Noranda gets rate cut; other Ameren consumers see increase

JEFFERSON CITY, Mo. -- Most Ameren Missouri customers will face higher bills while the electric utility's largest customer will get a lower rate it has long sought under a decision Wednesday by the state's Public Service Commission.

Commission chairman Robert Kenney said some of the costs from the lower rate for Noranda Aluminum Inc. -- which operates a smelter that employs about 900 people at New Madrid in Southeast Missouri -- will be shifted to other consumers. But he said the increase is less than the amount other consumers would have to pay if Noranda shut down.

"The rate we grant today does not amount to an infinite corporate bailout," Kenney said. "The commission retains oversight, and we will be watching."

The decision requires Noranda to provide employment information to the commission and invest $35 million in capital at the New Madrid smelter each year the rate is in effect. Its current effective base rate is $41.44 per megawatt-hour; the lower rate of $36 per megawatt-hour would be effective for three years. The company said this would save about $17 million per year in electricity costs when the smelter was at full operation.

Overall, Ameren will be allowed to increase the amount it collects from customers by $108 million starting May 12. About $103 million is the result of increased fuel costs, according to the commission's order.

When Ameren originally filed its case in July, the St. Louis-based company sought a $264 million rate increase that would have cost an extra $10 a month for a typical residential customer who uses 1,100 kilowatt-hours of electricity. Ameren spokesman Warren Wood said the increase would be about $6 a month without the Noranda-related costs and that the cost-shifting from Noranda added an additional $1.

Noranda officials had warned the smelter may shut down if it didn't secure lower electricity costs. Noranda spokesman John Parker said the company was encouraged, but he hadn't seen the specifics of the decision.

"We believe that relief will make a meaningful contribution to the sustainability of the smelter," Parker said.

Noranda announced plans to lay off up to 200 employees in September after the Missouri Public Service Commission rejected its request for a 25 percent reduction in electricity rates. Electricity comprises about one-third of its production costs. Parker said the layoffs were delayed while the commission decided this rate case.

A spokesman for Ameren, which has opposed a lower rate for Noranda, said the rate cut amounted to an economic development tax that should be borne by all taxpayers. Warren Wood added that the Legislature should decide whether Noranda should be subsidized.

"The fact is our customers will have less money in their pocket because of this and see very little benefit," Wood said.

Commissioner Daniel Hall said while there were several economic development arguments for cutting Noranda's rate, those should not play a role in the decision. He said the only thing that mattered was the effect on other ratepayers.

"At this discounted load retention rate, Ameren's ratepayers are better off than they would be if the smelter were to close," Hall said.

That premise was not necessarily true, Wood argued, because excess electricity would be sold to other customers, and the cost would depend on the market price at the time.