Public Service Commission staff: Cut, not raise, AmerenUE rates

~ At issue are matters of depreciation, sale of electricity and profit.

Instead of a 10 to 29 percent increase in electric rates, customers of AmerenUE could see a modest reduction if the Missouri Public Service Commission accepts a recommendation from staff auditors.

A complaint alleging Ameren overcharges for electricity by as much as $168 million a year will be filed today or early in the new year, Kevin Thompson, general counsel for the PSC said Thursday. The complaint, a result of an audit sparked by Ameren's request for higher rates, looked at all aspects of the utility's regulated electric business. It includes an allowance for Ameren to spend $45 million annually on tree trimming and other measures designed to reduce the threat of storm-related power outages.

In July, Ameren asked the PSC to increase its annual electric utility revenue by $361 million. Residential rate increases were pegged at 10 percent, while smaller commercial customers such as retail stores would pay 23 percent more and large industrial customers would see rates rise by 29 percent.

"We definitely will file a complaint," Thompson said.

Cape Girardeau customers of AmerenUE will get a chance to comment on the proposed rate increases, as well as requested increases in natural gas rates, at a public hearing next Thursday sponsored by the PSC. The hearing begins with an informal session with staff answering questions about the proposed rate increase followed by public testimony. The hearing begins at 5:30 p.m. Thursday in the Glenn Auditorium of Dempster Hall on the Southeast Missouri State University campus.

The PSC staff audit of Ameren's natural gas business concluded that the utility deserves a $2.2 million to $3.4 million increase in revenue. Ameren asked for $10.8 million more from customers.

AmerenUE is a division of Ameren Corp., the St. Louis-based utility. The company has 1.2 million customers in Missouri, including the city of Cape Girardeau, and said it needs a rate increase to make up for its $2.6 billion investment in infrastructure over the past three years and rising costs.

"The need for an increase in rates is well-established in our regulatory filings," spokeswoman Susan Gallagher said. "AmerenUE has not had a rate increase for 20 years."

She noted that Ameren's rates are well below the national average.

In Illinois, 1.2 million customers of three Ameren subsidiaries will see rate increases ranging from 40 percent to 55 percent starting Monday, after rates had been frozen for a decade.

In Missouri, the PSC ultimately will have to reconcile the $500 million gap between the amount of revenue the commission staff thinks Ameren should be allowed to collect and what the utility says it needs.

While many customers may be focusing on frustrating power outages and other customer service issues, the differences between PSC staff and Ameren are focused on more complex financial matters such as depreciation and revenue that AmerenUE will collect for wholesale electricity sold outside of its service area.

Another sticking point is profit, said Greg R. Meyer, an auditor for the PSC staff. Ameren says it should be entitled to a 12 percent return on equity; the PSC staff believes it should be 9.25 percent. The difference is a few percentage points, but it represents millions of dollars.

Separately, Attorney General Jay Nixon's office is recommending a $53 million rate reduction, Nixon spokesman Scott Holste said. However, the attorney general's examination of Ameren's rates wasn't as broad as the PSC staff's audit, so it isn't comparable.

Diana Vuylsteke, an attorney for Missouri Industrial Energy Consumers, a group that includes Anheuser-Busch Cos. and Boeing Co., agrees with the PSC staff and attorney general on many of the issues raised, but said the group hasn't taken a position whether Ameren is earning too much or too little.

Staff writer Rudi Keller contributed to this report.