PSC OKs increase for Ameren customers

Wednesday, May 23, 2007

JEFFERSON CITY, Mo. -- Millions of Missourians will pay more for their electricity as a result of a roughly $43 million annual rate increase granted Tuesday to Ameren Corp.

A majority of Missouri Public Service commissioners said they were sending the embattled utility a message that it needs to improve its reliability and customer service in approving a rate increase that was just a fraction of the $361 million Ameren requested.

An Ameren spokesman expressed disappointment.

But others said any increase was sending the wrong message after, in one year's time, Ameren customers suffered through several prolonged power outages from summer and winter storms and the utility's Taum Sauk reservoir ruptured.

Attorney General Jay Nixon immediately said he planned to appeal on behalf of the state, continuing to push for a rate cut.

The Public Service Commission's decision should result in a monthly increase of about $2.33 for an average residential customer, or about 3.3 percent, the PSC said.

Ameren serves about 1.2 million electric customers in Missouri, making it the state's largest utility.

"We expect Ameren to take this money and use it to enhance the reliability of their system, to improve their customer service," PSC chairman Jeff Davis said.

But Ameren spokesman Mike Cleary said the rate increase fails to provide Ameren the money necessary to make all of those improvements.

"We're obviously disappointed," Cleary said. "Improved reliability comes at a cost."

The PSC voted 4-1 to approve the rate increase, with Davis joined by commissioners Connie Murray, Robert Clayton and Lin Appling. Commissioner Steve Gaw, whose term is about to end, cast the lone dissent.

Gaw said he would have imposed a roughly $64 million rate decrease on Ameren, largely in response to hundreds of people who expressed frustrations with Ameren's storm-related power outages.

"The bottom line here is I would adjust their return downward to reflect that poor performance," Gaw said.

The rate increase is Ameren's first since 1987. Since then, the company says its costs to consumers have fallen by 13 percent.

State Public Counsel Lewis Mills, who represents consumer interests, also had urged the PSC to force a rate reduction. Although Ameren may not be satisfied with the increase it got, "Ameren's the winner, because they're getting a rate increase when they don't deserve one," Mills said. "Everyone else is the loser."

The rate case turned on several issues.

One was whether to assume that AmerenUE, the subsidiary that serves Missouri, could continue to get lower-cost energy from a Joppa, Ill., coal-fired electricity plant in which Ameren has an ownership interest. The PSC majority decided it could not make that happen because the plant is governed by a legally separate board. Had the PSC decided the other way, the estimated $63 million to $75 million in savings could have flipped the PSC's order from rate increase to a rate decrease.

The PSC granted Ameren a 10.2 percent rate of return on its equity, significantly less than the 12 percent sought by the company and slightly below the national average for other investor-owned utilities that control their own generation, transmission and distribution systems, Davis said.

The rate case also factored in the depreciating value of Ameren's power plants, including its Callaway nuclear facility, the amount of pollution control credits it's able to sell and the amount of electricity it likely can sell on the wholesale market.

The PSC assumed, for example, that Ameren can earn about $230 million annually through wholesale electricity sales. That helped keep the consumer rate increase from being higher.

Ameren has said none of the costs associated with the December 2005 Taum Sauk reservoir failure would be passed on to consumers.

But the public counsel's office questioned that assertion, claiming relatively late in the rate-case process that Ameren's consumer prices could be as much as $10 million lower if it had included projections for how much wholesale electricity could have been sold from the Taum Sauk hydroelectric plant.

The PSC rejected that assertion in its decision but directed its staff to look into the matter.

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