State hearing begins on AmerenUE rate case

Tuesday, March 13, 2007

The Associated Press

JEFFERSON CITY, Mo. -- State attorneys ridiculed AmerenUE as a disappointing and arrogant monopoly on Monday as the state's largest electricity provider defended its request for its first rate increase in 20 years.

AmerenUE is seeking to raise rates by as much as $361 million for its 1.2 million Missouri electric customers while staff for the state Public Service Commission, which regulates utilities, wants Ameren's rates to be cut by as much as $168 million.

As the PSC began what's expected to be a three-week long hearing, an attorney for St. Louis-based Ameren Corp. noted that an entire generation of Missourians has grown up since the company was last granted a rate increase in 1987. Since then, Ameren's cost to consumers fell 13 percent, he said.

"AmerenUE's rates have been -- and continue to be -- very, very low as compared to the rates of other investor-owned utilities in Missouri," the Midwest and the nation, said Ameren attorney James Lowery.

But the company needs to be allowed to earn additional money to ensure its financial strength, bond rating and ability to make infrastructure improvements, he said.

Ameren was heavily outnumbered in a hearing room full of about two dozen attorneys representing utility regulators, residential consumers, large industries and retail businesses.

Kevin Thompson, the general counsel for the PSC staff, mocked Ameren's request by claiming he almost wasn't able to rise in opposition because "I was weeping so hard" about Ameren's need for more money.

Thompson called Ameren "a disappointing company," citing the December 2005 failure of Ameren's Taum Sauk hydroelectric reservoir that unleashed over 1 billion gallons of water on a popular state park and seriously injured the park superintendent's family.

He also chastised Ameren's "repeated failures" to "keep the lights on in St. Louis" during some severe summer and winter storms last year.

"There is a great deal of public frustration, even outrage, against this company," Thompson told the administrative law judge and five Public Service Commission members presiding over the case.

State Public Counsel Lewis Mills, who represents consumer interests, amplified Thompson's disappointment, arguing, "This case is more about arrogance and greed" by Ameren.

Assistant Attorney General Douglas Micheel, representing the state Department of Economic Development, said Ameren's requested rate increase was unreasonable and its arguments "unique, creative, aggressive and mostly wrong."

But Lowery said the rate decreases advocated by others would force Ameren's rates to an "unreasonably low level" at the same time the utility is paying dramatically more for the materials it needs to supply electricity. Since 2002, the cost of copper wire has risen 147 percent and the cost of transformers has gone up 57 percent, he said.

As the hearing began, the gap appeared to narrow between what Ameren and the state are seeking. A PSC staff analysis showed Ameren's requests amounting to a $251 million increase and the staff's equaling a $88 million decrease. The analysis showed that the Office of Public Counsel's positions would amount to a nearly $179 million decrease in Ameren rates.

Among the technical issues at stake in the hearing is how much depreciation in value Ameren should be allowed on its Callaway County nuclear plant and how a particular Illinois coal-fired electricity plant should factor into the equation.

Also at issue is the revenue Ameren receives from wholesale electricity sold outside its service area and the percentage of profits it should be allowed to earn. Ameren is seeking approval for a 12 percent return on equity; others opposing that are suggesting an equity return of between 9 percent and 9.8 percent, Thompson said.

Attorney John Coffman, a former state consumer advocate now representing AARP, urged that Ameren -- either voluntarily or by PSC order -- should provide customers discounts anytime they lose power for a couple days. He also urged commissioners to give great weight to the public's criticisms of Ameren at previous hearings around the state.

Diana Vuylsteke, an attorney representing the Missouri Industrial Energy Consumers, claimed Ameren's "potentially crippling rate increase" was "similar to a large tax increase that could kill jobs" and hinder the expansion of businesses.

While state regulators considered Ameren's rates, the Federal Energy Regulatory Commission held public hearings Monday on Ameren's plans to rebuild the Taum Sauk reservoir. Federal regulators previously concluded Ameren delayed critical repairs that could have prevented the collapse.

Environmental groups urged federal regulators to consider rebuilding the reservoir only as part of a broader, lengthy review of whether to renew Ameren's license to operate it. They said considering the rebuilding separately blocks discussion of other issues, such as the overall impact on wildlife, water flows and problems that led to the reservoir's collapse.

Ameren's actions "reveal a long-standing pattern of putting corporate profits above public well-being," said Dan Sherburne, research director for the Missouri Coalition for the Environment. "Ameren should not be allowed to rebuild before establishing its commitment to public interest."

Federal regulators said that because the dam breached, it is a rebuilding process that falls under its dam safety regulations, rather than a re-licensing proposal.

Also at the meeting, Ameren engineering consultant Paul Rizzo outlined features of the new dam. The design calls for construction of concrete walls and overflow release valves to prevent catastrophic overtopping, with outside walls built 3.5 feet higher than where the water should crest. The dam would also be designed to withstand a sizable earthquake.

Associated Press Writer Kelly Wiese contributed to this report.

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