Ameren Missouri’s Proposal Puts Electric Utility Rates on Autopilot

St. Louis Business Journal, March 22, 2013

Editor:

I beg to differ with your editorial regarding Ameren Missouri’s bill before the General Assembly this year asking for a new surcharge that would let it get more money faster from customers to build new facilities.

Missouri has benefited from a fair ratemaking process for many decades. In a regular rate case, all financial aspects of a utility — its revenues and expenses — are examined to determine a rate increase and a return on equity. One way to look at the rationality of the system is to note that over time, the Public Service Commission has tended to grant a utility about half the rate it asks for. But, in recent years, with term limits rotating legislators unschooled in the complexities of utility law and regulation through the Capitol, the proverbial level playing field has begun to slant steeply upward, away from consumers.

In 2005 the utilities convinced the Legislature to let them add special issue surcharges to customers’ bills. As a result, in the past five years Ameren’s customers have seen their rates rise 43 percent from four rate cases and the regular imposition of a fuel surcharge. This spanned the entire recession, when Missouri’s families struggled with job losses and underemployment and many businesses wrestled with staying afloat. Meanwhile, Ameren was granted a profit of around 10 percent. The surcharge Ameren seeks is far more expansive than that allowed water and gas utilities.

Now it comes to light that last year Ameren exceeded its allowable profit by $80 million. At the same time, the company began arguing that it needs to shift the risk for building new projects to customers by levying a surcharge.
At no time during the rate case that concluded in December did the company present a list of capital projects that it couldn’t afford to build. Quite the opposite. Its CEO testified under oath that the company had no capital projects it needed to pursue immediately to provide safe and adequate service.

But in January it came to the General Assembly, surcharge bill in hand. Under Ameren’s proposal, Senate Bill 207 and House Bill 398, rates would no longer be given a thorough audit before increasing. What consumer protections that remain would be bypassed; no longer could we expect the Public Service Commission to scrutinize rates and reduce unreasonable and questionable expenses. Rates would essentially be put on autopilot.

Your editorial presents a misreading of the PSC analysis. In fact, Ameren Missouri customers would pay $40 million more in the first year of an infrastructure surcharge. And, as pointed out by the state’s official consumer watchdog, the Office of the Public Counsel, the surcharge would automatically rise each year after.

Yes, it is in the self-interest of consumer groups to oppose Ameren’s grab for fast cash. Those consumers are millions of Missouri households straining under financial pressures, as well as Missouri businesses who aren’t rebounding from the recession, while Ameren gives its CEO a 9 percent increase in his compensation.

Joan Bray, Board President, Consumers Council of Missouri

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