Unprecedented Overreach by Missouri Electric Utilities
Learn the Issues, Get the Facts
SB 207: Unprecedented Overreach by Missouri Electric Utilities
Missouri electric utilities including Ameren are working to pass legislation to charge a brand new rate increase fee to every business and resident electric bill. Despite the fact that Missouri electric rates have gone up 46% since 2007, costing Missourians a total of $5.7 billion, Ameren, Kansas City Power & Light and Empire want to change the rules so they can raise your rates without hearing your opinion about it.
The bill, SB 207, is allowing a monopoly utility company to take more money from Missouri businesses and citizens. No other state allows anything like this requested surcharge. SB 207 will kill Missouri jobs by operating as a massive rate increase on Missouri employers and consumers. In addition, SB 207 ‘s massive automatic rate increases will drive up the cost of doing business in Missouri and cause jobs to move to other states.
Despite Missouri’s struggling economy, Missouri electric companies are using profits extracted from Missouri ratepayers to prop up losses from its unregulated affiliates in other states.
We need your help to make sure the legislature knows that SB 207 is an unprecedented overreach and would hurt consumers. Take action! Contact your legislator here. Write a letter to the editor of your local paper here.
Local Public Hearings for Ameren Missouri
Ameren Missouri filed a request with the Missouri Public Service Commission to increase revenues by approximately $376 million or 14%. Over the next month, the Public Service Commission will be holding public hearings all over the state to provide an opportunity for ratepayers to ask questions about the pending rate cases. Ratepayers like you can give testimony at the hearing, which will be transcribed as part of the official case record.
If you would like to attend a hearing, please RSVP to the event you will be attending on our Facebook page, so we will know whom to expect. Also, we will be giving out a free coozie to anyone who testifies at the hearing. If you don’t RSVP, you can still show up and testify so please share this message with your friends today.
A History of Ameren Rate Hikes
Ameren has increased rates by 36% in just four years. Below is a history of Ameren’s excessive requested base rate hikes.
- August 2007 $360,709,000
- March 2009 $250,806,000
- February 2011 $401,500,000
- August 2011 $263,000,000
- February 2012 (Proposed) $376.000,000
HB 1316: The $115 Million Ameren Bailout
Ameren is asking Missouri businesses and residents to bail them out for costs they have already incurred and plan to incur in the future which do nothing to produce energy or provide any service to consumers now or in the future.
- Ameren has already spent at least $25 million towards pursuing an early site permit. Ameren willingly spent its own money and as with any other business, Ameren ought to be spending its own money on this speculative venture, rather than seeking a bailout through HB 1316.
- HB 1316 does not guarantee customers will be paid back their money in the case that a new electric plant is never built.
- HB 1316 will cost Missouri businesses and residents $45 million plus interest and Ameren earnings for 20 years totaling an increase of $115 million.
- HB 1316 will produce ZERO watts of electricity. This legislation will not result in a new electric power plant.
- HB 1316 will create ZERO jobs. This legislation has nothing to do with building a new electric power plant that would actually create jobs.
A Plan with Consumer Protections: Senate Bill 406
- Ameren says it needs this legislation to maintain the option of seeking an Early Site Permit toward building a second nuclear power plant. At the same time the bill protects Missouri employers, businesses and residential ratepayers if Ameren proceeds as it has indicated it would.
- The bill also protects business and residential ratepayers if Ameren is wrong and holds Ameren accountable.
- The bill represents a compromise that gives Ameren everything it says is needed to obtain an Early Site Permit and that protects businesses and residential consumers who are being asked to pay for the Early Site Permit.
- This bill allows Ameren to recover from ratepayers financing costs on $40 Million of expenditures to obtain an Early Site Permit.
- Consumer protections include the same three requests that were made by consumer groups this past November:
- A hard cap on expenses to ensure Ameren doesn’t charge consumers for cost overruns.
- This is important to avoid the mistakes and huge overruns that have historically plagued the building of nuclear plants.
- Consumers must be protected from cost overruns at all stages of the process.
- A rebate to ensure consumers are refunded their money if energy is never produced or the Early Site Permit is never obtained.
- Ameren has already spent $25 million dollars towards obtaining an Early Site Permit. A rebate is necessary to keep Ameren from shifting the gamble and all of the risk on getting the permit to consumers.
- Assessment funding for the Office of Public Counsel
- This takes the Governor’s proposal and makes sure legislative intent for funding the OPC is established and better secures the funding beyond FY 2012, which is the only year the Governor’s proposal ensures.
- Consumers need an adequately funded independent OPC to ensure consumers are protected through the entire process of building the nuclear plant.
“Ameren Demands $263 Million Rate Hike”
With an unemployment rate of nearly 10%, Missouri families and employers are struggling. Rather than tightening their belts like Missouri’s working families, Ameren is asking the Missouri Public Service Commission (PSC), the regulatory body responsible for policing the monopoly, to allow another Ameren rate hike which will:
- Raise electricity rates on Missouri’s working families and employers by $263 million.
- Drive up the cost of doing business in Missouri Ameren’s rate hike plan comes at a time of crisis for Missouri’s economy. Missourians are losing their jobs. Missouri businesses are being forced to downsize in order to stay afloat. Missouri’s employers and small businesses are already struggling to prevent layoffs of even more workers.
- Drive up the cost of living for already struggling Missouri families Ameren’s $263 million rate hike demand before the PSC comes at a time when Missouri’s employers and small businesses are hurting and at a time when Missouri families are hurting even more. In this fragile economy, thousands of families live on the brink of financial disaster.
Ameren has been awarded over $577 million in rate increases, a 26% hike, at the expense of Missouri ratepayers in less than two years. It’s time to ask Ameren to do the same, just like Missouri’s working families.
“The Nuclear Option”
It seems like common sense: the market should make decisions on whether a second power plant is financially viable, not the whims of politicians. In the midst of a recession and with unemployment at record levels, now is not the time to ask taxpayers and ratepayers to pay more money for energy investment. But that hasn’t stopped the big utilities from trying to push their financial gamble on us. Senate Bill 50 was crafted by the utility companies to create an exception in long-standing state law. It would allow large Missouri utilities to charge YOU for the costs associated with Early Site Permit (ESP), the first step in construction of a nuclear power plant.
- The fact that Ameren is seeking money from ratepayers and cannot get private backing means that there is substantial financial risk in building a second nuclear power plant.
- Missouri’s other nuclear power plant was built without a rate-hike in advance of the plant.
- Ameren made over $600 million last year and is still seeking to raise rates on consumers.
- Ameren has already raised energy rates several times in the past few years, and is now looking to raise them again.
- Other states have allowed energy companies to pass on development costs to ratepayers, and consumers in those states have seen their electric bills skyrocket.
- The development of a new power plant is financially risky, which is why Ameren wants to raise energy rates to cover the costs, instead of using their own money.
- Ameren is seeking to transfer the financial cost of energy development to their consumers in order to appease their shareholders.
Any proposal that were to meet General Assembly approval must have strong consumer protections. FERAF encourages you to express your support for consumers by insisting on pro-consumer provisions including:
- Robust Office of Public Counsel (OPC). Over the years funding for consumer protection has been greatly reduced impairing the ability of OPC and PSC to conduct adequate reviews of rate case filings. Legislation must include funding OPC that allows them to conduct thorough audits of rate cases filed with the Public Service Commission.
- Responsible Cap. Should the Legislature consider the utility’s proposed legislation allowing them to recover costs of construction while in progress, they must include a reasonable and fair cap on rate increases to keep energy costs from spiraling out of control. To ensure consumers money is well spent, each step of the construction process should be monitored and controlled.
- Rebate. If ratepayers pay tens of millions of dollars in rate increases and a plant is never built or the permit is sold at a profit, Missouri ratepayers deserve to be refunded in full. We believe these consumer protections to be essential for the health of Missouri’s energy future, and therefore, Missouri economy.
The “Bad Debt Surcharge” is Unfair to Consumers
Big gas companies have pushed the Missouri legislature to create a surcharge so they could raise our bills without going before the Public Service Commission, which currently sets utility rates in Missouri. This new surcharge would have allowed them to charge you immediately when other people don’t pay their utility bills. If this new practice had become law, what motivation would the gas companies have to track down customers skipping out on their bills when they could just stick you with their debt?
- Two bills before the legislature in 2010 (SB 705 and HB 1610) would have allowed increases on natural gas bills to pay the utility for the bad debts of its non-paying natural gas customers, overriding the current consumer protection against such single-issue ratemaking.
- This legislation would have allowed energy rates to increase, even at times when Laclede Gas Company or Missouri Gas Energy’s overall cost of doing business was not going up!
- Bad debts are already included in rates. When a utility needs to adjust rates, including for bad debt, it may initiate a rate case. The Bad Debt Surcharge would allow accelerated increases without the protections of a full rate case audit.
- This Bad Debt Surcharge would have increased the volatility of natural gas bills, due to the correlation between wholesale gas rates and uncollectible accounts.
- The Bad Debt Surcharge would have been a hidden surcharge. By cleverly attempting to redefine certain bad debts as “gas costs”, it would have been disguised in the Purchased Gas Adjustment (PGA), instead of being identified separately on gas bills.
- The legal purpose of the PGA is solely for recovering the wholesale cost of natural gas—not to compensate the utility for bad debt. In 2009, the Missouri PSC ruled unanimously that bad debt is not a “gas cost” [Case No. GT-2009-0026].
- This legislation would have decreased the utility’s incentive to effectively manage its bad debt accounts and increased the incentive to write off accounts early and pass those costs through the PGA. However, writing off accounts as “uncollectible” does not stop the utility from continuing to attempt collection from the customer who owes the debt.
- The Bad Debt Surcharge also reduces the utilities’ risk, and therefore increases their profits. These companies are already compensated for this risk through the return on equity (ROE) component of rates. Laclede and MGE are already permitted double-digit ROEs. In other states, it has been estimated that such surcharges would enhance earnings by 0.75% to 0.95%.
Single Issue Ratemaking
Single issue ratemaking is an unfair utility proposal whereby Missouri’s public utilities are allowed to increase electric rates on Missouri consumers through rate increase surcharges outside of the normal ratemaking process. As fuel charges have increased on Ameren as on all other consumers, for instance, Ameren has raised electrical rates via fuel surcharge increases. Often, Ameren has imposed these fuel surcharges even when their revenues are increase from other means such as off system sales. The result is that, while all Missourians struggle at times with increased fuel charges, only Ameren is able to pass those increased costs on to hard working families. FERAF opposes single-issue ratemaking for exactly these reasons.
Ameren Demands 18% Rate Increase
Missouri’s families and employers are struggling with a state unemployment rate of nearly 10%. In the face of this struggle, rather than tighten their belts like Missouri’s working families, Ameren demanded that the Missouri Public Service Commission (PSC), the regulatory body responsible for policing the Ameren monopoly, allow another Ameren rate hike. Thanks to the efforts of concerned Missourians and FERAF the rate hike was cut nearly in half.
- Raise electricity rates on Missouri’s working families and employers by 18%.
- Resulted in an immediate rate hike on Missouri’s electricity users. If Ameren has their way, Missouri’s families and employers would have had their electricity rates raised immediately, during one of the most difficult economic downturns we’ve seen in decades.
- Ameren’s original request would have allowed them to raise rates more frequently.Despite the fact that they enjoy a monopoly, Ameren isn’t content with its profits. Buried in the fine print of of its 18% rate hike request was a plan to allow it to raise rates on struggling Missouri families more often through rate increase surcharges on customers’ electric bills. If Ameren had their way, Missourians would need to be prepared for more frequent rate increases!
- Cause Missouri job losses. Missourians are losing their jobs. Missouri businesses are being forced to downsize in order to stay afloat. Hiking rates on Missouri’s employers and small businesses when they’re already struggling will force many to lay off even more workers.
- Push already struggling Missouri families into poverty. Rate increases will hurt Missouri’s employers and small businesses but it will hurt Missouri families even more. In this fragile economy, thousands of families live on the brink of financial disaster. Electric rate increases will cause the number of Missouri families living in poverty to increase.