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Utility, company push PSC in opposite directions in rate case

Utility, company push PSC in opposite directions in rate case

March 26th, 2014 in News

Noranda Aluminum said Tuesday it has proven that Ameren Missouri overcharged its electricity customers last year - and the state Public Service Commission should cut the utility's rates to benefit those customers.

But Ameren, Missouri's largest investor-owned utility, said Noranda's complaint has no merit and the PSC should dismiss it.

Noranda operates an aluminum smelter near New Madrid in the southeast Missouri Bootheel, and said in its seven-page excess earnings complaint filed with the PSC last month: "The smelting process consumes large amounts of electricity at all times, with the cost of such electricity comprising approximately one third of the smelter's production costs.

"Noranda is by far Ameren Missouri's largest customer of electric power, consuming over $160 million a year in electricity from Ameren."

And, Noranda complained, "Ameren Missouri is currently overearning at a rate of $44.6 million per year over its authorized rate of return on equity of 9.8 percent" - a rate the PSC set in January 2013.

The aluminum company added, "Compelling evidence shows" that the PSC's authorized rates are too high, making the utility's alleged overearnings "a rate of $67.1 million per year, or over $5.6 million per month."

In a news release announcing Tuesday's PSC release of some of Noranda's testimony last month, Chris Roepe, executive director of the consumers group the Fair Energy Rate Action Fund said: "Ameren is costing Missouri ratepayers millions each year by overearning.

"We applaud regulators for making this information public and urge the PSC to swiftly order a reduction in Missourians' electric rates to compensate for Ameren's excessive profits."

But Warren Wood, Ameren Missouri's vice president for legislative and regulatory affairs, said Noranda's complaint is "absolutely without merit."

"Since those (current) rates were put into effect, we're approaching over $1 billion in investments in generation, transmission, distribution equipment, energy-efficiency programs, renewable energy, (and) environmental compliance with EPA regulations," he explained.

"That over $1 billion in expenditures are not currently reflected in our rates."

And, as the PSC reviews the records while considering Noranda's complaint, or for the new rate case Ameren already has said it will file in July, those expenses will offset any appearance of overearnings, he said.

Greg Meyer, Chesterfield, a Noranda consultant, told the PSC in prepared testimony that he and another consultant used several reports Ameren filed with the commission to determine the amount of money Ameren has earned above its authorized "return on equity."

But in its motion to dismiss the complaint, Ameren reminded the commission: "A bare allegation that a utility has in the past earned more than its last-authorized return on equity does not state a claim upon which relief can be granted."

Wood said the "return on equity" is not a "cap" on a company's earnings.

"It's fully expected that - because of weather and other unexpected events - at times you'll be above that RoE and at times you'll be below it," he said.

Wood said Ameren believes Noranda's complaint was filed to divert attention from a different Noranda filing, asking the PSC to reduce the rates it now pays for buying Ameren's electricity.

He said Noranda pays a PSC-approved rate of about 4 cents a kilowatt-hour, "the lowest electric rate in the state of Missouri (and) 60 percent below what our residential customers pay."

Wood said if the PSC approves Noranda's request, it could shift about $500 million in costs to other customers.

"We have a number of very direct concerns what that would mean to other customers," Wood said.