St. Louis Post-Dispatch, July 27, 2014

When it comes to electric rate fights, Ameren Missouri is undefeated over the last decade.

Rate increases: 5. Rate decreases: 0.

On Monday, consumer groups will take another go at the St. Louis-based electric utility.

The Missouri Public Service Commission carved out the whole week to take testimony and evidence in the case, which accuses Ameren Missouri of earning more profit than regulators allow. Not only that, they will argue that the percentage return regulators do allow — the most important number for utilities and their consumers — is too high and should be reduced.

For customers, it won’t mean much on their bills. The latest testimony from PSC staff says Ameren earned about $25 million more than it should have during 2013. Spread that over 1.2 million customers, and it’s not much.

But after years of rate hikes — about $867 million, or a 42 percent increase since 2006 — consumers aren’t likely to say no thanks. It’s simply a matter of fairness, said John Coffman, a former Missouri public counsel who is now an attorney for the Consumers Council of Missouri and the AARP.

“If you told the average consumers that their utility was overearning by $25 million, I think they would like to have that reflected in their rates,” he said.

It’s not the first time the utility’s own numbers have showed it earning above its allowed rate of return. But to win an overearnings case, critics have to show that kind of earning will continue, and the groups seeking to hold the utility accountable don’t always have deep enough pockets to prosecute a complex regulatory action in front of the PSC.

Noranda Aluminum, on the other hand, does. Not only does it say Ameren earned more than it was legally allowed, it says the utility’s allowed return on equity of 9.8 percent is too high and should be reduced to 9.4 percent. That would put the utility’s 2013 excess earnings at $50 million.

Ameren has consistently said the numbers are a snapshot and not the full picture. Earnings fluctuate above and below the allowed rate of return, the utility argues, and just because it earned a little more than it’s allowed doesn’t mean it will continue to do so.

It appears to have the PSC staff on its side. Testimony submitted last month from Mark Oligschlaeger, who manages the PSC’s utility auditing unit, indicated staff would only conduct a full earnings review if the commissioners direct it to.

“The results of staff’s analysis of Ameren Missouri’s calendar year 2013 earnings … do not indicate that Ameren is materially or continually overearning at the present time when its recent actual earnings levels are analyzed in light of traditional Missouri ratemaking practices,” Oligschlaeger said in written testimony.

To do a comprehensive audit would be redundant, Ameren said after the complaint was originally filed in February. The utility pointed out it planned to file a general rate increase in July, and a comprehensive audit could be done then, which it said would show it was actually underearning.

It kept its word, filing a 10 percent, or $264 million, rate increase just as Independence Day weekend was getting underway.

Not since 2002 has a group succeeded in rolling back the rates of the state’s largest utility. That was the year consumer groups won $442.5 million in rate reductions and social-welfare benefits phased in through 2005. Ameren also saw its rates reduced in the late 1980s, and between 1988 and 2006, customers didn’t experience a single rate increase.

But the two prior rate reductions have two stark differences from the one underway. Each was launched in response to a marked outside change — a drop in the federal tax code in the mid 1980s that gave the utilities more money, and the end of an experimental regulatory regime in the early 2000s that allowed the utility to tweak its books to keep more customer cash.

Perhaps even more important, each overearnings complaint was initiated and prosecuted by the PSC staff, the closest thing to a counterbalance to the experience and manpower the utilities bring to bear at the commission.

Generally overearnings cases are triggered by some sort of outside change, such as a merger, said Charles Fishman, a utilities analyst with Morningstar. A rate reduction isn’t something that weighs heavily on the minds of investors. It does happen, but regulators know that if investors stop seeing regulated utilities as stable, secure sources of income, that could hurt electric reliability.

“Missouri regulation has been pretty consistent the last few years,” he said. “Every once in a while you run into events that create regulator mischief, where regulators don’t act as consistently as they have in the past. We see that every once in a while, but not that often.”

Needless to say, rolling back Ameren’s rates is no easy feat. The utility fended off a court order to roll back rate increases three years ago, when a Cole County judge ruled then invalid and put the utility at risk of losing $300 million or more a year in rate revenue. Consumer and industrial groups, initially cheered by the ruling, lost on appeal.

In 2006, the utility’s regulator, the Public Service Commission, ordered its staff to investigate Ameren’s earnings at the behest of some of the state’s largest industrial consumers. But the PSC staff came back and said they didn’t have the manpower to do it.

While Missouri law allows anyone to file an overearnings complaint, the barriers are high, Coffman, the former public counsel, said.

Earnings information filed in periodic reports is classified unless confidentiality agreements are signed. The time and expense it takes to launch an overearnings case precluded even his group and the office of public counsel from filing a complaint last year after Ameren financial data showed it made some $80 million more than its allowed return.

“The office of public counsel hasn’t had that kind of resource,” Coffman said. “If they had that kind of staff, I think they would be able to do it on their end.”

Kansas City Star, July 18, 2014

Many utilities allow payday lenders to collect utility bill payments from customers, but Missouri regulators are considering whether to stop the practice.

The dispute has simmered for years. Critics say it’s ridiculous to collect utility payments at places they say provide loans at sky-high rates and target cash-strapped consumers. Customers pay off their utility bills but may find it too convenient to take out a loan to do so.

Utilities defend it as the best and most convenient option for some customers. And payday loan companies argue that very few utility customers paying their bills also take out a loan.

The issue erupted at a recent meeting organized by the Missouri Public Service Commission that was attended by payday lenders, utilities and consumer groups. Next month the commission’s staff will deliver a report with a recommendation on whether to proceed with drafting a rule to ban the practice.

“We’ve been fighting this for years, and it’s finally getting some momentum,” said John Coffman, an attorney for the Consumers Council of Missouri.

Most utility customers pay their bill by mail or online. But a small percentage don’t have a bank and have to pay in cash. A couple of decades ago, utilities had storefront locations that accepted payments, but those were closed to cut costs.

KCP&L said 2.6 percent of its customers now use walk-in authorized pay stations, such as grocery and convenience stores. But the utility has an arrangement with eight of those authorized pay stations in Missouri and one in Kansas that offer check-cashing services or payday loans.

“We only use one when we have no other way to have a walk-in payment option,” said Katie McDonald, a KCP&L spokeswoman.

The utility has had no complaints from customers about using payday lenders, McDonald said.

The Missouri Energy Development Association, which represents the state’s investor-owned electric and natural gas utilities, said in a document filed with state regulators that in the absence of a compelling showing of abusive business practices, it would be arbitrary to restrict who can be authorized pay agents.

The payday loan industry is often the target of criticism, especially in Missouri with its lax oversight of the business. Earlier this month, Gov. Jay Nixon vetoed payday loan legislation, saying it fell far short of the serious reform needed and would still allow the lenders to charge 912.5 percent for a 14-day loan.

“Payday lending often perpetuates an endless cycle of debt for consumers who can least afford it,” he said in a statement.

Berta Sailer, co-founder of Operation Breakthrough, a Kansas City social services group, attended the recent PSC meeting and hopes regulators will ban utilities from using payday lenders.

“People who turn to high-interest loans are desperate for money,” she said, “especially if they’ve fallen so far behind on payments that their utilities are turned off.”

QC Holdings, one of the state’s largest payday lenders and speaking on behalf of two others, said in a letter to state regulators that accepting utility bill payments and offering short-term loans were separate transactions.

It contended that very few utility bill payment customers took out payday loans. And it pointed out that the $1 average fee collected for each utility payment doesn’t cover the cost of handling the payments.

“We strongly contest the unsupported opinion that payday loan stores are taking advantage of bill pay customers,” Matt Wiltanger, vice president of QC Holdings, said in the letter.

In 2009, the PSC staff reviewed the issue and didn’t recommend that utilities stop using payday lenders to accept payments. In 2011, regulators said the relationship between the lenders and utilities was a concern, but it wouldn’t seek to ban them.

The Office of the Public Counsel, a state agency that represents consumers on utility issues, has been a critic of the relationship for years. Recently in a regulatory filing, it said its concerns were unabated.

“A bill payment at these locations … becomes an opportunity to solicit the utility customer to borrow money at an extremely high rate,” the Office of Public Counsel said.

St. Louis Post-Dispatch, July 4, 2014

Ameren Missouri filed a request Thursday to raise electric rates by nearly 10 percent, the sixth time since 2006 the state’s largest utility has sought a general rate increase.
The St. Louis-based utility is seeking permission from its regulator, the Missouri Public Service Commission, to increase rates by $264 million.

If the PSC grants Ameren the full request, the typical household would pay about $10 more a month in utility bills. The rate case process takes almost a year as the commission undertakes a complete audit of Ameren’s cost of service, and consumer and opposing groups get involved. Ameren expects a decision by May of next year and rates to become effective by June 2015.

Rate increases over the last several years have increased the utility’s overall rates by about 42 percent, not including the smaller changes that adjust rates based on fluctuating fuel costs. Since 2006, Ameren Missouri’s base operating revenue from rates has risen from just more than $2 billion to more than $3 billion, according to the utility’s filings with the PSC.

Rates will have risen more than 50 percent since 2006 if the PSC grants the latest request in full. In recent years, the regulator has approved Ameren’s rate increase requests, but a lower amount than originally proposed by the utility.

About half of Ameren’s request is to recover higher net fuel costs, which the utility says are mostly driven by lower prices for the wholesale electricity it sells to other utilities. The utility uses these sales to partly offset costs to its Missouri customers.

Ameren also cited the money it has put into Missouri’s renewable energy mandate and the cost of complying with stricter Environmental Protection Agency rules on coal-fired power plant pollution. It says it also has to invest millions into replacing aging infrastructure such as substations and power lines.

“Those three primary drivers continue to drive up the cost of service,” said Warren Wood, Ameren’s vice president of external affairs and communications.

In addition, the utility listed increased costs from taxes and costs it expects to incur when it shuts down its Meramec coal plant in south St. Louis County by 2022.

In addition, it is requesting a higher percentage return than what is currently allowed by the commission. Right now, Ameren is allowed a 9.8 percent return on equity; it’s seeking 10.4 percent.

Wood said the request was based on the average return among investor-owned utilities throughout the country. “We have to be able to attract investment, obviously, to be able to invest in more clean renewable energy,” he said.

Ameren’s rate increase was expected, with Ameren alluding to it for months. Customer groups criticized the request.

“I think like all other ratepayers for Ameren, I look at the request from a place of pretty profound skepticism,” said Acting Public Counsel Dustin Allison, whose office advocates on behalf of ratepayers in front of the commission.

The Fair Energy Rate Action Fund, or FERAF, which counts consumer groups as well as large industrial power users among its members, accused Ameren of purposely filing the request just before the holiday weekend, when it “expected fewer Missourians to be paying attention.”

“Missourians simply can’t afford to pay 50 percent more for electricity than they did seven years ago,” FERAF executive director Chris Roepe said in a statement. “We look forward to aggressively opposing this unwarranted rate hike because of the damage it would do to Missouri’s families and economy.”

The increase is almost the same for all of the utility’s customers, which are charged different rates based on how much electricity they use. Industrial and larger commercial customers would see about the same 9.7 percent increase as households. General rates last increased in January 2013, when Ameren won a 10 percent, $259.6 million increase from its regulator.

What’s different this time, however, is Ameren’s rate increase is being filed at the same time it is defending against an overearnings complaint filed by its largest customer, Noranda Aluminum.

That case, filed at the beginning of the year, seeks a reduction in rates and accuses the utility of earning $67 million more than it should have during late 2012 through September 2013.

Noranda has filed a separate request ask for a lower individual rate. Noranda consumes about 10 percent of Ameren Missouri’s power, and it has its own electric rate as a result.

PSC Chairman Robert Kenney said there was little to no precedent for a rate increase and overearnings case occurring simultaneously, but he expected the two to have little influence on each other. Hearings begin on the overearning case at the end of this month and a decision is expected in September.

“To a certain degree there shouldn’t be too much overlap, and I would imagine the decision in the (overearnings) case would come in before the rate request case,” he said. “I think that what we will have to do is weigh the evidence in each case on their own merits.”

Joan Bray, who heads the Consumers Council of Missouri, said she thought the timing of Ameren Missouri’s rate filing was influenced by Noranda’s overearnings complaint as well as its request for a lower individual rate.

“I would think it certainly might be considered a defensive tactic,” she said.

There’s good evidence that the utility is earning more than the rate set by the PSC, she said, and it is “interesting” Ameren would say it needs more money. “There’s a case going on right now, and it should be allowed to play out.”

Zacks Upgrade Ameren to ‘Strong Buy’

Before It’s News – Analyst Blog, July 10, 2014

On July 10, Zacks Investment Research upgraded Ameren Corporation (AEE) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Ameren Corporation has been witnessing rising earnings estimates on the back of strong earnings performance. The supplier of electricity and natural gas to over 3.3 million customers delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 18.69%. The long-term expected earnings growth rate for this stock is 7.5%

To maintain its performance over the long run, Ameren Corporation has long-term investment plans aimed at strengthening its operations. The company intends to invest a total of $8.3 billion on regulated infrastructure between 2014 and 2018, with roughly $1.83 billion allocated for 2014. Ameren’s 2014 spending projection reflects a 32.6% year-over-year jump.

Ameren Corporation is progressing well on its Illinois Rivers Transmission Project and plans to invest $1.4 billion in its Ameren Illinois & Ameren Transmission Company of Illinois (ATXI) ventures. The scheduled completion of these projects will enable Ameren to provide uninterrupted services to its customers.

Ameren’s focus on rate regulated operations is expected to provide stability to its revenue stream. Moreover, the company disburses regular dividends with a long-term plan to increase the payout ratio to a band of 55% and 70%. This will keep the investors interested.

Based on strong fundamentals, the company raised its earnings per share projection for 2014 to a range of $2.30–$2.50 from $2.25–$2.45. The company expects earnings per share to increase at a 7% to 10% compound annual growth rate from 2013 through 2018.

Over the last 30 days, the Zacks Consensus Estimate for 2014 increased 12.7% to $2.37 per share as two estimates were revised higher while, for 2015, one positive estimate revision lifted the consensus by 7.8% to $2.55 per share.

St. Louis Post-Dispatch, May 22, 2014

Ameren Missouri customers will be paying a little more for electricity starting later this month.

The Missouri Public Service Commission has approved an increase in the surcharge customers pay to account for Ameren’s fuel and power purchases.

The fuel adjustment clause will rise by 66 cents a month to a total of $3.63 for a residential customer using 1,100 kilowatt-hours of electricity a month. The change will take effect May 27.

The Post-Dispatch reported Ameren’s request when it was filed in late March. Ameren said it expected to raise about $57 million from the charge, which it attributed to a cold winter that kept electricity demand higher than usual.

A 2005 law allows utilities to bill customers for changes in fuel costs without waiting for their next general rate case. Ameren typically asks for adjustments three times a year, and sometimes bills decrease if the utility pays less for fuel.

St. Louis Post-Dispatch, May 14, 2014

As a rebate that subsidized rooftop solar panels nears its end, two Ameren Missouri customers have filed a formal complaint with the state’s utility regulator in an attempt to keep the money flowing.

The complaint, submitted Wednesday to the Missouri Public Service Commission, accuses Ameren Missouri of violating the state’s renewable energy law when it denied their rebate applications. State law keeps utilities’ renewable energy efforts from increasing electric rates beyond 1 percent, but the PSC never determined the program would do that, the complaint alleges.

The complaint comes just weeks before the expected end of a $2-per-watt rebate that Ameren Missouri and other investor-owned utilities in the state have to pay to customers who install rooftop solar panels. In Ameren’s case, the $91.9 million it allocated for solar rebates was spoken for at the end of last year, and installers need to wrap up projects before the end of June to claim the payments.

The rebate program was established as part of the 2008 voter-approved Renewable Energy Standard, which required investor-owned utilities to use renewables for a portion of their electricity. To help get the state’s solar industry off the ground, the law also set up the rebate.

It has proved popular across the state, but the utilities cited the 1 percent rate cap when they filed to suspend rebate payments last year.

Solar industry and other renewable advocates eventually reached deals with the utilities to avoid a sudden halt to the solar rebates. In Ameren’s territory, the utility capped their value at $91.9 million, but the solar industry has always maintained that Ameren never revealed how it arrived at that cap.

“It’s never been calculated to the satisfaction of the industry, for sure,” said Heidi Schoen, executive director of the Missouri Solar Energy Industries Association. The $91.9 million cap agreed to last year, and others covering other utilities’ territory, are “completely arbitrary,” she said.

Ameren, in a statement, said the $91.9 million was “the maximum that state law allows without adding more than 1 (percent) to our rates” and was agreed to by the solar industry, consumer advocates, industrial consumers and others.

But Deane Todd and Patricia Schuba, the two customers who filed the complaint, say state law expressly requires the PSC to calculate whether the 1 percent cap has been reached. Until then, it can’t allow utilities to stop paying the rebate. Schuba also is one of the organizers fighting Ameren over its proposed coal ash landfill in Franklin County.

Matt Ghio, the St. Louis attorney representing the complainants, said his clients weren’t bound by the agreement reached with Ameren last year setting the $91.9 million cap. He is representing other customers in a similar case filed Wednesday against Kansas City Power & Light Greater Missouri Operations, and he said he hoped to add more customers to the complaint cases in the coming weeks.

“The commission is required by law to make those determinations before they can authorize utilities to suspend payments of the rebates,” Ghio said.

St. Louis Post-Dispatch, April 24, 2014

Ameren shareholders Thursday voted down two proposals offered by activist shareholders, but the measures still drew significant support from investors at the company’s annual shareholders meeting.
The board of directors at the St. Louis-based power company had recommended that the two proposals be rejected.

The first proposal, which would have required Ameren’s chairman be an independent member of the board of directors, was backed by 26 percent of the vote cast by investors. Seventy-three percent of voted against the proposal, while 1 percent abstained.

The current board chairman is Thomas Voss, who stepped down as Ameren’s chief executive Thursday. Warner Baxter, who took over as CEO, is expected to also take the board chairmanship when Voss retires on July 1.

The second — a proposal that would require Ameren to disclose its lobbying efforts and any money given to nonprofit groups that write and endorse model legislation — was supported by 30 percent of the vote. Meanwhile, 51.5 percent voted against it, while 18.5 percent abstained.

Part of the second proposal was aimed at Ameren’s past support of American Legislative Exchange Council, a corporate-backed nonprofit group. ALEC has drawn fire from many Democrats for its role in developing and pushing model legislative bills that back conservative or pro-business causes.

As recently as August, the utility was a sponsor for ALEC’s annual meeting, according to the liberal advocacy group Center for Media and Democracy.

Ameren says that it is not a member of ALEC and that it would disclose any political contributions to that group.

“Ameren is committed to transparency, and our political contributions policy is available” on the company’s website, Ameren’s General Counsel Greg Nelson said in a written statement.

A spokesman couldn’t be reached for a comment on whether the Ameren provides any money, not just political contributions, to the organization.

Overall, the proposal votes seem to reflect investor interest in the particular subjects rather than dissatisfaction with the company’s management. On Thursday’s vote to approve compensation for top executives, only 4 percent of those votes cast disapproved the resolution versus 94 percent approving and 2 percent abstaining.

A third proposal, which would have required a detailed report on greenhouse gas emissions, had been withdrawn by the sponsor — New York State Comptroller Thomas P. DiNapoli, acting on behalf of the N.Y. State Common Retirement Fund — after Ameren improved its social responsibility report.

St. Louis Post-Dispatch, March 31, 2014

A dispute between a major employer in the Missouri Bootheel region and St. Louis-based Ameren Corp. is commanding attention from consumer groups, cities and even the world’s largest retailer, creating unusual alliances in the process.
Noranda Aluminum Holding Corp., which operates a smelter in New Madrid that employs 888 people, is seeking sharply lower electric rates, something it says it needs to preserve jobs in an economically depressed corner of the state.

If granted, the rate cut to this one business — from 4.1 cents per kilowatt hour to 3 cents — would raise the cost of electricity by at least 1.8 percent for Ameren’s other customers in Missouri, according to a regulatory filing. The average residential customer pays 10.3 cents a kilowatt hour.

Despite that, some high-profile Missouri consumer advocates are on Noranda’s side.

The reason: Noranda, in a separate complaint with the Missouri Public Service Commission, is accusing Ameren of earning millions of dollars more than the 9.8 percent return on equity allowed by the PSC. The company wants state regulators to order Ameren to reduce rates for all customers.

In the 12 months ended Sept. 30, the amount the utility overearned was at least $29.2 million, according to Ameren’s own reports. Noranda’s consultants assert the amount was even higher, $67.1 million.

Ameren has argued the reports detailing its return on equity are not a complete picture of its earnings, and that Noranda already pays less for electricity than its other customers.

The allegation of overearning surfaced last year. In March 2013, the utility released part of a report that showed its return on equity, a key measure of profitability, was 11.66 percent in 2012 — far above the 10.2 percent it was authorized by the PSC to earn at the time. The difference equaled about $80 million.

Ameren attributed higher earnings in 2012 to some unusual circumstances, including the hottest summer on record.

Consumer groups could have filed a complaint and asked for a rate reduction when the excess earnings were first identified, but they didn’t.

“That takes quite a bit of money to do,” said John Coffman, an attorney for the Consumers Council of Missouri. “No one had the resources to put that together.”

Instead, the consumer groups turned to Noranda, a Franklin, Tenn.-based company controlled by Apollo Global Management, one of the nation’s biggest private equity firms.

Unlike the PSC’s Office of Public Counsel, which advocates for ratepayers, or grass-roots consumer groups, Noranda has the resources to press an overearnings case before the PSC.

Its complaint, filed last month, set off a flurry of activity from lawyers, lobbyists, publicists, advocacy groups, municipalities. Even Wal-Mart Stores Inc. has asked to intervene, although it has not taken a public position on the cases.

The group advocating on behalf of Noranda and consumers is the Fair Energy Rate Action Fund. Charles Skoda, Noranda’s senior vice president of strategic operations sits on the board. So does Joan Bray, a former state legislator who heads the Consumers Council. Jeanette Mott-Oxford, a former state representative from St. Louis who is currently director of the Missouri Association of Social Welfare is a board member, as is the Missouri state director of AARP.

Even though it would mean higher rates for other Ameren customers, the consumer groups have not opposed Noranda’s request for a rate cut. In fact, they have even filed a motion asking the PSC to expedite its review of Noranda’s request to lower only its rates, suggesting a plant closure could hurt other customers more.

The smelter buys roughly 10 percent of Ameren Missouri’s power. If the plant were to close, the drop in demand would have to be made up somewhere, they argue.

“That closure … would cause rates to increase for all Ameren Missouri customers by an amount greater than if complainants obtain their requested relief,” the consumer groups wrote in a filing asking for expedited review of Noranda’s rate reduction request.

A sluggish global economy and rising Chinese production have hurt aluminum prices and spurred producers to trim capacity. On Friday, Alcoa announced it would temporarily shutter a smelter and reduce production at another smelter because of the Brazilian facilities’ operating costs.

Public Counsel Lewis Mills, whose office represents consumers in regulatory matters and was a party in that filing, said there’s a difference between asking for faster review and “being on board” with Noranda’s request for lower rates.

The PSC should review the case quickly, Mills said, because Noranda has threatened to shut down. If that’s true, it could harm ratepayers.

“If the commission does not act expeditiously, it will be the same as not acting at all,” Mills said.

Mills, though, said there’s a chance Noranda’s overearnings complaint could help consumers more than the company’s rate reduction request would hurt them. Still, his office hasn’t staked out a position on the smelter’s rate filing yet.

Chris Roepe, executive director of the Fair Energy Rate Action Fund, said there is no conflict between Noranda and the more consumer-oriented members of the group.

“The fact is all consumers’ rates are going to go up higher if Noranda has to buy energy on the open market or they have to close their doors,” Roepe said. “That would be a very bad thing for consumers.”

One of the parties that has taken a position on Ameren’s side, the office of St. Louis Mayor Francis Slay, also says consumers will be hurt, but for the opposite reason.

In a letter sent last week to the PSC, City Counselor Michael Garvin wrote that Noranda’s request to reduce its rates would increase consumer rates by “more than 2 percent per year for the next decade” and cost city coffers $3 million over 10 years.

Irl Scissors, director of Missourians for a Balanced Energy Future, a utility advocacy group that generally pushes bills beneficial to Ameren, criticized the consumer groups’ work with Noranda. In effect, he said, they’re endorsing a rate increase on their own members.

“It is shocking and it is indefensible that some of these groups would just walk lockstep with whatever Noranda requests,” he said.

But Mott-Oxford said her goal and the coalition’s objective is to hold down utility rates.

“You don’t have to agree with people about every single thing that they do if you have a common goal,” she said.

Noranda’s request for a special rate case is nothing new — companies ask for incentives and special treatment all the time, Mott-Oxford said. She doesn’t celebrate it, but to hold down utility rates, her organization has found more success within a coalition than acting alone, she said.

“Who would you sit down with if you had to examine everyone’s life for absolute purity?” she said.

St. Louis Post-Dispatch, March 25, 2014

Ameren Missouri’s largest customer says the utility earned $44.6 million more than legally allowed from October 2012 through September 2013, according to documents unsealed Tuesday.

Noranda Aluminum Holding Corp., which operates a smelter in New Madrid, last month filed a complaint against Ameren with the Missouri Public Service Commission, saying the utility made more money than it was allowed.

The amount, though, was unknown until Tuesday, when administrative law judge Morris Woodruff unsealed confidential documents that accuse Ameren Missouri of earning more than the 9.8 percent return on equity allowed by the PSC.

Noranda also says Ameren should be earning a smaller return on equity. Based on estimates from Greg Meyer, a consultant with Brubaker & Associates in Chesterfield who was hired by Noranda to perform the financial analysis, the utility should only earn a return of 9.4 percent on equity. Adjusting for that, Ameren Missouri earned $67.1 million more than it should have from October 2012 through September 2013.

Along with its overearnings complaint, Noranda is seeking a reduction in its electric rates, warning it may have to lay off 150 to 200 workers at its smelter later this year if it doesn’t get a break. Eventually, the company says it may have to close the plant and lay off the close to 900 people who work there.

If its plant closes, Noranda says rates for other customers will go up because Ameren will lose about 10 percent of its power demand and be forced to sell electricity in other markets for less than the new rate the smelter is asking for.

Noranda wants the commission to reduce the rate it pays Ameren Missouri to 3 cents per kilowatt hour from roughly 4.1 cents per kilowatt hour. The average residential customer pays 10.3 cents a kilowatt hour, Ameren says.

The change could result in other Ameren consumers paying up to 1.8 percent more, Noranda says. Ameren counters a rate cut for Noranda likely would raise rates for other consumers by 2 percent.

The Office of Public Counsel earlier this month asked that documents be made public detailing Noranda’s overearnings allegations. They were redacted because they came from a confidential PSC report, known as a surveillance monitoring report. But the public counsel, which advocates on behalf of ratepayers, argued it was unable to explain Noranda’s complaint to its clients — the public — without knowing more.

Warren Wood, Ameren Missouri’s vice president of legislative and regulatory affairs, acknowledged that the surveillance report data shows the utility overearned by $29.2 million during the 12-month period ended September 2013.

But he said surveillance reports are a poor indicator to determine whether a utility is earning more than allowed because the allowed return is more of an average than a ceiling.

“The expectation is you’ll bounce around that number over time,” he said.

Ameren Missouri has invited the PSC to conduct a “cost of service” study if it is concerned the utility is overcharging customers. Either way, Ameren Missouri plans in July to ask the commission for authority to raise rates, which will trigger a larger rate review study that Ameren said it welcomes.

Wood called Noranda’s overearnings complaint a “distraction” designed to divert attention from the aluminum company’s other case pending in front of the PSC that would lower its rates at the expense of other customers.

Noranda, for its part, says it hasn’t shied from the fact that its proposal might affect household rates. But it has argued that its plant’s closure would hit Ameren customers harder.

“Our rate design proposal is revenue neutral to Ameren,” John Parker, Noranda’s vice president of communications, said. “We’ve been very open about the impact our proposed rate design will have on other consumers.”

Parker also defended the company’s use of the surveillance reports in its overearnings calculations. “There’s a reason the Public Service Commission insists they file these reports quarterly,” he said.

The Missouri Retailers Association, the Consumer Council of Missouri and the AARP have all filed responses with the PSC saying the reports show that Ameren earned more than allowed and should reduce rates.

St. Louis Post-Dispatch, March 8, 2014

To understand the latest dispute between Ameren Missouri and its biggest electricity customer, Noranda Aluminum, think about pie.

Ameren, the investor-owned monopoly utility company, is always hungry. It likes pie.

When Ameren wants to charge more for the electricity you use, it asks the Public Service Commission for more pie. Over the past six years, Ameren has been gluttonously successful in grabbing a 43 percent bigger pie.

When rates go up, the PSC does a couple of important things. First, it sets a profit target for Ameren which the company isn’t supposed to regularly exceed. Second, it divides shares of the pie among all the consumers. Those consumers, from big industrial users of the most power to senior citizens on a fixed income, generally negotiate and come to consensus on which part of the pie they will fund.

The biggest consumers, such as the New Madrid aluminum smelter owned by Noranda, get the lowest rates. Other big manufacturing companies, like Boeing and Anheuser-Busch InBev, also pay less per kilowatt hour. Residential customers pay the most per kilowatt hour because it is less efficient to distribute electricity to individual homes than big manufacturing plants.

Usually, the consumers, big and small, gang up on Ameren to try to make the entire pie smaller.

That context is important in understanding two recent filings with the Public Service Commission by Noranda.
The company, which is owned by private equity giant Apollo Global Management, is asking the PSC to lower its rate, already the lowest rate in the state. Noranda currently pays a little more than 4 cents per kilowatt hour of electricity; it wants to cut that by 25 percent, to 3 cents.

For comparison, the rest of us pay a little more than 7 cents per kilowatt hour. Noranda also wants the PSC to declare that Ameren has been making more money than it is supposed to.

In many ways, the first request is just another case of a big company exerting its oversized influence to obtain a taxpayer (or ratepayer) subsidy. How big? The rate cut would shift about $500 million over 10 years onto the rest of us. For what Ameren calls its typical residential electric customer, that increase could cause a monthly bill of $104.50 to go up by about $2.09.

That doesn’t sound like a lot. But it adds up. So it’s curious that consumer groups aren’t making much noise about Noranda’s rate-cut request.

Joan Bray, executive director of the Consumers Council of Missouri, says this about Noranda: “They have been on the side of consumers.”

Indeed, that’s true. Hence Noranda’s second filing, which accuses Ameren of eating an extra helping of pie.
On behalf of all consumers, Noranda is asking the PSC to determine that Ameren has earned more than the 9.8 percent profit level set during the utility’s last rate case.

Ameren, through its vice president of legislative and regulatory affairs Warren Wood, denies it is taking in more profits than allowed by the PSC.

“The complaint is without merit,” he told us.

OK, then, why won’t Ameren simply open up its books?

That’s what the consumers have been asking them to do for months. It is something Ameren has done previously when accused of overearning, most recently in 2012. In fact, lawyers for parties to Ameren’s most recent rate case already have seen the confidential financial reports that ultimately will determine whether the PSC tries to order Ameren to reduce its rates. It seems highly unlikely that Noranda would file an expensive PSC overearnings case without already knowing the answer it seeks.

In effect, Noranda is asking the PSC to (a) first reduce the overall portion of pie that Ameren gets to eat, and then (b) also reduce the aluminum smelter’s portion of its pie.

The smelter argues it needs a lower rate to compete, pointing to several consecutive quarters of net losses. It says its competitors in other states have obtained even larger rate cuts. Noranda suggests that unless it gets its rate cut, it will have to fire employees or shut down completely.
That argument isn’t without merit, but it’s hard to swallow when Leon Black, the chief executive officer of Apollo, made $546 million last year, more than any other private equity firm boss. Here’s how Crain’s business magazine described his obscene haul:

“Mr. Black’s pay, which was in cash, was about 25 times higher than the amount awarded to Goldman Sachs CEO Lloyd Blankfein or JPMorgan Chase’s Jamie Dimon, who are paid mostly with stock. It is more than double the New York Yankees’ payroll and, for those keeping score at home, 10,702 times more than median household income in the U.S.”

This is the very picture of income inequality in America. For Mr. Black, $546 million wasn’t enough. He needs to squeeze a few more pennies out of grandma next year or he’s going to take his aluminum smelter and go home.

It’s distasteful. And, yet, without Noranda, who keeps Ameren’s runaway greed in check?

Our hope is that the PSC dials back the gluttony of both behemoths.

Save some pie for grandma.

Fox 4 News WDAF-TV Kansas City, February 24, 2014

Missouri Gas Energy wants a $23 million rate hike. It says the increase is needed to help with pipeline and service line costs, lines that bring warmth to homes and business.  The energy company says if the Missouri Public Service Commission grants its request, residential customers will pay an extra $2.33 a month.  That’s money some customers believe is not just to build pipelines but to line the pockets of company executives.

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