 The testimony, filed by CUB and the Illinois attorney general's
office Monday as part of an 11-month case before the Illinois
Commerce Commission, includes a statistical analysis that measured
Ameren's efficiency among 115 electric utilities nationwide.
Ameren hit customers with a $162 million electric and natural gas
"delivery" rate hike last year, as it raked in profits of $622
million. Within months it requested another increase, $226 million,
as consumers suffered one of the worst economic crises since the
Great Depression.
Madison, Wis.-based consultant Steve Fenrick, a top expert on
utility economics, used an "econometric model" to analyze Ameren
expenses. He found that as Ameren fought for a rate hike in 2008,
its electric utilities spent $158.5 million beyond what even an
average utility would be expected to spend. That put Ameren in the
poorest performing, bottom third of the study's 115 utilities.
"Ameren has misused our money, and now, at the worst possible
time for a rate hike, wants consumers to foot the bill for its bad
decisions," said David Kolata, executive director of CUB. "A company
this wasteful shouldn't expect a pay raise."
"In the midst of a very tough economy, Ameren is once again
asking the state to help them balance their corporate checkbook on
the backs of struggling families and older adults," said Bob Gallo,
AARP Illinois state director. "We urge the Illinois Commerce
Commission to reject this unwarranted rate increase request, and to
protect the interests of Illinois consumers."
Based on the premise that "effectively managing costs is an
essential element of a well-performing utility," Fenrick's
statistical evaluation measured the Ameren electric utilities'
expenses in 2008 compared with what would be expected of a typical
utility, based on average annual cost benchmarks from three years
before, 2005 to 2007. Fenrick examined two major areas of operations
and maintenance expenses: administrative and general expenses, and
distribution and customer-care expenses.
Additional testimony by Chris Thomas, policy director for CUB,
and David Effron, a New Hampshire-based consultant specializing in
utility regulation, found at least $47 million in reductions.
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Thomas faulted the company for seeking an exorbitant return on
equity -- or profit rate for shareholders -- and recommended that
the company be granted a more fair 7.97-8.76 percent return rather
than the 11.25-12.25 percent Ameren requested. Effron found that the
company overstated recurring expenses for storm damage and its
merger with Illinois Power earlier this decade.
Kolata urged Ameren customers to join the fight against the
proposed increase by going to www.stopameren.com, which provides
information on how consumers can let state regulators know they are
opposed to the rate hike. The online site lists public hearings that
the ICC is conducting to get consumer comments on the rate hike
request.
The proposed rate hike, about $181 million in higher electric
rates and about $45 million in increased gas rates, covers the
"delivery" portion of bills -- what customers pay to get electricity
and gas delivered to their homes. That accounts for about a third of
bills, with roughly two-thirds going to paying for the actual
electricity or gas.
State regulators are expected to make a decision on the Ameren
case in April.
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 line toll-free at 1-800-669-5556.
[Citizens
Utility Board]
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