The new year will bring higher electric rates for 1.2 million Ameren Missouri customers.
The Missouri Public Service Commission voted 3-1 Wednesday to approve a 10 percent, $260.2 million rate increase for the St. Louis-based utility, making it that much more expensive for consumers to run their air conditioners, watch television and wash clothes.
The increase is expected to take effect Jan. 2. On average, electric bills for the typical Ameren residential customer will rise by about $10 a month. The calculation is based on average usage of 1,100 kilowatt-hours a month. Amounts will vary by customer based on actual usage.
In February, Ameren filed for a $376 million, 15 percent increase, arguing the increase was necessary to cover higher fuel costs, pay for improvements to the local electric grid and to implement energy-efficiency programs.
Wednesday’s decision marks the fifth electric rate increase for Ameren Missouri since May 2007. Those increases total more than $800 million, not including interim rate adjustments for changes in prices of fuel and purchased power.
Even including Wednesday’s approved increase, Ameren Missouri’s rates remain below national and regional averages, and the lowest among investor-owned utilities in the state, said Warren Wood, the utility’s vice president of legislative and regulatory affairs.
Ameren agrees with certain parts of Wednesday’s ruling and disagrees with other parts, Wood said. But the utility said it wasn’t ready to offer a broader opinion because Ameren executives were still reviewing the 120-page order.
Lewis Mills Jr., the state’s consumer advocate on utility matters, said the utility got more than it deserved. The decision was “pretty favorable” for Ameren, he said.
It was inevitable that some rate increase would be approved based on information provided to the commission, but the amount “shouldn’t have been anywhere near this high,” Mills said.
The increase approved Wednesday is more unwelcome news for St. Louis-area consumers who have watched utility bills rise as incomes for many fall or remain static. In fact, inflation-adjusted median household income in the St. Louis area fell 10 percent from 2007 to 2011, according to recent census figures.
The squeeze is especially tough for lower- and fixed-income customers who sometimes are forced to choose between running their air conditioners and buying groceries or medicine — a point raised at some of the dozen public hearings held across Ameren’s service area this summer.
More than $100 million of the rate increase will go to pay for higher fuel costs, much of it for coal hauled by rail to Missouri power plants from sprawling mines in Wyoming.
PSC Chairman Kevin Gunn said the commission by statute has little discretion to deny Ameren increases in fuel costs if the record shows it made prudent purchasing decisions.
“I could say ‘no,’ but they (Ameren) would go across the street and the court would overturn that,” he told the Post-Dispatch.
Another big piece of the rate increase — perhaps a silver lining for consumers — is $89 million that will go for energy-efficiency programs.
Ameren is set to kick off the largest energy-efficiency program in Missouri’s history in January, a historic initiative that was agreed to by the utility and consumer and environmental groups. The program will provide incentives for consumers to reduce energy use, such as rebates on energy-efficient appliances.
Gunn said the efficiency programs are a way for consumers to shrink their bills even as rates go up.
“We’re giving much more control back to the consumers to control their energy use,” he said. “The goal is for customers to be able to mitigate a large part of this increase.”
Ameren got much of what it sought Wednesday, but not everything.
The commission denied the utility’s request to increase the “customer charge,” or fixed charge, on residential bills to $12 from the current $8 a month. Customers pay the fixed charge no matter how much energy they use to compensate the utility for expenses it incurs regardless of how much energy it sells.
The proposed increase would have cost all customers an extra $4 a month even before they turned on a light switch. And that would send the wrong message at a time when consumers being steered to reduce energy use, the order said.
The PSC also reduced Ameren’s maximum return on equity to 9.8 percent from 10.2 percent — the level authorized in the last rate decision 18 months ago. The adjustment seems insignificant, but it adds up to tens of millions of dollars of annual profit potential for the utility.
Gunn said the rate approved is below the national average and reflects lower interest rates and borrowing costs in a sluggish economy. Still, not all commissioners were satisfied.
PSC member Robert Kenney, of St. Louis, cast the lone dissenting vote Wednesday, arguing that Ameren’s maximum return should have been further reduced because the utility faces less risk when it comes to recovering costs, such as tree trimming and storm recovery.
“The Commission over the last several years has made it easier, faster and less risky for Ameren Missouri to collect money from its customers,” Kenney said. “As a result, consumers will pay more than they should.”