PSC staff testimony questions overearnings claim

The Public Service Commission’s staff didn’t ask their bosses to pursue an “overearnings” case against Ameren Missouri because the staff didn’t think the company’s earnings had reached that level, staff members told the five-member commission this week.

“Staff believes that, at this point, no party has made a full assessment of all the relevant factors, so no real determination for the purposes of re-setting rates has been reasonably presented,” testified John Cassidy, a utility regulatory auditor. He is the lead auditor, or case coordinator, on Ameren rate cases.

Cassidy’s comments came Tuesday morning during the PSC’s hearing on a complaint that Ameren has been taking in more money than it should.

The complaint was lodged in February by Noranda Aluminum — which operates an aluminum smelter near New Madrid in the Missouri Bootheel that is Ameren’s single largest electricity customer — and by 37 individual customers, mainly from Southeast Missouri.

They argue the company has filed quarterly reports with the PSC for the last two years, showing revenues higher than the company should have earned based on the utilities approved “return on equity.”

Called “surveillance” reports, the documents are required because the PSC has approved Ameren’s request for a “fuel adjustment clause” — the ability to adjust rates on a regular basis, as the costs of the fuel the company uses to generate power fluctuate.

Although the surveillance reports are submitted every three months, each report actually covers the previous 12 months and shows a number of facts about Ameren’s operations and finances for that period.

But Ameren told the PSC that the surveillance reports don’t show the whole picture, and that Noranda and its supporters didn’t offer the commission enough detail to justify pursuing the overearnings case.

“I think it’s essential to look at all the relevant factors,” Cassidy testified Monday afternoon, saying the four or five months needed to do that kind of in-depth study is “certainly not” wasting time.

In his Tuesday morning testimony, Cassidy spent several minutes listing the “whole host of (things) that need to be assessed,” that make up those relevant factors in rate-change decisions.

Among other things, he said, the list includes “a fuel-modeling, in order to determine fuel expense, purchased power and off-system sales revenues;” the impact on rates of any growth or reduction in the number of customers; plant maintenance costs; employee salaries and benefits; the costs of any capital improvements; and taxes the company pays.

Although the staff can ask the commission to investigate overearnings, he said, it wouldn’t make the request without doing detailed analyses first.

And, although the policy is to consider anything over 1 percent of revenues to be a trigger for looking at overearnings, Cassidy explained Monday, “It’s been my experience that, when we have experienced overearnings, it has been at a much more significant level.”

Commissioners expect to make their decision by the end of September.


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