We recently wrote a blog post regarding Ameren's pending rate "decrease." In that post, we briefly discussed the RESRAM and what it means in general. However, we felt it needed a further explanation.
RESRAM - Renewable Energy Standard Cost Recovery Mechanism
We first learned about the RESRAM line item charge while we were researching the High Prairie Wind "Farm" and reading the Public Service Commission Docket # EA-2018-0202. In testimony for that project, a Mr. Ajay Arora and a Mr. Steve Wills discuss the RESRAM, at length, in Ameren's initial application for the wind project.
The RESRAM allows for Ameren to implement a rate adjustment mechanism without going through a standard rate case, due to their need to comply with Missouri's Renewable Energy Mandate or Renewable Energy Standard (RES). They call this RES compliance costs.
Mr. Arora states, "...implementation of a RESRAM as part of this case is necessary to address the significant financial detriment (Really?) Ameren Missouri would experience due to regulatory lag if Ameren Missouri were to have to place the High Prairie Wind Farm (and additional wind farms it will build for RES compliance) into service but wait to recover its costs through the traditional rate case process." Essentially, Ameren does not want to wait for a standard rate case and instead wants to pass the costs on to the customer as soon as possible. Ameren feels that without the RESRAM, they would lose costs associated with investment including return, depreciation expense and incremental operations and maintenance expenses. Why did Ameren ask for the RESRAM? Mr. Wills states, "The investment levels required in order to develop the 700 MW or more of compliance-related wind assets are substantial - likely over $1 billion. Under traditional ratemaking, Ameren would permanently lose the RES Compliance Costs associated with this investment - return on the capital deployed, depreciation expense, incremental Operations and Maintenance expense, property taxes, etc..." Ameren wants to make sure customers are covering at least some of the costs of all of the above. Mr. Wills further explains, "Because these costs (he is discussing the RES Compliance Costs) are not reflected in the current rates since they did not exist when base rates were last set, the ENTIRETY of the costs of the wind additions would show up as an under-recovery and would be eligible for recovery in a future Recovery Period (through the RESRAM)..."
What increases the suspicion of Ameren's use of the RESRAM, is their request for SIX variances from the original rule, put into place by the Public Service Commission. These variances are convoluted and we recommend you take the time to read Mr. Wills' testimony in the docket to better understand Ameren's requests.
One of the variances that Maurice Brubaker of the Missouri Industrial Energy Consumers raised concerns about was Ameren's request to use the RESRAM as a "per kilowatthour recovery factor, rather than a percentage of revenue factor" as the PSC rule is written. Not only is this against what the PSC ruled but it also goes against Proposition C, or Missouri's Renewable Energy Mandate. Per the mandate, voter approved in 2008, electric rates should be limited to a 1% increase annually. By allowing Ameren to bill the RESRAM per kilowatthour, Ameren "cannot assure compliance" with Proposition C. Mr. Brubaker further explains, "The wind farms essentially are fixed costs, and fixed costs traditionally are recovered on a demand charge basis or some form of percentage basis. It is not appropriate, nor common, to recover fixed costs on a per kilowatthour basis." Unfortunately, it does appear the Public Service Commission approved this variance to allow Ameren to bill per kilowatthour, in essence increasing bills over the 1% that was VOTER APPROVED.
The Office of Public Counsel (OPC) also raised concerns regarding the RESRAM and the variances requested. They questioned the PSC's approval of one of these variances to the point that they appealed it and are now requesting it go before the Missouri Supreme Court for review. Their issues arise from the use of the RESRAM with another regulatory asset known as plant-in-service accounting (PISA) which helps account for depreciation expense and return. By allowing Ameren to use the PISA and RESRAM in conjunction, the Public Service Commission is allowing one hundred percent recovery of depreciation expense and return, immediately. Through the PISA, fifteen percent of these costs should have been subject to regulatory lag or a standard rate case. The Office of Public Counsel feels, "...when a utility decides to mix-and-match two different statutory mechanisms to weaken consumer protections in both, there becomes and unavoidable conflict in law." By allowing both of these mechanisms to be use simultaneously, the PSC is further allowing Ameren to circumvent the 1% retail rate cap. The Office of Public Counsel goes on to say, "...the Commission read any ambiguity in the statue broadly in favor of the applying utility (Ameren) rather than narrowly with the public's interest at the forefront." Essentially, the PSC does NOT hold the public's best interests.
So, what does this mean for Ameren's customers, all 1.28 million of them? Well, even if Ameren "decreases" their rates, your bill is likely to continue to go up. Make sure you thank the PSC.