To access any of the documents referenced in this blog visit the Public Service Commission (PSC) Docket.
Case No. ER-2019-0335
We hope that you are finding yourself safe and sound now that winter has officially arrived. To say we were spoiled throughout December is an understatement. We have already experienced power outages this year and this brings to the forefront just how much we rely on electricity as well as how appreciative we are of our local office personnel and lineman that risk their safety to keep our lives going. We rarely think of the details of how our electric needs are met as long as it is there when we need it and our bills don’t go up, we stay content.
As Schuyler and Adair Counties have suddenly been thrown into the world of energy generation, the true cost of that "on demand electricity" becomes clear. The intention of Ameren to purchase the High Prairie Wind “Farm” is the first time a public utility in Missouri has done so. We believe this deserves close scrutiny considering renewable energy investment across the country by public utilities equated to rate increase requests of anywhere from 9-24% in 2019. You can learn more about these rate increase requests here, here, here, here and here. All of these increases specifically mention renewables and a transition to "green energy."
We already know investments in wind energy are not about the energy considering the pathetic return on investment, but are instead about the tax credits, subsidies and fulfilling mandates. What are these investments going to mean for your bills? According to the letter Ameren sent to customers about the ongoing rate case, they are requesting a rate decrease which is equivalent to about $0.03 off your bill.
Well, thank goodness rates are not going up and why would anyone attend a public hearing to contest that?! We sincerely hope you kept reading. Even though the wording is confusing, the remainder of the letter alludes to actual rate INCREASES. “Please note that while Ameren Missouri’s filing suggests to the PSC what Ameren Missouri contends are the appropriate rates to be set as a result of this case, an overall rate INCREASE or an INCREASE for some rate classes could be proposed as the case proceeds which, if approved by the PSC, could result in the rates applicable to one or more rate classes are HIGHER than those initially requested by Ameren Missouri, or that are HIGHER than those reflected in Ameren Missouri’s current rates.” It seems like a blatant effort to confuse the public and an abundance of words to say, “about that rate decrease… not so fast.” KTVO did cover the rate hearing held in Kirksville, MO on January 13, 2020. Read on to get a glimpse of the truth.
In the testimony of Robert E. Schallenberg of the Office of Public Counsel, “The COMPANY (AMEREN) updated its cost-of-service study showing that its current rates are now deficient. It is unclear whether Ameren Missouri will actually seek reduced rates for its electric customers when, in fact, there is likely to be a quarter of billion dollar increase to the rates of its Missouri electric retail customers.” The details of how he came to that conclusion are spelled out in his testimony on the PSC public docket.
Above all, please understand that this rate decrease discussion is a form of distraction considering the possibilities of an actual increase as well as the RESRAM line item that was approved recently. The RESRAM charge is designed to recover costs associated with Missouri’s Renewable Energy Standard. This stands for Renewable Energy Standard Cost Recovery Mechanism (RESRAM). Remember that Ameren is not required to own renewable energy projects, they must simply purchase and provide 15% of their energy from a renewable energy source. This RESRAM allows Ameren to "decrease" rates but your bill can still go up!
In our opinion, as well as some of the experts that provided testimony to the PSC, this rate case being proposed as a rate decrease is misleading. According to expert Amanda Conner of the Office of Public Counsel, “Ameren has an estimated rate case expense of $501,045 without the depreciation study." So, they are spending $500,000 minimum in consultants, witnesses and testimony, of which they expect customers to pay for, in order to decrease rates a measly $800,000 spread among all 1.2 million customers. Do you see how much sense this makes? Propaganda. From our research what we expect to happen is for Ameren to continue to use the RESRAM line item as well as the FAC (discussed in detail shortly) to continue to RAISE bills. Please pay attention to line items and bill amounts, not just rates!
Another reason to question the validity of this rate decrease is the FAC charge. The FAC is the fuel and purchased power adjustment charge. This line item allows the company to pass increases or decreases in its net fuel and purchased power costs to customers outside of a general rate case (this is what is currently happening, a "general rate case"). It also allows Ameren to recover up to 95 percent of its costs of fuel charges. The goal is supposed to be to assist the company to deal with violate fuel pricing. On January 8, 2020, the PSC approved a reduction in the FAC credit, from $1.36 per 1,000 kW to $0.77 per $1,000 kW. This means an increase in your bill. This was decreased from $1.76 per 1,000 kW in September 2019. You make think, “That isn’t that much.” However, the Office of Public Counsel has concerns regarding the FAC and its role in this rate case. They state, “…the FAC may be manipulated to present a “rate reduction” in a general rate case when in fact it could easily be a delayed bill increase.” After a new rate is set as well as the revenue requirement, “the FAC allows the electric utility to bill its customers 95% of any increase in FAC costs above the normalized costs set in the general rate case.” During a rate case, if the estimated FAC costs are predicted lower then “the actual fuel costs will be higher than the FAC costs used in the rate case to determine revenue requirement. The difference will be positive and the electric utility will bill its customers through the FAC for this mismatch between what was included in permanent rates and what should have been included.” Here is the important part, what this means for Ameren’s customers, “the utility receives more revenue than the revenue requirement from the “rate decrease” and customers end up seeing an increase to their total bills as a result.” The OPC goes on to say, “Had the FAC costs in Ameren Missouri’s revenue requirement remained at the level currently set by the Commission (PSC), Ameren Missouri would have been asking for a rate increase of $107 million instead of this being a rate decrease case” of $800,000. Greg Meyer of the Missouri Industrial Energy Consumers also found data regarding the FAC, " It is my understanding that on January 1, 2020 new fuel and transportation contracts will reduce Ameren Missouri’s annual fuel expense by approximately $100 million. Normally, these changes in fuel expense would flow through the fuel adjustment clause (“FAC”) and be reflected in reduced charges to customers. In this instance, without the rate case filing, Ameren Missouri’s customers would have seen a $95 million credit through the FAC, everything else held constant. However, Ameren Missouri has proposed other increases in expenses (depreciation and ROE) to offset the effects of the fuel expense reduction, which has lowered the base rate increase to approximately a $1 million base rate reduction. In summary, due to proposed increases in other expenses, Ameren Missouri is proposing to reduce rates $1 million, in lieu of the $95 million reduction customers otherwise would have realized through the FAC." Ameren appears to be manipulating the FAC in this rate case to appear lower than it actually will be, which in turn means a change in the FAC charge on customer’s bills. See the following picture to understand what else Mr. Meyer discovered:
To quickly clarify, Ameren's rates are based off of their revenue requirement. The revenue requirement is the revenue that a regulated utility needs to earn in a test year in order to provide adequate service to its customers and a fair return for its shareholders. Price determined by the cost incurred by the provider of the product or a service and not by the price the purchasers are willing to pay.
Another issue that is relevant to electric rates is affiliate transactions. According to the direct testimony from Robert E. Schallenberg (OPC), “Ameren Missouri’s affiliate transactions with AMS play a significant role in establishing Missouri’s customer’s rates for electrical service." In 2018, Ameren Missouri paid $218,239,556 to AMS for goods and services.” So what is an affiliate transaction? Basically it is a conflicted transaction, commonly done on terms that are not in the best interest of all parties entering into the agreement. AMS stands for Ameren Services Company and provides goods and services to Ameren Missouri. The problem comes into play when it is realized that AMS is a sister company to Ameren Missouri, both owned by Ameren Corp (AMC). “Common control of both parties removes the independence from the buyer and seller in their agreement of terms,” according to Schallenberg. The Missouri Supreme Court acknowledged this practice as a “profit-producing scheme among public utilities termed “cross-subsidization” in which utilities abandon their traditional monopoly structure and expand into non-regulated areas. This expansion gives utilities the opportunity and incentive to shift their non-regulated costs to their regulated operations with the effect of unnecessarily increasing the rates charged to utility customers.” Rules became effective in 2003 to ensure these types of transactions are not occurring or that are occurring with oversight and according to Schallenberg’s testimony, “there is no documentation that Ameren Missouri has ever been in compliance with the Commission’s affiliate transactions rules.” These types of transactions in his opinion, the $218,239,556 paid to AMS, is in violation and in turn should be void from being the customer’s responsibility to pay. Additionally, Schallenberg points out several areas in which the use of affiliate transactions are hurting rate payers. This includes the fact that what Ameren pays AMS is more than what it would cost to produce the goods and services themselves while eliminating competitive bidding. Ameren acknowledges that competitive bidding does not occur in affiliate transactions which eliminates any chance for a reduced cost or best cost option for rate payers.
Another point we will highlight is included in the testimony of Amanda Conner. The concerns she raises made our jaws drop. Lack of justification for expenses to the tune of $1,306,291. Excessive scheduling of meetings over meals including alcohol, charges to two separate research institutes, paying for lobbyists that lobby for legislative goals that may not be in the best interests of rate payers or customers may not wish to support and instead only support shareholders interests, trips to Canada and Italy, and charges for storm relief efforts the company has already been reimbursed for. Are you okay with footing that bill? How does it make you feel knowing you are paying for Ameren's extraneous costs.
In the KTVO article mentioned above, Ameren is happy to tout, "Ameren adds that electric retail rates are the lowest in the state, 22% below the Midwest average and 24% below the U.S. average. Since August 2018, base electric rates have been reduced by 6%..." HOWEVER, Greg Meyer states, " In 2008, Ameren Missouri was the lowest cost provider of electricity service. However, in 2018, Ameren Missouri’s rates are no longer the lowest and are close to the median (9.59) and only slightly lower than the average (9.43). The increased investments associated with Ameren Missouri’s Smart Energy Plan as described in the direct testimony of Ameren Missouri witness Warren Wood will add to Ameren Missouri’s rate increases in the next five years. If costs are not controlled by Ameren Missouri, the rankings shown in Table 3 will worsen further." See Below:
Ameren's rates have INCREASED 64% in 10 years!
For a $3 billion company that has not paid any federal income tax in EIGHT years and is not expected to in the near future, they sure like to spend YOUR money. Yes, that is right, Ameren has not paid federal income taxes for at least EIGHT years, but continues to count it as an expense. As a customer, you would think they would value their customers more, instead they are misleading them with this rate case "decrease". Be informed, read the public docket testimony and ask Ameren the tough questions. Its time that Ameren starts answering for its wrongdoings and the Public Service Commission actually provide protection to the public and utility customers.
You are welcome to use any of the above to file a Public Comment for this rate case. You can do this online, through the above provided website, or you can mail or fax in your comment using the form below.
Below is additional information that was provided at the Public Hearing on Monday, January 13, 2020 in Kirksville, Missouri.
Comments