America on Decemer 3 and 4.

Federal and state policy makers and regulators continue to address pressing banking, insurance, investment, and real estate issues affecting consumers, after more than two decades of financial services deregulation and reregulation. To keep consumer advocates and educators informed about these issues, the Consumer Federation of America is presenting an annual conference on financial services, planned with the assistance of consumer groups and the financial services industry.

 John will return to Missouri armed with information to help local consumers so watch for follow up information on this website. 

The first annual Alberta Slavin Consumer Award will be presented to Lewis Mills, Public Counsel of the State of Missouri on Sunday, September 13th.

The award will be presented at the Consumer Council’s annual meeting and will be presented to Mr. Mills for his outstanding dedication to representing Missouri consumers and because of his courageous promotion of ethics reform at the Public Service Commission.

 The event will be held at the Tarlton Corporation, 5500 West Park in St. Louis beginning at 4 p.m.  Admission is $50 and refreshments will be served. 

Lenders shouldn’t be utility collectors.

09/01/2009

Sending the poor to pay utility bills at a payday lender is like sending the hungry for a meal in a shark tank.

It’s the worst kind of business synergy. Missouri utility regulators should halt the practice.

Payday lenders make a living off the poverty and lack of financial sophistication of their desperate customers. They charge very high interest rates — an average of 431 percent in Missouri; by law, they can charge as much as 1,950 percent — on short-term loans that often are secured by post-dated checks.

In some poor neighborhoods, those predatory lenders are the only local business where customers can make cash payments toward their electric and phone bills. Utility companies long ago eliminated most of the small neighborhood billing offices where they accepted payments from customers.

Most people today pay utility bills by check or credit card. But once, it was common to pay in person. Those who still do are disproportionately elderly, poor and living paycheck to paycheck without a checking or savings account.

As usual, it’s all about the money.

Utility companies say they got rid of their neighborhood billing offices as a cost savings measure. Re-establishing them would be costly. That expense would be passed on to utility customers, they say. And it could be significant.

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AmerenUE’s service area, for example, covers 25,000 square miles of eastern and central Missouri — much of it rural.

Utilities contract with third-party providers, who set up a network of collection agents. Those providers make money by charging a “convenience fee” for each transaction.

The collection agents can include banks and grocery store courtesy counters. But those are in short supply in poor neighborhoods. There, the most prevalent financial institutions are predators like check-cashing businesses and payday lenders.

Customers, especially those with delinquent bills who face being disconnected, benefit from having convenient places to make payments. But they make easy marks for payday lenders whose high interest rates and easy renewal can leave them trapped until paying off the underlying balance becomes impossible.

The Missouri Public Service Commission, which regulates utilities, has been asked to change its rules so that payday lenders no longer could be used as collection agents.

That request came from the Office of Public Counsel, which represents ratepayers before the PSC. It builds on similar recommendations made nationally by consumer advocacy groups.

Utility regulators in Kansas and Arizona have been asked to issue similar rulings. A bill that would make it illegal for utilities to operate payment centers at payday lenders was introduced by state lawmakers in California.

The “convenience fee” is capped at $1 per transaction, and utilities don’t receive any part of it. But utility companies do collect fees of about $3 for credit and debit card payments by phone. There shouldn’t be an additional fee just to pay your utility bill.

The Missouri Public Counsel alleges that those fees are, in effect, an unapproved rate hike. Their impact is compounded because utilities have fattened their bottom lines by closing neighborhood centers where customers could pay their bills in person.

The Public Counsel is asking that utilities be required to keep a number of locations where customers could pay their bills.

Even if that’s impractical, the PSC should prohibit utilities from operating payment centers in payday lenders.

People living from paycheck to paycheck have enough financial worries without being sent to swim with loansharks.

From the St. Louis Post Dispatch

07/29/2009

Missouri Gov. Jay Nixon will soon, possibly as early as today, make one of his most important appointments since taking office in January: He will try, for the second time, to fill the fifth seat on the Missouri Public Service Commission.

The PSC regulates the state’s investor-owned utility companies; the new commissioner will have a key vote on such matters as AmerenUE’s request last week for an 18 percent rate increase. At stake in those hearings will be controversial provisions of a 2005 law that allows utilities to pass on environmental costs to customers without extensive PSC review.

The appointment is all the more critical because the commission currently is deadlocked 2-2 between those who generally side with utilities’ interests and those who are more attuned to consumers’ interests.

In 16 years as state attorney general, Mr. Nixon, a Democrat, built a strong pro-consumer record. But the PSC appointee must be confirmed by the Republican-controlled state Senate when the Legislature reconvenes in January.

In April, Mr. Nixon appointed Joseph Bindbeutel, a former aide who had been an assistant attorney general in charge of environmental issues, to the PSC seat. But the Senate, strongly pro-utility in recent years, let the nomination die when it adjourned in May.

Thus the PSC nomination has become a sort of minor-league version of the president’s Supreme Court nominations: The governor has to appoint someone who will please his own constituents but not antagonize pro-utility senators on the other side of the issue.

One key difference: Republicans also don’t want to antagonize big industrial electricity customers, whose executives often are major political contributors. Big corporations and small consumers often are on the same side in rate hearings.

A spokesman for the governor said Mr. Nixon will appoint a commissioner who has “no predetermined agenda” and who will have ample time to demonstrate his or her independence before the Senate reconvenes in January.

That should be about the time when AmerenUE’s rate hike request is making its way through the hearings process; a decision is due in June 2010.

The $402 million hike would be AmerenUE’s largest in 20 years, but its third in three years; just last January, the PSC approved an increase of $162.6 million. AmerenUE says its new request would raise monthly bills for the average household (one using about 1,100 kilowatt hours of power each month) by about $15.

Slightly more than half of the money would go to paying higher fuel costs, primarily for coal, and to offset lower returns on electricity sold outside AmerenUE’s service area. About $175 million would help pay for burying power lines and other improvements to ensure reliable service and to offset the higher cost of borrowed money.

The rate case will establish future procedures for allowing AmerenUE to pass along higher fuel and environmental costs without going through a full-blown rate case. A bill approved by the Legislature in 2005 allowed these pass-throughs; the current rate case is the only time the procedure is likely to get the full attention it deserves.

AmerenUE is entitled to a fair return. Whether 11.5 percent (the return the utility is seeking) for a monopoly operation is fair, given that the Legislature has removed a lot of the risk, deserves the active scrutiny of a full, and fully engaged, board of regulators.