Utility rate rule changes debated

Wednesday, August 30, 2006

State commission discusses the possibility of a fuel adjustment surcharge.

Electric rates could rise -- or fall -- up to four times a year under proposed Missouri Public Service Commission rules changing the way utility companies charge customers.

The new rules, which would take effect this fall if approved, are the commission's response to a bill passed last year by the Missouri Legislature. Under the rules, electric customers would be subject to fluctuating prices similar to the changes seen in natural gas rates.

Called a fuel adjustment surcharge, the rule would allow consumer prices to rise more quickly, reflecting a utility's changing costs for fuel to fire power plants or changes in the costs of power purchased from another electric company, said Warren Wood, PSC director of utility operations.

Any company winning approval for a fuel cost surcharge would be subject to annual reviews of actual costs to make sure it is not making a windfall profit on the rate change, Wood said. Any overcharges would have to be returned to customers with interest, he said.

At a sparsely attended public hearing Tuesday evening on the Southeast Missouri State University campus, all of those testifying questioned the need for the rules. And they said utility companies should not be able to pass on unlimited cost increases.

Bill Hinckley of Cape Girardeau, plant manager for BioKyowa, said his firm spends $1.75 million annually for electricity. "Missouri has maintained healthy utilities and low rates without such surcharges," he said.

Missouri regulates utility prices by comparing revenue from current rates with the costs of doing business plus enough profit to keep the utilities attractive to investors.

Currently, rates are charged only when the utility requests an increase, or a complaint case is filed alleging the rates are too high.

AmerenUE, which provides electricity in Cape Girardeau, has had stable or falling prices since 1987.

The utility is currently seeking a 17.7 percent increase in overall rates. Residential customers would pay an additional 10 percent, while commercial customers would be charged from 23 to 29 percent more.

AmerenUE also wants to include a provision allowing it to file for fuel cost adjustments.

AmerenUE's rate increase request is part of a rate case, in which all aspects of the company's business are scrutinized to determine if the rate increase is justified. Fuel cost adjustments would not require that level of scrutiny. Instead, the change would take effect if the utility showed it had incurred changing costs.

Hinckley testified that allowing utilities to change rates without tough scrutiny eliminates incentives to control other costs to maintain profits. A utility should be required to show a valid financial need before increases for fuel costs would take effect, he said.

No business in a competitive industry would sign a contract allowing a supplier to increase prices at any time because the supplier experiences cost increases in a single area, he said. "That is what the utilities are asking you to write into their contract with us," Hinckely said.

The public hearing was conducted via video-conferencing in the Glenn Auditorium at Dempster Hall. Colleen Dale, chief regulatory law judge for the PSC, presided from Jefferson City while the public gave testimony.

Dale was joined by PSC chairman Jeff Davis, who said prior testimony and comments on the proposed rule have focused on the way electric rates could change constantly under the rule.

"One thing I have heard from consumers all over this state is they do not like volatility more than anything else," Davis said.

Tom Wiginton of Cape Girardeau testified that he worries about big increases in his bill from one month to the next. He said the rule should be written so utility companies are required to absorb at least a part of rising costs before increasing prices.

Kevin Priester, water system manager for Cape Girardeau, noted that the city charter limits water price increases to no more than 5 percent per year. Any surcharge rule should require a detailed breakdown of a utility's fuel costs so that any increases are as small as possible, he said.

The comment period on the rule will end Sept. 7. The PSC plans one more public hearing, in Joplin, on Sept. 6, said Gregg Ochoa, spokesman for the commission.

The commission is also accepting written comments at Missouri Public Service Commission, P.O. Box 360, Jefferson City, Mo., 65102. Comments should reference case No. EX-2006-0472.


335-6611, extension 126

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