Regulators approve $260M rate increase for Ameren

JEFFERSON CITY, Mo. -- Ameren Missouri electric customers will face a $260 million annual rate increase as a result of a decision Wednesday by utility regulators, though some of that extra money could be returned to them in savings through new energy efficiency incentives.

The rate increase, scheduled to take effect in January, marks the fifth time in six years that rates will have risen for the 1.2 million customers of Missouri's largest utility. Monthly bills will go up by about $10 for an average residential customer using about 1,100 kilowatts of electricity, according to the Missouri Public Service Commission.

Commission members voted 3-1 Wednesday for the rate increase, which amounts to about two-thirds of the $376 million that Ameren originally requested last February. Though a majority of commissioners described it as "reasonable," consumer advocates said the $260 million price hike is too much for residents to bear in the current economy.

"Rates have been going up by leaps and bounds for the last five years," said state Public Counsel Lewis Mills, Missouri's official consumer advocate in utility regulatory cases. "It's going to put a real headlock on a lot of customers."

The rate increase is intended to cover such things as Ameren's fuel costs, infrastructure improvements, vegetation trimming, storm repairs and employee benefits. Additionally, about $89 million of the rate increase would help pay for energy efficiency incentives that ultimately could save money for some residents and businesses. A 2009 law allows utilities to recoup money for efficiency measures, just as they long have done for investments in power plants and other capital expenses.

The result is that all of Ameren's electric customers will shoulder a share of the cost for the utility to provide incentives for some businesses or homeowners to lower their utility bills through more efficient lighting, heating and cooling systems. But all consumers stand to benefit if the energy savings push back the need for Ameren to build costly new power plants, said utility regulators.

"Our hope is that this report and order not only gives customers the chance to save, but it means that Ameren is not going to come in for another rate increase next year or the year after," said PSC Chairman Kevin Gunn. "So we bring some rate stability to the customers."

Warren Wood, Ameren's vice president of legislative and regulatory affairs, said the St. Louis-based utility has not decided whether it will seek another rate increase in the near future, and is still reviewing the commission's 120-page decision.

"There were some aspects of the order that looked like appropriate rate-making policy, and there were other pieces that were a bit below national averages," Wood said.

Utility profit margins are capped by state regulation. Ameren Missouri currently is allowed up to a 10.2 percent return on equity and had sought to increase that to 10.5 percent. Instead, the PSC capped that at 9.8 percent, which it said was a little below the average rate allowed nationally.

Decreasing the amount of money Ameren can earn could make it more difficult for the company to attract investors, Wood said.

But commissioner Robert Kenney, who cast the lone no vote, said the earnings percentage was too high considering Ameren already is able to quickly recover its fuel costs and recoup money spent on repairing storm damage and clearing trees away from power lines.

"The commission has made it easier, faster and less risky for Ameren to collect its money from its customers," Kenney said.

John Coffman, an attorney for the Consumers Council of Missouri and AARP Missouri, said his clients advocated for an 8 percent return on equity for Ameren.

The amount approved by regulators is "out of sync with the very, very low interest rates and economic conditions that we're currently experiencing," Coffman said.

But Coffman was complimentary of at least one portion of Wednesday's decision. He praised regulators for rejecting Ameren's request to increase the fixed cost on residents' monthly bills to $12 from the current $8.

Combining Wednesday's rate increase with others from the past six years, utility regulators now have allowed Ameren to increase its revenue by nearly $1 billion, said Chris Roepe, executive director of the Fair Energy Rate Action Fund, which represents consumers and industrial energy users.

"These actions absolutely undermine what was not too long ago a strength in Missouri -- low energy costs," Roepe said.

Wood said Ameren's rates will remain below national and regional averages, even with the latest increase.