Ameren to seek increase in rates

Higher costs for fuel and materials, the need to continue efforts designed to make the electrical grid more reliable and a quest for higher profits all combined in AmerenUE's decision to seek a 12.1 percent rate increase, company representatives said Friday.

The rate increase request to the Missouri Public Service Commission comes less than nine months after the commission approved a 2 percent average rate increase for the St. Louis-based utility. That increase was in response to a July 2006 request to raise rates 10 percent for residential customers, 23 percent for commercial customers and 29 percent for industrial users.

The company hopes to avoid the fierce opposition from commercial and industrial users that request generated by raising rates evenly for all customers, vice president for energy delivery Ronald Zdellar told the Southeast Missourian.

AmerenUE provides power to about 1.2 million electric consumers, which makes it the state's largest utility. It's a subsidiary of Ameren Corp., which has 2.4 million electric and 1 million natural gas customers in Missouri and Illinois. AmerenUE has customers in Cape Girardeau and several other communities in Southeast Missouri.

The rate increase will help support continuing efforts to make electric service more reliable as well as add cash to the company's bottom line to make the utility more attractive to investors, Zdellar said. The company will also be asking for the ability to adjust rates as fuel costs rise without going through a full rate increase review process.

The last PSC-approved rate increase for Ameren took effect in July. It was the first rate increase for the utility since 1987. The request filed Friday seeks to increase revenue from regulated Missouri customers by a total of $251 million.

Under the conditions approved last year, AmerenUE is allowed a return of 10.2 percent on its regulated Missouri operations. AmerenUE is asking for that allowed rate of return to be increased to 10.9 percent. Since the rate increase took effect, Zdellar said, Ameren has recorded a return of 9 percent and expects that to fall to 8 percent.

The company's bottom line is being squeezed by cost increases that have included a 33 percent increase in the cost of coal, a 70 percent increase in the price of electrical transformers, a doubling of copper wire prices and a 40 percent increase in the cost of power poles, Zdellar said.

If approved, the rate increase would add about $9 per month to the average electrical bill, the company said in a news release.

"We do not request this increase lightly because we realize that our customers are facing rising costs in other areas," Thomas R. Voss, AmerenUE president and chief executive officer said in a news release. "However, UE's existing rates are insufficient to recover current costs and permit UE to earn a reasonable return on its investments."

To bolster its argument for a rate increase, Ameren included a chart with its news release indicating its rates are far below the national average, the average in Midwest states and other regulated Missouri utilities.

Ameren sent letters to Missouri customers describing the rate increase in general terms. The letter does not mention the amount of the increase. It includes a description of efforts to increase reliability and a pledge that the rate increase is not excessive. "Be assured, we're doing all we can to keep our costs down and your prices as low as possible," the letter, sent over Voss' signature, states.

Filing for a rate increase is the first step in a process that will likely take up to 11 months, Zdellar said.

rkeller@semissourian.com

335-6611, extension 126

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