Ameren to seek 18 percent rate hike in Missouri

ST. LOUIS — Utility customers in parts of Missouri could be in for another rate increase as early as next year after AmerenUE officials on Friday announced a request for an 18 percent hike.

Warner Baxter, president and chief executive officer of the St. Louis-based utility, said the $402 million request to the Missouri Public Service Commission would amount to less than 50 cents per day for the average household. But it would be AmerenUE's third rate increase since 2007, and Baxter acknowledged that in a lagging economy, it could be hard on some customers.

"We do not make this request lightly, particularly during these difficult economic times," Warner said.

About half of the new revenue would be used to make reliability improvements such as putting wires underground and trimming trees, along with covering increasing generation and delivery costs and other expenses.

The rest of the requested increase is needed to cover higher fuel costs and to offset lower revenues from sales outside of the system, Warner said.

In January, the Public Service Commission approved a $163 million rate increase for customers of AmerenUE, the state's largest electricity provider. That roughly 8.1 percent increase meant the average customer will pay $5.88 more per month. Ameren had sought a 12.1 percent rate hike.

In 2007, Ameren was granted a $43 million increase, a fraction of the $361 million it requested at that time.

Missouri Public Counsel Lewis Mills, the state's official consumer advocate, said the increases are adding up for many.

"There are a number of people and businesses that are clinging to the margin by their fingernails," Mills said. "Eighteen percent is going to create a lot of hardship for a lot of people."

Warner said AmerenUE offers a variety of programs to help needy customers pay bills, cut costs and manage their utility budgets.

A final decision by the commission is expected by next June, AmerenUE said.

Baxter noted that even with the rate increase, AmerenUE's rates are reasonable compared to other utilities. Currently, he said AmerenUE's rates are 40 percent below the national average and more than 20 percent below those of other investor-owned utilities in Missouri.

Shortly before the AmerenUE announcement, its largest electric customer made a presentation to the commission emphasizing how its business depends on affordable electricity.

Franklin, Tenn.-based Noranda Aluminum Inc. runs a smelter and manufacturing plants in New Madrid and still is rebuilding after a massive ice storm knocked off power in January. Electricity accounts for nearly one-third of its costs and, though Noranda receives a discount from AmerenUE, its electricity costs still are among the highest of the nine aluminum smelters in the U.S., the company said.

Instead of a rate increase, "we need short-term rate relief and long-term cost-competitive power," Noranda CEO Kip Smith said.

In addition to the rate increases, AmerenUE is looking at ways to cut costs, Baxter said, including possible cuts in executive pay. The utility hopes to reduce expenditures by more than $150 million over the next two years.

Warner said customer feedback indicates a top priority is reliability. The company has been working to improve reliability, he said, citing statistics showing 96,000 fewer outages in 2008 compared to 2005. Through the utility's "Power On" program, he said, 60,000 homes and businesses have benefited from work to move lines underground, and 9,400 miles of trees have been trimmed away from power lines.

AmerenUE serves about 1.2 million customers in Missouri and is a subsidiary of Ameren Corp., which provides electricity and natural gas in Missouri and Illinois.