PSC staff recommends acceptance of settlement agreement

The Associated PressJEFFERSON CITY, Mo. -- Regulatory staff have recommended the Missouri Public Service Commission accept a $400 million settlement with AmerenUE in which utility customers could eventually save several dollars a month on their electricity bills.

The staff memorandum filed July 19 was part of discussions Wednesday at a Public Service Commission hearing during which the five-member panel reviewed the settlement proposal with staff, AmerenUE officials, state agencies and other interested parties.

"A combination of benefits occurs as a result of this settlement," the memorandum said. "The settlement removes the uncertainty resulting from a continued litigation in this case and, if approved, will redirect resources to other endeavors that will likely further the public interest."

The commission is scheduled to meet Thursday and could vote on whether to accept the settlement with the state's largest utility. The PSC is not bound by the staff recommendations.

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.

Kelvin Simmons, the PSC chairman, said while questions remained, regulators were generally pleased that an agreement had been put together.

"We are much more happy to be at this point than a long protracted litigation process," Simmons said during Wednesday's hearing.

The rate reductions and consumer 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.

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

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.

AmerenUE President and Chief Operating Officer Gary Rainwater, who was questioned by Simmons and other commission members, said he was also pleased litigation had been avoided and the settlement was fair to all.

"We believe we have achieved the best balance possible," Rainwater said. "Our intent is to work within the guidelines of this agreement."

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.

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.

The 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.

"The staff believes that a four-year rate moratorium is reasonable, particularly in light of previously mentioned staff interest in rate stability for UE's ratepayers," the staff report said.

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

Some customers also would benefit from another $22 million 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. Both groups were represented at Wednesday's hearing.

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.

------On the Net:

Ameren: http://www.ameren.com

Public Service Commission: http://www.psc.state.mo.us