CUB Uncovers Bloated Ameren Spending For Sports Events, Corporate Sponsorships, Asks ICC to Double Electric Rate Cut

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Apr 13, 2012, 11:24 ET

CHICAGO, April 13, 2012 /PRNewswire-USNewswire/ -- Citing inflated Ameren expenses for "branding" changes, corporate sponsorships, and athletic events, the Citizens Utility Board (CUB) said Friday it has filed expert testimony arguing that the utility should give its customers a $42.8 million electric rate cut, more than double what the company has proposed in its "formula rate."

Ameren's formula-rate filing—a proposal for new electric rates—is connected to the "Energy Infrastructure and Modernization Act," also called the "smart-grid bill," the utility helped push through the General Assembly late last year. The legislation will help Ameren pay for $625 million in upgrades to the power grid. CUB is cautiously optimistic that those upgrades could cut future electric bills and improve reliability.

However, CUB did not support the legislation, citing too few consumer protections. The new law ties yearly rate hikes to a formula that sets the utility's Return on Equity (ROE), or profit rate for shareholders. Although the legislation created the formula, final numbers still need to be plugged into it. Ameren's proposed formula is being considered in this case—one of CUB's most important Illinois Commerce Commission (ICC) cases ever.

At least initially, Ameren's proposed formula would lead to an upfront rate cut of about $19 million. However, CUB filed testimony from Michigan-based accounting expert Ralph Smith that recommends state regulators more than double the cut, to $42.8 million.

"We're glad to hear that electric customers are due a rate cut, but Ameren's proposal doesn't even come close to giving its customers the upfront decrease they deserve," CUB Executive Director David Kolata said. "The company has no business billing customers for the bloated spending uncovered by CUB."

Smith's analysis uncovered operating expenses that Ameren customers should not have to pay, including:

$718,000 in "branding" expenses, in connection with the company's 2010 decision to merge its Illinois utilities into a single entity, Ameren Illinois;
$253,000 in corporate sponsorships, including spending on basketball tournaments, game tickets, and holiday street decorations;
$158,000 in E-store expenses, related to an internal online store where Ameren employees can purchase corporate branded shirts, sweaters, cups and other merchandise;
$98,000 for athletic event expenditures;
$94,000 in lobbying expenses.

"It's hard enough for customers to pay their bills in this economy, without Ameren trying to stick them with bloated expenses for corporate sponsorships and athletic events," Kolata said. "Ameren customers deserve a much bigger rate cut."

Ameren's formula case will result in new rates by October 2012. New rates are expected to take effect every January, according to the formula finalized in this case, for up to a decade.

CUB is Illinois' leading nonprofit utility watchdog organization. Created by the Illinois Legislature, CUB opened its doors in 1984 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 over the years. For more information, call CUB's Consumer Hotline at 1-800-669-5556 or visit CUB's award-winning website, www.CitizensUtilityBoard.org.

SOURCE Citizens Utility Board