State refigures AmerenUE's earnings

JEFFERSON CITY, Mo. -- Staff for state utility regulators said calculations show that AmerenUE earned up to $285 million more than it should have, tens of millions of dollars more than first suggested.

Using a base year ending last June 30 at the St. Louis-based utility's request, the Missouri Public Service Commission staff said Friday the company serving much of eastern Missouri had earned between $246 million and $285 million more than it should have.

When the commission shut down AmerenUE's experimental rate plan last year after six years, the PSC staff -- using the earlier base year ending June 30, 2000 -- said the state's largest electric utility had made $213 million to $250 million more than it should have under the allowed rate of return on equity.

In its re-evaluation of the case, the PSC staff lowered the return on equity to 8.91 percent to 9.91 percent, from 9.04 percent to 10.94 percent. As the allowed return goes down, the alleged excess earnings go up.

State utility regulators seek to reduce the company's annual electric revenues on grounds that AmerenUE has been earning too much at the expense of its customers.

Since 1995, AmerenUE has operated under an experimental state rate regulation plan that allowed customers to share in the company's earnings when they reached a certain level.

For example, customers received half and shareholders the other half of all earnings above 12.6 percent and up to 14 percent. Nine-tenths of all earnings from 14 percent to 16 percent went to customers and all earnings over 16 percent went to customers.

That regulatory agreement expired last June 30.

Vowed to refund overbilling

AmerenUE has argued that the experimental rate plan allowed it to share its profits from buying and selling electric power with its customers, thereby lowering their bills by a total of $425 million while ensuring needed capital for investment.

Utility analysts and institutional investors like experimental rate plans because they allow regulated monopolies to boost earnings above what they might earn simply from selling power to customers.

When it petitioned the PSC for the base year ending June 30, 2001, AmerenUE vowed it would refund any overcharge on April 1 of this year -- if the commission found it overcharged customers.

Missouri law does not require utilities to credit customers in such cases. If the PSC finds later this year that AmerenUE did overcharge, the utility could contest the ruling in court.

That doesn't mean AmerenUE won't "challenge whatever the commission does," said Steven Dotheim, the PSC's deputy general counsel. Any credits to customers could be years away, he said.

The PSC will hold public hearings in Jefferson City in July, with expectations of resolving the case this fall.