Statement By CUB Executive Director David Kolata On ICC Ruling On Ameren Formula Rate Plan

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Sep 20, 2012, 12:30 ET

CHICAGO, Sept. 20, 2012 /PRNewswire-USNewswire/ -- The Citizens Utility Board (CUB) is generally pleased with the Illinois Commerce Commission's (ICC) decision to order a $48.1 million electric delivery rate cut for Ameren customers. A first step in building a smarter grid that benefits Illinois consumers is making sure they don't pay inflated rates. While CUB does not agree with every aspect of the ruling—our experts determined the utility should give a bigger rate cut—families in Ameren territory will see a decrease in rates, and that's good news. However, there's more work to be done. Ameren's plan for upgrading the power grid was rejected by state regulators over the summer, and CUB urges the utility to improve the plan so that it delivers on its promise to reduce future electric bills and improve reliability.

Background:

* Ameren filed its proposal for new electric rates after passage of the "Energy Infrastructure and Modernization Act," or the "smart-grid bill," late last year. The new law uses a formula to determine Ameren rates each January for up to the next decade to pay for $625 million in power-grid upgrades. Wednesday's 3-2 decision plugs final numbers into the formula.

* CUB supported a $54.5 million rate cut. An ICC judge agreed with most of CUB's arguments, recommending that the commission order a rate cut of about $50.7 million.

* Wednesday's decision will result in a delivery rate decrease from October through December 2012. Under the law, new rates take effect every January. Consumers are expected to see future increases according to the formula, which sets the utility's Return on Equity (ROE), or profit rate for shareholders.

* The new January rates will be decided in yearly "reconciliation" cases in which CUB and other consumer advocates can analyze and challenge operating, capital, and maintenance expenditures. In the reconciliation case for January 2013 rates, Ameren's calculation would result in an additional $16.1 million rate cut—partly because Ameren hasn't launched smart-grid improvements yet. A final order in that case is not expected until December.

* Over the summer, the ICC voted to reject Ameren's smart-grid deployment plan, arguing that it lacked detail on how it would benefit consumers. CUB argued that the company's revised plan was only a slight improvement and the consumer group recommended that the company be forced to take part in a workshop process where consumer advocates could help the company improve the plan. An ICC decision on the plan is due in November.

* The $48.1 million rate cut affects delivery charges on Ameren bills—what customers pay to have the electricity delivered to their homes. Those charges take up about a third of the bill. The cost of the electricity itself takes up the other two-thirds. The supply rate is determined through a power-buying process managed by the state-run Illinois Power Agency (IPA) or the rate is determined by an alternative power supplier, if a customer has chosen one.

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 helped save consumers more than $10 billion by blocking rate hikes and securing refunds. For more information, call CUB's Consumer Hotline at 1-800-669-5556, or visit www.CitizensUtilityBoard.org.

SOURCE Citizens Utility Board