Finance topics

For at least the last five years, AmerenUE has doggedly worked for approval of a fuel surcharge that would allow it to more quickly recover millions of dollars in coal and natural gas expenses from its 1.2 million electric customers.

The St. Louis utility, a subsidiary of Ameren Corp., lobbied the Missouri Legislature to get a law passed in 2005. For three years, it pleaded to regulators, claiming it was at a disadvantage to utilities in other states. Finally, the state Public Service Commission approved AmerenUE’s request on Jan. 27 as part of a rate increase that lifted revenue by $163 million a year.

Now, just two weeks later, AmerenUE is back on the PSC’s doorstep asking for a temporary change to the new rules, which haven’t yet taken effect.

Because of last month’s crippling ice storm in southeast Missouri and a bizarre set of circumstances, what would have been a $31.4 million windfall for Ameren shareholders becomes a $73 million gusher for utility customers.

AmerenUE says the potential $100 million swing in revenue ultimately threatens to wipe out almost half of last month’s rate increase.

The issue centers on Noranda Inc.’s aluminum smelter in New Madrid County. The plant, which is outside AmerenUE’s geographic service area, is the utility’s biggest electricity consumer. In 2005, the PSC approved a 15-year electric supply agreement between AmerenUE and Noranda.

The ice storm knocked out Associated Electric Cooperatives Inc.’s transmission lines that deliver AmerenUE’s power to the plant. Noranda said the outage cut plant capacity by 75 percent, and restoring full capacity could take a year.

The outage leaves AmerenUE with excess electric generation that it can sell for a higher price on the wholesale power market.

Under current rules, Ameren could sell the power at market rates. That would mean an additional $31 cash advance america.4 million in pretax earnings for AmerenUE and its parent’s shareholders.

But the PSC-approved fuel surcharge will require that 95 percent of the additional revenue from the sale of excess power go to utility customers.

AmerenUE said in its filing that "giving customers a windfall caused solely by an act of God that reduced Noranda’s production would be unjust, unreasonable and unfair."

"We never anticipated an ice storm like we saw in southeast Missouri," utility spokeswoman Karen Foss said. "All we’re asking for is a one-time exception for this extraordinary situation."

But consumer groups that vehemently opposed the fuel surcharge balked at the idea of taking revenue from customers and giving it back to utility shareholders.

"I’ve been doing this for a long time, and I can’t remember a time when I was so appalled at the greed and callousness of a utility," said Lewis Mills Jr., Missouri’s public counsel. "They’ve literally spent millions of dollars getting this particular fuel adjustment clause through. That’s why it’s so outrageous."

Foss said AmerenUE is only asking the commission to "be made whole," so that it isn’t penalized from the storm and damage to transmission lines it doesn’t own. Customers would still benefit from any additional profit on power sales above what’s needed for the company to recoup lost revenue.

The utility has asked the PSC to rule on the request by Feb. 19. The fuel surcharge and higher electric rates are expected to take effect March 1.

jtomich@post-dispatch.com | 314-340-8320

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