AG, CUB Analysis Uncovers Bloated Claims in Ameren's $90 Million Rate-Hike Plan, Coalition Urges Regulators to Order Rate Cut

CHICAGO, Aug. 25, 2011 /PRNewswire-USNewswire/ -- On the verge of a public hearing on Ameren's $90 million rate-hike request, new testimony filed by the Illinois Attorney General's office and the Citizens Utility Board (CUB) shows why state regulators should reject the proposed increase and instead order a rate cut, consumer advocates said Thursday.

The coalition, which also included AARP Illinois, held news conferences in Champaign, Decatur, East St. Louis, and Peoria, urging consumers to visit a special website, www.StopAmeren.com, where they can get background on the Ameren rate-hike case and learn how to send a message to the Illinois Commerce Commission (ICC), the state agency that will rule on the utility's request in January 2012.  

Consumer advocates also urged people to attend the only public hearing on Ameren's proposed increase, scheduled for 1 p.m., Tuesday, Aug. 30 at the ICC's main hearing room, 527 E. Capitol Ave., in Springfield.

"It's been a long hot summer, but that's not why Ameren customers are red in the face," CUB Executive Director David Kolata said. "A joint analysis by Attorney General Lisa Madigan's office and CUB proves that Ameren doesn't deserve another dollar from customers, let alone 90 million of them."

Ameren's original $111 million rate increase is now down to $90 million—$49.7 million for gas service and $40.2 million for electric service. It threatens to jack up rates for customers by up to $100 a year. The increase affects the rates Ameren charges customers to deliver power and heat to their homes. These "delivery" rates account for roughly a third of a customer's bill. The cost of the actual gas or electricity takes up the other two-thirds of the bill.

Since 2008, Ameren has received more than $200 million in rate hikes.

"It's completely unacceptable for Ameren to ask consumers for yet another unneeded rate hike when consumers are still facing substantial financial hardship," Attorney General Madigan said. "We shouldn't have to foot the bill to help the utility pump up its profits."

"With consumers bracing for another possible recession, this is not the time for Ameren to greedily demand that they pay more for the service they receive," said Scott Musser, Associate State Director for AARP Illinois. "AARP urges consumers to tell the Illinois Commerce Commission to reject Ameren's rate-hike request."

The testimony filed by CUB and the Attorney General's office on Tuesday called for deep cuts in Ameren's proposed natural gas increase, as well as a $28 million reduction in electricity rates. The overall impact is a $2.2 million rate cut.

One of the key findings of the testimony is that Ameren is seeking an exorbitant return on equity (ROE)—an allowed profit rate for shareholders—of 11 percent on the electric side and 10.75 percent on the gas side. The CUB and Attorney General analysis recommends a more reasonable profit margin of 9.06 percent and 8.22 percent. That recommendation alone would cut Ameren's proposed increase by $57 million ($34 million for electric, $23 million for gas). 

The analysis also found that Ameren inflated estimates for operations and maintenance expenses connected to its natural gas and electric distribution system. For example, the company forecasted a 28 percent increase over its estimated electric distribution operations and maintenance spending from 2011 to 2012. There is no justification for Ameren to argue that current levels of spending are not adequate to properly maintain the system, the testimony said. Recommendations by CUB and the Attorney General's office in this area reduced the rate hike by another $25 million. 

The testimony was prepared by Chris Thomas, CUB director of policy, David Effron, a New Hampshire-based consultant specializing in utility regulation, and Scott Rubin, a Pennsylvania-based consultant who focuses on public utility issues. 

CUB is Illinois' leading nonprofit utility watchdog organization. It was created by the Illinois legislature in 1983 to represent the interests of residential and small-business utility customers. Since then, CUB has saved consumers more than $10 billion by helping to block rate hikes and secure refunds. For more information, call CUB's Consumer Hotline at 1-800-669-5556.

SOURCE Citizens Utility Board