Missouri regulators are past the halfway point in Ameren Missouri’s sixth major rate case since 2006.
The Missouri Public Service Commission is expected to issue a decision in the St. Louis-based utility’s $264 million rate increase request by May. Filed in July, the request would raise all customer bills by about 10 percent.
Auditors for the Missouri Public Service Commission, however, say the utility should get less than half of that.
The PSC staff’s analysis, submitted to the commission last month, calculates the utility is due for an increase of only about $113 million in rates. That comes out to just more than a 4 percent overall hike.
Missouri’s utility regulators usually only give utilities part of what they ask for, but its rates have still risen much faster than inflation. Regulators have granted Ameren rate increases totaling some $867 million since 2007, a more than 40 percent increase for many customers.
On Monday, at the first of many public hearings hosted by the PSC as part of the ratemaking process, most of the 100 or so Ameren customers there grumbled at the prospect of paying higher rates. Facing a mostly unfriendly audience, the utility’s vice president of external affairs, Warren Wood, tried to sympathize.
“We know you’re seeing a lot of increases in expenses coming from a lot of different directions,” Wood told the mostly older group gathered at a Holiday Inn in Sunset Hills. “So are we.”
Much of the increase in recent years comes as the utility’s infrastructure — substations, poles and lines — ages and is replaced.
Ameren touts its investment in recent years to improve its distribution system, including 6,500 new electric poles and more than $100 million for recent major substation replacements.
Excluding major weather events, outages fell to 0.7 per customer in 2013 from 1.24 per customer in 2006, when major storms took out electricity for 1 million of its customers and turned attention to the reliability of its system.
Another big chunk of this increase covers a $150 million major reactor part replacement at the utility’s Callaway nuclear power plant.
The utility also faces higher costs to comply with tightening environmental rules. Ameren’s heavy reliance on coal power was cheap for years, but new federal rules have required multimillion dollar equipment installations at its plants to keep mercury and other toxins out of the air.
Barbara Hemphill, a recent retiree from Webster Groves who came to Monday’s meeting, said no one likes rate increases but that she also understands important pollution control equipment isn’t cheap.
“I’m a little bit concerned only because there have been a lot of increases over a short amount of time,” she said after leaving the hearing. “I’m not a person willing to throw money away, but I also understand there’s no free lunch. If you want something, you have to pay for it.”
Ameren’s July rate request asked for regulators to raise the return on equity, or profit, it is allowed to earn on capital investment to 10.4 percent from the current 9.8 percent.
The PSC staff’s study actually calls for lowering Ameren’s allowed return to 9.25 percent, a difference of some $61 million.
Ameren also has to contend with its largest customer, Noranda Aluminum.
Earlier this year, the Southeast Missouri smelter tried to lower its electric rate in a complaint against the utility, arguing it would close otherwise. The PSC denied the request this summer but told the smelter it was welcome to ask for its rate to be lowered during the general rate case.
Utilities charge customers rates based on their size, and Noranda pays its own special rates because of the vast amounts of electricity it buys. Regulators can choose to raise or lower rates different amounts for different classes of utility customers in rate cases.
Noranda has already proposed a rate of $32.50 per megawatt hour, a 23 percent reduction. The Office of Public Counsel, which is an advocate for ratepayers, appears to be on the smelter’s side. It filed a proposal that would cut the smelter’s rate, though not by as much.
If Noranda’s rates are cut, other customers could pick up the difference, which could result in as much as a 2 percent increase. Noranda says if it closes, the drop in demand for Ameren’s power will force rates up anyway.