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PSC: "We can't deny utility rate increases because of the economy'

PSC: "We can't deny utility rate increases because of the economy'

April 5th, 2011 in News

Is there a "Men Are from Mars, Women Are from Venus" disconnect between the Missouri Public Service Commission and the public?

At a recent public hearing to help the PSC decide on Ameren Missouri's current request for an 11 percent rate hike, the PSC and public seemed to be on two different wavelengths.

The PSC outlined its role, which is generally to form just and reasonable rates, while allowing utilities such as Ameren to recover prudently incurred costs. It's a complex process that involves a considerable amount of number crunching by some of the PSC's 1-4-member staff, which includes engineers and accountants.

Then the public spoke.

One by one, Ameren customers bombarded the PSC with an almost unified theme: The economy's bad. Don't raise rates.

PSC Chairman Kevin Gunn said such sentiments were common at not just the Jefferson City hearing, but all 14 hearings held by the PSC on the Ameren case.

Gunn said that if the PSC simply shot down a utility rate request because of the poor economy, that utility would have grounds to sue. If a power company, for instance, spent funds that are deemed "prudent" - nothing misspent, no cost overruns, etc. - then the commission can't bar them from recovering the costs through rate increases.

"We are hamstrung by the law in exactly how we can apply the information that we get from the local public hearings in terms of just having the bad economy and people not being able to afford it," Gunn said.

Still, he said, the PSC is given discretion to use other methods to help consumers afford utilities, and to hold utilities' feet to the fire on other customer-service issues. For instance, the agency can require utilities to fund winterization programs, energy efficiency programs and low-income assistance programs. The commission can also work with consumers on billing issues and reliability issues.

After a summer storm downed trees and power lines, Gunn said the PSC realized that some utilities weren't doing a good job of trimming trees near their power lines. The PSC ordered them to spend money on tree-trimming to increase electric power reliability during storms, he said.

Gunn said the public is generally well-informed when attending their hearings. But the commission, he said, is a "strange animal" in that it's quasi-judicial and quasi-legislative. Those complexities often cause misunderstanding.

"That is actually one of the most frustrating parts of the job, and it's one of the things we try on a regular basis to educate people about," he said.

He said the PSC's previous chairman, Robert Clayton III, revamped its public hearings so that before comments are taken, the PSC explains its role to the public.

Even so, the public's comments centered around the economy.

Clara Tremaine, one of nine people to give testimony, told commissioners she was a nurse who retired after a disability. With no cost-of-living increase for the past three years, she keeps her thermostat at 60 when she's at home and 50 when she's not. She prefaced her comments by telling the commission: "I wondered if anything I had to say would make a difference."

Gunn said: "We understand the economy is not great. Even in a good economy, people have a difficult time affording rate increases. And we are mindful of that and try to do what we can in our legal bounds to address those situations.

"I can't tell you how many times people think we work for the utilities," Gunn said. "When we go in local public hearings, people say, "You don't need this money, why are you getting this money?"

The public's representative in such cases is the Office of Public Counsel.

Public Counsel Lewis Mills Jr. said the public's testimony about economic woes "certainly factors into" our recommendation. "We are trying to get the rate reduced as much as we possibly can, and that's one of the big reasons," Mills said. "This is the fourth (Ameren) increase in just a few years, and it's working a severe hardship on a lot of people."

Last summer, the PSC approved an order for a 10.2 percent rate increase by Ameren, which had asked for 18 percent. Ameren says its electric rates are still 35 percent below the national average. If the current rate request is approved in full, rates would still be about 25 percent blow the national average, the company says.

Clayton voted against the PSC's last Ameren rate increase request. In his dissenting opinion, one of the first things he mentions is public concerns about the economy: "Testimony at local public hearings revealed that residential and commercial customers are struggling in the worst economic downturn since the Great Depression," he wrote. "Customers testified to increases in unemployment and those employed described the effects of underemployment. Many customers are living on a month-to-month basis without any cushion to absorb any unexpected or additional expenses."

He went on to write that utilities need to take into consideration such challenges when filing back-to-back rate increase requests.

Still, in a telephone interview on Thursday, Tremaine was still doubtful that the public hearings will make a difference. Asked whether she believes the commission will listen to her and others' concerns about the economy, she said: "I really don't."

She said because of Ameren's large profits - $360 million in 2010 - the PSC should be able to hold off on a rate increase.

She asked: "I wonder why they (the PSC) have hearings like that if they don't have some ability to influence" rates based on the economy? "What would be the purpose of bringing people together and getting their hopes up?"