Utility regulators asked to reconsider Ameren rates

Friday, June 1, 2007

JEFFERSON CITY, Mo. -- Ameren Corp. wants more money from its electricity customers. The state thinks it should get less.

Both asked the Missouri Public Service Commission on Thursday to reconsider last week's decision approving a $43 million annual rate increase for Ameren's 1.2 million Missouri electric customers. Other parties also filed rehearing requests by Thursday's deadline.

The rehearing motions, which are common in utility rate cases, illustrate how no one was completely satisfied with the PSC's decision. If they remain disgruntled, the next step would be to appeal the case to circuit court.

Ameren claims utility regulators failed to properly account for the depreciating value of its power plants and set a return on equity, or profit, that was unreasonably low. Among other things, the St. Louis-based utility also argues the PSC should not have denied its request for a fuel adjustment clause, which would have allowed its customer rates to vary in the future based on the cost of the coal and natural gas used to produce electricity.

Attorney General Jay Nixon, representing the state, counters that the PSC should have granted Ameren a lower return on equity, should have assumed it could earn more money by selling pollution control credits and failed to fully account for the December 2005 collapse of Ameren's Taum Sauk reservoir.

Ameren has assured that no costs associated with the reservoir collapse will be passed on to customers. But Nixon's office asserts the PSC decision fails to account for the wholesale electricity Ameren could have sold from the hydroelectric plant, which could have lowered the rates charged to its Missouri consumers.

"Ameren is not entitled to any rate increase, and should have received a rate cut from the PSC," as had been sought by Nixon's office, staff of the PSC and the state's official consumer advocate, Nixon said in a written statement.

Ameren, by contrast, originally requested a $361 million rate increase.

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.

Ameren suggests the PSC should have used a Midwest average as a basis for deciding its rate of return. Its rehearing request asks for a rate of at least 10.9 percent.

By contrast, Nixon claims the PSC provided no justification to set the rate of return higher than 9.8 percent.

Among its other conclusions, the PSC assumed Ameren would have $230 million in annual wholesale electricity sales, which help hold down consumer rates. Nixon contends the PSC should have assumed even higher wholesale electricity earnings while Ameren claims the PSC should have assumed wholesale earnings of $202.5 million.

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