Regulators poised to grant Ameren rate increase

JEFFERSON CITY, Mo. -- State utility regulators are poised to grant electricity provider Ameren Corp. its first rate increase in two decades over the objections of consumer advocates who urged that the embattled utility should instead be forced to lower its rates.

The Missouri Public Service Commission could formally endorse the rate increase as soon as today.

If commissioners stick with a scenario they outlined, Ameren's revenues would rise by about $45 million annually, resulting in a 3.4 percent rate increase for the average residential customer.

St. Louis-based Ameren is Missouri's largest electricity provider, serving 1.2 million customers.

The rate increase would fall significantly short of the $361 million originally sought by Ameren. By contrast, staff for the Public Service Commission originally recommended a $168 million decrease.

Attorneys for the state lambasted Ameren as a disappointing and arrogant monopoly in March as the PSC began a courtroom-like hearing on Ameren's rates. In a roughly one-year period, Ameren suffered through the collapse of its mountaintop Taum Sauk reservoir, which wiped out a state park, and several summer and winter storms that left people powerless for days. The events sparked widespread public and political outrage.

Public Service commissioners reviewed a 120-page draft of their order Monday, offering several revisions. Chairman Jeff Davis said he would like to vote today on the final document.

Based on Monday's commissions discussions, the roughly $45 million rate increase seems unlikely to change too much in the final order, said state Public Counsel Lewis Mills, who represents consumer interests.

"It's more than I think they need," said Mills, who had sought a nearly $179 million decrease in Ameren rates.

Gov. Matt Blunt has repeatedly criticized Ameren following the Taum Sauk disaster and its storm-related power outages. He urged the PSC in December to delay Ameren's rate case until Ameren had a better plan to avoid power outages. Blunt on Monday denounced the likely rate increase.

"As I have said, the Public Service Commission should not even consider a rate increase for Ameren until Ameren provides better service and better performance for their customers," Blunt said in a written statement. "I strongly disagree with the commission's decision."

Since its last rate increase in 1987, Ameren said its cost to customers has fallen 13 percent. The company argued it needs to be allowed to earn additional money to ensure its financial strength, bond rating and ability to make infrastructure improvements.

"It's been 20 years, our rates are 37 percent below the national average, we have invested in infrastructure to the tune of $2.6 billion since 2002 and, basically, our costs have gone up significantly," Ameren spokeswoman Susan Gallagher said.

But she added: "I can't comment on what [utility regulators] may do until we know exactly what they have done."

The draft order states that no costs associated with the Taum Sauk reservoir collapse are contributing to higher rates. That conclusion rejects an argument from Mills, who claims that Ameren has failed to account for about $10 million in wholesale electricity sales that otherwise could have come from the hydroelectric plant.

Under a scenario outlined last week by the PSC, Ameren would be allowed a 10.2 percent return on equity, which is less than the 12 percent the company sought. The PSC also would assume Ameren's Callaway nuclear plant would get a 20-year operating extension beyond its current 2024 license, an assumption that would help hold down rates in the short-term.

The PSC would deny Ameren a fuel adjustment clause, which could have allowed it to seek additional rate increases when costs rise for natural gas, coal or other energy sources used at its power plants.

Just last week, the PSC granted Kansas City-based Aquila Inc. the potential to adjust rates twice annually because of fuel costs while approving a total $58.7 million rate increase for its two Missouri regions. The increase amounted to about half of what Aquila requested.

The PSC in December granted a $50 million rate increase of Kansas City Power and Light, its first since 1988, and a $20 million rate increase for Empire District Electric Co.

All those rate increases were approved by 3-2 votes.

The Ameren case also appears likely to be a split decision. Commissioner Steve Gaw indicated Monday that he was preparing to write a dissent.

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On the Net:

Ameren: http://www.ameren.com

PSC: http://www.psc.mo.gov