AmerenUE approves plan to cut rates

JEFFERSON CITY, Mo. -- Customers of AmerenUE could eventually save several dollars a month on their electricity bills under a proposed settlement that would provide more than $400 million in rate reductions and consumer benefits over the next four years.

The agreement reached Tuesday among the state's largest utility, state regulatory staff and others still needs the approval of the Missouri Public Service Commission, which could come as soon as July 25.

The rate reductions and benefits are about half of what the PSC staff originally had sought, but well more than three times what AmerenUE officials had offered about two months ago.

A typical residential customer using 1,000 kilowatt-hours of electricity would save about $3.80 monthly, compared to current rates, by the time the lower rates are fully phased in, said PSC spokesman Kevin Kelly.

That same customer could have saved $7.71 monthly under the plan originally pushed by the PSC staff.

Still, the settlement provides a "fair deal for the consumer," said Dan Joyce, general counsel for the PSC staff.

"What we're getting is stability in rates and hard reductions over the next four years," Joyce said. "But we have not brought rates down to what we feel actually is their cost of service."

AmerenUE officials said the proposed settlement would cut its 2002 earnings by about 22 cents per share. The company said the reduction already had been incorporated into its earnings guidance.

Besides the customer rate reductions, AmerenUE touted provisions in the settlement committing it to between $2.25 billion and $2.75 billion in energy infrastructure improvements over the next four years.

"In the end, the plan provides for low, stable rates, continued high levels of energy reliability, solid investor returns and incentives for the company to continue to improve its operations and customer satisfaction," AmerenUE president and chief operating officer Gary Rainwater said in a statement.

AmerenUE serves about 1.2 million electric customers in 66 Missouri counties, primarily in the St. Louis area and the eastern half of the state, although it also has some pockets in western Missouri.

Under an alternative state regulation plan that expired a year ago, AmerenUE was to share with its customers a portion of its earnings over certain levels.

$40 million credit

Tuesday's proposed settlement calls for a $40 million credit to AmerenUE electric customers as a result of that expired plan.

Under the new regulatory plan, AmerenUE is to provide a $50 million rate reduction retroactive to April 1. Rates are to decline another $30 million on April 1, 2003, and decrease by yet another $30 million on April 1, 2004. After that, rates are to remain unchanged until June 30, 2006, when the agreement ends.

Because the reductions are cumulative, customers will save an estimated $377.5 million over four years, compared to AmerenUE's current rates, Joyce said.

Some customers also would benefit from another $22 million that AmerenUE would contribute to economic development projects, home weatherization programs and bill payment aid to low-income residents.

AmerenUE described the agreement as another alternative regulatory plan -- terminology that could be attractive to investors. But PSC staff said the agreement was closer to a traditional regulatory method, limiting earnings based on a utility's rate-of-return on its investments.

Among those signing the agreement were the state attorney general's office and the state Office of Public Counsel, which represents the interests of residential and small-business consumers. Acting public counsel John Coffman said the rate reductions would amount to a roughly 5.4 percent decrease for residential customers and a more than 6 percent drop for small-business consumers.

The Public Service Commission is to hear a presentation on the proposed settlement July 24 and could vote on it as soon as the next day, said commission chairman Kelvin Simmons.

WHAT IT MEANS

An agreement reached with AmerenUE would amount to a roughly 5.4 percent decrease for residential customers and a more than 6 percent drop for small-business consumers. It awaits approval by the Missouri Public Service Commission, which could come as soon as July 25.