AmerenUE includes request for rate increase for Callaway 2 federal permit process
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AmerenUE includes request for rate increase for Callaway 2 federal permit process

Date: January 27, 2009
By: Emily Coleman
State Capitol Bureau

JEFFERSON CITY - AmerenUE requested its rates be increased to help pay for overall rising costs as well as certain Callaway 2 construction and operating license application costs.

The Public Service Commission did not approve the Callaway 2-related costs since it violates current legislation, but it did vote 3-2 to increase electric rates for Ameren consumers.

"I think there was an unanimous agreement that the costs associated with Callaway 2 violate what's called the anti-CWIP law or the anti-construction work in progress law that was passed by proposition one and by the voters some 30 years ago, that those expenses associated with the plant that has not yet been built cannot be passed through to rate payers," said Robert Clayton, the chairman of the commission.

While the inclusion of the related costs was categorically denied by the commission, Ameren maintains that the costs are a part of its efforts to ensure future reliability.  Ameren has increased its budget for tree trimming and has put more wires underground to minimize blackouts.

"We felt that those costs were appropriate because they're aimed at ensuring reliable service for our customers in the future," Ameren spokesman Mike Cleary said.

Clayton voted against the Ameren order because he said the return on equity component or the profit margin was too high.

The estimated increase for a residential consumer is approximately $5.88 or 8.1 percent, according to a press release from the commission.  The profit margin increased from 10.2 to 10.76 percent.  The increase in rates will bring in an additional $162.6 million in revenue.

"My concern is that the people who voted against this order were not basing their decision on the facts, they were basing their decision on what they thought would be acceptable to the public," said commissioner Jeff Davis, who voted in favor of the increase.

Clayton was also opposed to the inclusion of a fuel adjustment clause.

"I also disagreed with the fuel adjustment clause that was set up, and that basically enables Ameren to pass through 95 percent of their fuel expenses (to their consumers)," he said. "And I didn't believe that was appropriate in the current economic climate, and also believe there should be a better balancing of risks among the rate payers and with the company."

The majority opinion did vote to include the clause, however, citing the previous spending habits of Ameren.

"Everyone in this case agrees that Ameren's fuel purchasing practices are prudent," Davis said.  "No one has ever contested that one piece of coal or one BTU of gas that Ameren has purchased has not been prudent.  So everything they have been doing is prudent, and the question is are they entitled to recover all of those costs....  What this commission said, what the majority said was let them recover 95 percent of those costs to give them some incentive to manage (their fuel expenses appropriately)."

Cleary said the fuel adjustment clause would allow Ameren to decrease its prices as well as increase them due to the volatile nature of the fuel industry.