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PSC decision allows Ameren to continue charging customers for construction projects

This article first appeared in the St. Louis Beacon, Dec. 14, 2012 - Along with a $260 million rate increase, Ameren Missouri will be allowed to continue to charge customers for the rising costs of transmission projects still under construction. Currently, the costs are about $26 million but are expected to rise 24 percent each year.

On Wednesday, the Missouri Public Service Commission approved a $260 million rate increase for Ameren, about two-thirds of what the company had sought. The hike goes into effect Jan. 2.

Ameren officials were contacted for this article but were unable to comment.

Although it is illegal in Missouri to charge customers for construction projects that have not yet brought in revenue, the PSC, which rules on utility rate cases, decided that costs related to the construction of transmission facilities belong in the customers’ fuel adjustment charge (FAC). Ameren had been placing those costs in the customer fuel charge since they began  in January 2012.

The commission ruled that the charges should be allowed because the costs are imposed on Ameren by the Midwestern Independent System Operators, a regional transmission organization that works to provide safe, reliable and affordable electricity within 11 states and a Canadian province.

Still that decision rankles some.

Former state Sen. Joan Bray, who is now the chair of the Consumers Council of Missouri, asked, “What can they do within state law? Can they completely usurp it? I find it very troubling.”

Bray said that the members of the Consumers Council of Missouri will explore how they can get the issue sorted out on behalf of customers.

The Office of Public Counsel’s attorney Lewis Mills, who represents customers in rate cases, also disagrees with the commission’s ruling.

“The charges are in violation of state law. I think they got that wrong,” Mills said.

The commission decided that the costs associated with these federally approved projects are unavoidable for Ameren and cannot easily be separated from the fees Ameren pays to be a member of the regional transmission organization, which provides customers with the benefits of more reliable electricity and reduced utility costs from the sale of excess energy.

Mills said that while some costs are unavoidable, Ameren is “one of (the organization’s) biggest members” and “have more influence than they let on.”

John Coffman, the Consumers Council’s legal counsel, said, “They have a lot of control, and consumers have almost no control. The (fuel adjustment charge) should not be treated like someone else's credit card, which can be used to pass along any particular cost.”

Kevin Gunn, PSC chairman, said, “This is a very unique situation. You have a federal pre-emption issue. Regardless of state law if the feds say that if you can collect, then you collect it.”

The commission’s decision was based in part on its ruling that these transmission charges could be legally included in the fuel charge, which is for volatile costs associated with fuel for its generators and transportation of that fuel.

Coffman said that utilities have an inclination to pass any costs possible through a fuel charge.

“The more costs that they can slip into that surcharge, the more of their business risk they can transfer to consumers,” Coffman said. 

Bray said that she was concerned about the commission’s conclusion that the transmission of energy be included as a transportation cost.

“What this means is things get more and more obtuse and hard to track,” Bray said. “It becomes less and less consumer friendly and even more industry friendly.”

Mills said that he disagrees with the commission’s decision but does not believe that this decision sets a precedent in broadening the definition of transportation even more. He does not, however, believe the costs to be volatile.

“Something that is projected years into the future is the antithesis of volatile,” Mills said. “We know years into the future that what the projects are projected to cost.”

Mills said that these expenses belong in a rate case where all the costs and revenues are reviewed together.

Customers pay 95 percent of the costs in the fuel charge and Ameren pays the remaining 5 percent. If revenues are made, the customer gets the same percentage that they paid returned to them.

Gunn said that he struggled with this decision but after reading the law he concluded that transmission is the only way that electricity can be transported and, therefore, the charges are appropriate to include in the fuel charge.

“It may have been poor drafting (of the law), but we have to go with what the statute said,” Gunn said.

Gunn said that there are both advantages and disadvantages to allowing the costs to be paid for by the fuel charge. It allows for customers to pay only for projects that actually get built. He does acknowledge that revenue from the fuel charge typically benefits the utility more than the consumers.

“We had a choice to make,” Gunn said. “Is it the most ideal place to put this? I agree it’s not perfect. But going through the FAC allows the costs to be recovered efficiently; it’s transparent.”

Although the PSC staff had overlooked the charges prior to the rate case, Gunn said now that the staff is aware of these charges, they will pay closer attention.