AmerenUE to pay $10 million fine

Tuesday, October 3, 2006

AmerenUE will pay $15 million to settle federal claims stemming from the December reservoir collapse that sent more than 1 billion gallons of water surging through a state park, the Federal Energy Regulatory Commission announced Monday.

The utility agreed to pay a fine of $10 million to avoid prosecution for alleged violations of its license and another $5 million for community improvements in the area around the reservoir. In addition, AmerenUE has agreed to adopt new safety measures at its hydroelectric stations.

The fine announced Monday is by far the largest ever imposed by the FERC, chairman Joseph Kelliher said during a news conference in Washington, D.C. "This was a very serious incident," Kelliher said. "There was no loss of life, but there was a very serious threat."

The federal action announced Monday doesn't alter any plans for state civil or criminal action against AmerenUE, said Scott Holste, communications director for Missouri Attorney General Jay Nixon. The state investigation is continuing, he said, and no decision has been reached on possible litigation.

"The penalty that was announced today does not help Missourians at all," Holste said. "Two-thirds of it is going up to Washington. We are certainly very much pursuing our investigation with the goal of having Missouri interests made whole."

Gov. Matt Blunt took a similar tone in a statement issued after the fine was announced. AmerenUE has been paying for the cleanup of the Black River, which was choked with sediment and debris by the breach on Proffit Mountain, and state officials are demanding that they continue the payments.

"To fully compensate the state of Missouri and its citizens, significantly more will be needed," Blunt said.

Ameren has already spent more than $44 million on clean-up, covering property damage claims, business claims and costs for the state, said Tim Fox, spokesman for the utility. The company anticipates spending another $19 to $39 million, he said, not including the $15 million announced Monday.

Most of those costs will be covered by insurance policies, and $10 million of the federal fines will be taken from earnings, Fox said. He was unsure if the utility would seek to include the $5 million for community improvements in the formula for setting rates. AmerenUE is seeking a rate hike for its electric customers in Missouri.

"We have from day 1 of this incident stated that we are taking responsibility for the breach," Fox said. "We have cooperated fully with federal and state agencies, and we chose to enter into this consent agreement rather than engage in prolonged litigation."

Shortly after the retaining wall collapsed at about 5:20 a.m. Dec. 14, a wall of water and debris struck the home of Jerry Toops, superintendent of Johnson's Shut-Ins State Park. Toops, his wife Lisa and their three children were swept from their beds and deposited hundreds of yards away. The youngest child was hospitalized for three weeks as a result of injuries and hypothermia.

The release closed Johnson's Shut-Ins for months, kept the park from being fully used this summer and left the Black River running gray with sediment for weeks. Blunt has suggested that AmerenUE make a large donation to the state to compensate for the lost recreation and business opportunities and has pointed to options such as AmerenUE acquiring and turning over to the state as recreational opportunities the Rock Island railroad corridor and Church Mountain.

"The value of an 80-year-old forest cannot be translated into a dollar amount," Blunt said, referring to the wooded portions of the Shut-Ins.AmerenUE reached a settlement with the Toopses soon after the last of their children was released from the hospital.

AmerenUE made no admission of guilt in accepting the negotiated settlement, Kelliher said.

An investigation by the commission found that AmerenUE violated its license to operate the Taum Sauk Hydroelectric Project on numerous occasions prior to the breach. The first violation occurred Sept. 25, 2005, when water overflowed the top of the reservoir wall, Kelliher said.

The Proffit Mountain reservoir held water that was released to power generators, then pumped back to the top of the mountain from a dam on the Black River.

AmerenUE should have reported that overflow, Kelliher said. According to the commission's order approving the settlement, AmerenUE was also accused of failing to notify federal regulators of several steps taken as a result of the Sept. 25 overflow, including:

* A discovery that water gauges weren't working properly

* An adjustment in the instrument readings in an attempt to prevent overflow

* A decision to set the levels for automatic shut-off gauges higher than the highest point on the reservoir wall.

In addition to the fines, AmerenUE has established a dam safety office within the utility with authority to shut down any hydroelectric station when safety concerns become an issue. The utility was waiting for regular annual maintenance to fix the water gauges at the Taum Sauk project, according to documents released by FERC.

AmerenUE hasn't decided whether to rebuild the reservoir. "We wouldn't move ahead unless all the safety and economic considerations justify doing that," Fox said.

FERC will be watching closely if the reservoir is rebuilt. While no material flaws were found in the construction, Kelliher said, the reservoir was more than 40 years old when it collapsed. "If they pursue rebuilding we will go through the engineering details with great care," he said. "If it is rebuilt it will be a very different project than what failed in December."

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