Ameren files to raise electric rates

~ The electricity price increase would be 10 percent for residential customers, more for commercial customers.

On Friday afternoon AmerenUE filed for an electric rate increase that would spike bills across the state by an average of 17.7 percent next year. The increase, if approved, reflects rising coal and transportation costs and would be the first rise in electricity prices since 1987, Ameren officials said.

Ameren is also requesting an increase in natural gas delivery charges that would result in an average 6.4 percent increase in gas bills. Cape Girardeau is the largest city in Illinois or Missouri to depend on Ameren for both its gas and electric services.

The company's filings will be evaluated by the Missouri Public Service Commission, a state utility regulatory board whose commissioners are appointed by the governor. The PSC has a maximum of 11 months to make its decision, so the changes would take effect no later than June 2007. The raises, which would apply to all 1.2 million AmerenUE customers in Missouri, would annually generate an additional $361 million from electric bills and $11 million from gas bills.

But not all consumers will be affected equally. Ameren said it will seek to cap the increase on residential rates at 10 percent. That means the average user who consumes 1,000 kilowatt-hours per month would see a bill rise from $66 to $72 under the plan.

Commercial customers such as retail stores would pay 23 percent more, and larger industrial customers would pay 29 percent more. The assumption of tiered pricing is that commercial customers can pass on higher prices to consumers while homeowners cannot, officials said.

But some local businesses fear the rising costs.

Steve Leus, the plant manager at the Buzzi Unicem USA at 2524 S. Sprigg St., said the proposal was shocking. Buzzi, the cement manufacturer formerly Lone Star Inc., is the largest electricity consumer in Cape Girardeau.

"I knew they were thinking about raising prices, but this is unbelievable," Leus said. "This would be a tremendous price increase on our cost of power. If you're talking 29 percent, you're talking big bucks, and you're talking about a major impact on our costs. I'd like to know why they're doing it."

Leus said his plant uses as much as 18,000 kilowatt-hours per month and gets monthly electric bills ranging from $300,000 to $800,000.

The increase would mean the plant's bill would be $240,000 higher during peak months.

"We have tremendous horsepower in this plant, and it takes a lot of energy to run this plant. Obviously this would make our unit cost of producing a ton of cement jump considerably," Leus said.

Small businesses will also be hit hard. Barry Robinson, owner of Cup 'n' Cork at 46 N. Main St., said high energy bills will hurt customers more than anyone.

"It ultimately hits the consumer because they get hit at home and then they get hit again when they go out in the public to do their shopping. The retailer is forced to pass energy costs on to the customer just to stay in business," he said.

Robinson said his electric bill last month was $700. He shuddered at the prospect of that bill jumping to $860.

"It just means you've got to make a choice: Either you keep the AC running and the lights on or you open up all the doors, turn off the lights and let the flies come in," he said. "I certainly hope Ameren is looking at the bigger picture because, honestly, if I was thinking about going into business right now and I heard about this rate hike, I'd rethink it."

For the past four years Ameren has been under a PSC-ordered electric rate moratorium that expired June 30. Ameren officials insist the increase is warranted but must wait for PSC to make the final judgment.

"We believe our filing today represents our true cost of doing business," said Ameren vice president and controller Marty Lyons. "In these cases it is typical that different people take different views of data. So whether the commissioners or staff or other interveners believe in our case in whole or just in part is yet to be seen. But we believe this is a fair and accurate response to the rise in our costs."

Ameren officials point to the fact that since 1987 electric rates have dropped by an average of 6 percent in Missouri. In 2004, Ameren instituted the last phase of a PSC-ordered three-part $110 million reduction in Missouri electric rates.

"If you ask people when was the last rate increase, a lot of them think it was recently, but it's not true," Lyons said. "Since 1987, as rates have gone down, consumption has actually increased by 30 percent. People have added computers, refrigerators and cell-phone chargers. That's why their bills are up."

Overall, Missouri electric rates are 30 percent below the national average. This has been maintained through a mixture of price-stable power sources like nuclear power, coal and hydroelectric power.

However, the stability of coal prices has begun to slip. At the beginning of 2006, Ameren projected its coal and transportation costs would rise between 10 and 15 percent during the year. Experts project the costs to rise another 15 to 20 percent in 2007.

Coal represents the largest expense line item on Ameren's balance sheet and is the source of 80 percent of the energy it produces.

Despite the fluctuations, Wall Street has shown continued confidence in the health of the company. Last year, Ameren stock rose $3.13 per share. In 2005, Ameren Corp's net income was $606 million compared with $530 million in 2004, a rise of 14 percent.

But Lyons said the move is needed if the company hopes to stay competitive. "Across the board, the cost of doing business is going up significantly, and our investment in infrastructure and our plant up substantially," he said. "It's important that the utility stay financially healthy because we've got to be able to attract capital investment."

Lyons pointed to more than $1 billion in modifications Ameren will make to its plants over the next 10 years to reduce sulfur and mercury emissions to meet EPA requirements. Ameren has also invested $2.6 billion in infrastructure since 2002.

Ameren took hits in PR and its pocketbook from the collapse of its Taum Sauk reservoir. The damages and liabilities from the breach and resulting flood at the power plant are estimated by the corporation to cost between $53 million and $73 million.

The Missouri Department of Natural Resources announced Friday that it will intervene in the rate case to ensure that Ameren does not seek to recoup any costs relating to the Dec. 14 accident through consumer billing.

On May 15 of this year, the PSC announced a formal investigation to determine whether Ameren is charging unfair rates for its electricity. Ameren's current request for a rate increase will be handled separately from the investigation, said PSC spokesman Kevin Kelly.

The PSC is charged with determining whether Ameren is receiving a "reasonable return on its investment after recovering its prudently incurred expenses."

tgreaney@semissourian.com

335-6611, extension 245