WHAT OTHERS SAY: Ameren has tough sell in seeking new electric rate surcharge

Friday, January 25, 2013 | 6:00 a.m. CST

Ameren Missouri president and chief executive Warner Baxter was describing the utility’s plans for a building boom in power generation plants. He was talking with his right hand.

In a meeting with the Post-Dispatch editorial board, Mr. Baxter held his hand parallel to a table and then tilted it up, climbing steadily like a roller-coaster at Six Flags heading up its first ascent.

Most of Ameren’s generation plants are aging. They were built in the age when coal was king and few people were worried about climate change.

Ameren Missouri needs to “ramp up” its investment in infrastructure, Mr. Baxter told us. The Big Nuke plan of 2010 failed. So, too, did last year’s Baby Nuke plan (at least so far). So Ameren Missouri is stuck with aging coal plants for about 75 percent of its generating capacity at a time when nobody is going to build new coal plants.

Eventually, some of those plants will need to be retrofitted for natural gas, which has become cheap and plentiful thanks to fracking technology. A better electrical grid will improve the efficiency of wind power. Even a solar power plant is on the table as Ameren looks to its future.

So Ameren will be asking the Missouri Legislature this year for a version of what it’s asked for each of the past few years: a way to recover building costs from consumers more quickly. Sometime in coming days or weeks, Ameren is expected to ask for a new surcharge, much like one water and gas utilities have, which charges consumers for ongoing costs of replacing old infrastructure.

Power customers eventually pay for such costs, but generally only after the Public Service Commission considers a full rate case, a process that generally takes 10 months to a year.

Utilities want to accelerate that process.

Based on past legislative proposals from the utility, consumers should be wary of such a proposal, even though Mr. Baxter says Ameren no longer wants to get rid of the state’s construction work in progress (CWIP) law. That statute, passed by voter initiative in the 1970s, says utilities can’t charge customers for construction until a power plant is up and operating. It was passed after Ameren built the Callaway I nuclear plant with millions of dollars in cost overruns.

Ameren made several attempts in recent years to get rid of the CWIP law. That was bad enough, but worse were numerous other proposed changes to the regulatory framework that would have left consumers without a net.

Or, to continue the analogy, it would have left consumers on the wrong end of a bottomless roller-coaster ride.

Mr. Baxter correctly notes that there is a logic to taking advantage of both low interest rates and the need for construction jobs to invest in aging infrastructure. Dropping the request to undo the popular and important CWIP law is a good thing.

But to win his argument, he’ll have to make the case that Ameren’s electrical generation plants and transmission facilities are outdated. The argument will be complicated by the fact that in its last five rate cases, the company agreed to make proper investments in its infrastructure.

Ameren and some of its utility partners must also overcome their habit of asking way too much from consumers while treating any critics as, with apologies to William Safire, nattering nabobs of negativism.

Ameren Missouri is no doubt serious about helping Missouri develop a modern energy policy that helps the state compete for jobs of the future. Here’s what it must do:

  • Follow the model it used in developing its most recent energy efficiency initiative. Ameren made partners out of its top customers and critics, rather than opponents.
  • Put a sunset clause of about 20 years into any proposal, so consumers and lawmakers have a chance to address whether the utility lived up to its promises.
  • Stop opposing proper funding of the Office of Public Counsel, the statutory representative of consumers in regulatory matters before the Public Service Commission.
  • Put forward a proposal that clearly defines “infrastructure” so that whatever surcharge is sought cannot be used as a backdoor attempt to bypass construction work in progress protections.

Ameren Missouri will have to deal with an inconvenient truth in arguing that it needs special help to speed up the process of recouping its infrastructure costs:

In the past six years, Ameren has obtained $607 million in rate increases, a whopping 37.3 percent spread over five rate cases. Plus Ameren has received over $300 million from customers for the Fuel Adjustment Clause surcharge during this same time period.

Ameren’s position, apparently, is that those increases didn’t come fast enough.

Seems like a tough sell.

Copyright St. Louis Post-Dispatch. Reprinted with permission.

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