Jefferson City News Tribune, October 6, 2014
The Fair Energy Rate Action Fund, or FERAF, thinks the Missouri Public Service Commission got it wrong last week.
With a unanimous vote, the five-member commission on Wednesday said that Noranda Aluminum had not made its case that Ameren had taken in more money than its current rates allowed, making those rates “unjust and unreasonable.”
“Ameren’s own quarterly reports show it has earned excessive profits for the past 33 months,” Chris Roepe, FERAF’s executive director, said in an email. “We are disappointed that Ameren was not told to lower all customers’ rates by millions of dollars because of its over-earning.”
In part of last week’s 22-page order denying the over-earnings complaint, the PSC seemed to agree with the over-earnings claims, based on the “surveillance” reports Ameren must file with the commission every quarter: “The September 30, 2013, surveillance report shows that Ameren Missouri earned an actual return on equity of 10.32 percent for the twelve months ending September 30, 2013.
“Ameren Missouri’s authorized return on equity, established in its last rate case, was 9.8 percent.
“Those numbers would indicate that Ameren Missouri earned approximately $29.2 million more than its authorized rate of return during that period. Earlier surveillance reports also show that Ameren Missouri earned more than its authorized rate of return in those periods.”
But, the commissioners added, “It is important to understand that the earnings levels reported in the surveillance reports are actual per book earnings of the utility and cannot be compared directly to an authorized return on equity to determine whether a utility is over-earning.
“Actual per book earnings are often computed differently than earnings used for the purpose of establishing rates.”
Additionally, the commissioners noted, book earnings fluctuate from month-to-month and season-to-season, as power demands change. Nor do they account for planned expenses that haven’t happened, yet — such as rebates Ameren must pay to customers adding solar units, and capital improvements being made to Ameren’s distribution system.
The commission sees the return-on-equity number it sets in a rate case as a target that the utility will sometimes be above and, other times, be below.
But FERAF, and others, argue that it is a cap, a top limit to a utility’s earnings.
“This is money taken directly out of the pockets of Missouri families, who have nowhere else to get their electricity because Ameren is a monopoly,” Roepe said. “We can’t imagine a more blatant case of over-earning by a monopoly than this one.”
In a separate, also unanimous vote, the PSC on Wednesday rejected several formal motions — and numerous letters from politicians — to rehear Noranda’s request for a substantial reduction in the rate it pays to buy electricity from Ameren Missouri.
The commission on Aug. 20 denied Noranda’s request to cut its electric rate by about 25 percent and — to keep Ameren’s income revenue-neutral — raise all other customers’ rates by around 2 percent.
In that case — as well as the over-earnings case decided last week — the commissioners said Noranda’s evidence presented both in prepared testimony and in the PSC’s formal hearings ultimately didn’t make the case that it needed a better rate for its electricity than the lowest rate of any Ameren customer.
Commissioners have approved that lowest rate because Noranda’s demand for electricity is constant and predictable, and Ameren’s costs to provide that power are less than its costs for most other classes of customers.
But, the commissioners said in the August order: “Missouri law forbids a utility to charge a rate that gives an undue or unreasonable preference to any particular customer or class of customers, and the Commission cannot lawfully approve such a rate.
“Since the Complainants are asking the Commission to order Ameren Missouri to charge Noranda a rate that is not based on the utility’s cost to serve that customer, they bear the burden of proving that such a subsidized rate is just and reasonable and is not an undue or unreasonable preference to a particular customer.
“The Complainants have not carried that burden.”
After the commission denied the rate-change request in August, the company said it would have to lay off up to 200 of its nearly 900 employees.
After the formal hearings in June, but before the PSC issued its order, Missouri’s Public Counsel’s office proposed an alternate rate-change idea that would reduce Noranda’s rate by about 16 percent and raise other customers’ rates by only about 1 percent.
Gov. Jay Nixon and most of the lawmakers from Southeast Missouri also backed the idea.
Before casting last week’s vote against rehearing the rate-change request, commissioners again noted the parties still could reach a compromise as part of Ameren’s new rate case, which the PSC must decide by next May.
But Noranda spokesman John Parker said that “will likely be too late for the 125 to 200 employees whose jobs will be lost based on the PSC’s decision.”
And state Sen. Doug Libla, R-Poplar Bluff, said in a news release: “The PSC missed yet another opportunity to do something crucial for our rural economy, especially for Southeast Missouri.
“This lack of leadership for Missouri ratepayers by the PSC and Governor Nixon is frustrating. We need urgent action now by the Governor to protect these jobs, families, and communities.
“This lackluster effort and reasoning is both puzzling and very disappointing.”
State Sen. Jason Holsman, D-Kansas City, also weighed in, sending commissioners a copy of a Sept. 24 story from an American Metal Market publication, reporting that Niagara Worldwide won’t re-open a smelter it bought in Ohio, because of an “electricity rate (that) is simply too high.”
Holsman also urged the PSC to rehear the rate change request, “allowing Noranda to operate for years to come.”
Commissioners have said, repeatedly, that economic development isn’t their responsibility.
In August they wrote: “A request for an economic development subsidy of this magnitude is more properly directed to the Missouri General Assembly.”