JEFFERSON CITY — Missouri utility regulators decided Wednesday to allow Ameren Missouri to increase electric rates by $172 million, but the state's largest utility will not be allowed to recover costs it sought for replacing the Taum Sauk reservoir after the previous one collapsed.
New rates were expected to take effect in August and are estimated to raise the average residential electricity bill by about $8 per month.
The Public Service Commission voted 5-0 to approve the rate increase. St. Louis-based Ameren Missouri has about 1.2 million electric customers, mostly in eastern and central Missouri.
Kevin Gunn, the chairman of the Missouri Public Service Commission, said Wednesday the decision "balances the need for a financially healthy utility with the needs of the ratepayers for reasonable and affordable rates."
A spokeswoman for Ameren Missouri said the utility was reviewing the decision. From its preliminary review, the power company said it agrees with some parts but was disappointed by others, including that a portion of the costs for building the new Taum Sauk reservoir were excluded.
"Our investment in Taum Sauk will provide significant benefits to our customers for decades to come and our request was consistent with costs we could seek recovery for under our settlement with the state of Missouri," Ameren Missouri spokeswoman Rita Holmes-Bobo said.
Ameren Missouri sought a rate increase of more than $200 million. The request included costs for installing "scrubbers" at its Sioux Power Plant that help to remove sulfur dioxide gas, particulates and other substances. The utility also wanted a portion of the costs for rebuilding the Taum Sauk reservoir added to its rate base that is collected from electric customers over time.
The reservoir needed to be rebuilt because it collapsed in December 2005. The collapse of the reservoir near Lesterville about 110 miles southwest of St. Louis sent a billion gallons of water down a mountain that swept away the home of a state park superintendent and critically injured his three children.
The utility reached a November 2007 settlement with state officials, and under that agreement, it promised not to charge customers for the costs of the accident with the caveat that it was allowed to request recovery for "enhancements, costs incurred due to circumstances or conditions that are currently not reasonably foreseeable and costs that would have been incurred" if Taum Sauk had not collapsed. Regulators were not part of the settlement.
Ameren Missouri contends that customers will benefit from a new reservoir that is safer and will last longer and that the costs it pursued were allowed. Staff for the Public Service Commission agreed. Opponents that had included the state public counsel who represents customers before regulators said customers should not be forced to pay for building the new reservoir.
Public Service Commission member Robert Clayton said he thinks regulators sent the right message Wednesday. In a concurring opinion, Clayton said much of the rate increase was for the environmental improvements at the Sioux Power Plant that are the types of improvements regulators should support. Clayton also endorsed the commission's decision with the Taum Sauk reservoir.
"Rate payers should not be burdened with this investment which came about entirely and solely because of mistakes made by the utility," Clayton wrote.
Missouri Public Counsel Lewis Mills said excluding the costs for the Taum Sauk reservoir made sense.
"It's just common sense," Mills said. "That's the way it should have come out."
The original Taum Sauk reservoir started operation in 1963, and its replacement started in April 2010. Water flows down the mountain and turns turbines. At night when electrical demand is low, the water is pumped back to the top of the mountain.
Utility regulators Wednesday also set the return on equity that Ameren Missouri is allowed to earn at 10.2 percent. The utility requested that it be set at 10.7 percent.
This most recent rate case was the fourth for Ameren Missouri in roughly four years. In May 2010, the commission approved a $226 million rate increase. In January 2009, regulators approved a rate increase of $163 million. And in 2007, the power company was granted a $43 million increase, which was a fraction of the $361 million it had requested.