JEFFERSON CITY, MO — Noranda Aluminum – backed by the United Steelworkers Union, Missouri Retailers Association, Missouri Industrial Energy Consumers, and several legislators – filed a request with the Public Service Commission to restructure Ameren UE’s rate design, as well as separately filing an over-earnings complaint against Ameren.
The over earnings complaint alleges that Ameren earned over the 9.8 percent on equity allotted by the PSC. Because Ameren UE is a state regulated monopoly, it has a limit on the profits it can earn.
Chris Roepe, Director of the Fair Energy Rate Action Fund, said his organization supports the complaint. FERAF represents residential consumers as well as large corporations like Noranda.
“We think it ought to be and easy decision to make,” he said. “It’s crystal clear that Ameren as a monopoly has taken advantage of their rate payers.”
The complaint is based on the Surveillance Monitoring Report Ameren is required to issue to the PSC. Were the PSC to rule that Ameren over-earned, it would not be the first violation for the energy company. Ameren reported that it over-earned about $80 million dollars in 2012.
PSC spokesperson, Kevin Kelly, said the penalty for over-earning is reducing rates. There is no mechanism for a rebate to ratepayers for over-earnings. The deadline for Ameren to respond to the complaints is March 17. The deadline for intervention, from interests other than the public represented by the Office of Public Counsel, is March 7.
Ameren released a statement from Vice President of Regulatory and Legislative Affairs, Warren Wood. The statement refutes the claims, and in fact restates the company’s intent to file a case with the PSC to raise rates later this year:
“We strongly disagree with the earnings complaint case and rate design allegations, and we intend to vigorously argue our position before the Missouri Public Service Commission. In fact, in November 2013, we announced plans that we will file a rate case during the second half of 2014 to recover operating costs and investments for environmental initiatives and energy infrastructure necessary for providing safe and reliable service to our customers.
Today’s filings are attempts by Noranda to lower their costs by shifting them to residential customers, small business owners and other businesses as quickly as possible. This action is simply inappropriate. Noranda’s rate is the lowest in the state, which already is more than 60 percent below our residential customer rate.
In addition, they are seeking a rate below the rate set in their original contract in 2005.”
Noranda is Ameren’s largest customer, and on an average day uses the same amount of electricity as the entire city of Springfield. The actual amount is 4.2 million megawatt hours a year. Ameren charges the aluminum smelter a rate of $37.94 per megawatt hour. With a fuel adjustment rate addition of $3.15 imposed in 2013 the total per megawatt hour rate comes to $41.41. Noranda has proposed a per megawatt hour charge of $30.
“In order to be sustainable in today’s aluminum price environment, it is essential for New Madrid to have competitive power rates,” said Chief Executive Officer and President of Noranda Kip Smith. “We are grateful for the support of a broad-based coalition seeking to ensure New Madrid’s long-term sustainability. Noranda respects the Commission’s process and seeks to actively participate in this process and to engage in a constructive dialogue with all stakeholders.”
Without approval of the new rate structure Noranda claims it could be forced to close.
“Without this rate change we would probably have to look at layoffs of 150 to 200 more employees in the near term and ultimately the smelter would be subject to closure,” John Parker, Vice President of Communications at Noranda, said.
Because of the amount of power Noranda consumes — and the fixed costs it subsidizes — their closure would result in higher electric rates for the rest of the state. Under their proposal, other consumers’ electric rates could increase as much as 1.8 percent.
If the PSC adopts the rate adjustment, Ameren’s revenue will stay the same.
Irl Scissors, executive director of Missourians for a Balanced Energy Future, laid out the case against the consumers’ request.
“Today’s PSC filing by Noranda Aluminum, the sole company that enjoys the cheapest rates in the entire state, does a complete disservice to Missouri electric consumers,” Scissors said. “This corporation is seeking relief for themselves knowing full well the difference will be made on the backs of Missouri residents and small businesses. Furthermore, today’s effort halts any potential progress regarding Missouri energy policy. Whether it be the electric, gas, or water industry, it doesn’t matter, Noranda’s efforts over the years stifle initiatives that encourage investment in Missouri’s energy infrastructure putting Missourians at risk.”
For the past several legislative sessions, Ameren has led a group of investor owned utilities — including KCP&L and Empire District Electric Co.— attempting to pass legislation allowing them to recoup investment costs more quickly and to subsidize increased investment in the state’s power grid. Last year’s proposal, Infrastructure System Replacement Surcharge (ISRS) died in the Senate before coming up for a vote, and was never brought up in the House.
This year, Sen. Brad Lager, R-Savannah, introduced legislation to assist KCP&L and Empire in obtaining more revenue, cutting Ameren out of their bill and citing their fractured relationships with their larger customers as one reason why. In the House there have been discussions about proposing legislation known as “plant in service accounting” that would bring in more revenue for all utilities including Ameren, but no accompanying bill has yet been filed in the senate.
Several legislators weighed in on the issue.
“Noranda is an important employer in our region, they are also the largest consumer of electricity in the state. A competitive electricity rate is critical to their continued success in Missouri,” said Rep. Todd Richardson, R-Poplar Bluff.
“An over-earnings complaint is a very serious allegation that I hope is investigated thoroughly to make sure that Missouri consumers are protected. In the end, safe and reliable energy at the cheapest price available is what will help the consumers and Missouri’s economy the most,” Rep. Robert Cornejo, R-O’ Fallon
“I noticed at the same time that they asked for a huge rate decrease,” Rep. Doug Funderburk, R-St. Peters, said. “I question the timing.”
“Noranda is more than just an employer it’s an economic catalyst and the lifeblood of the region generating millions of dollars for some of the poorest counties in the state,” Sen. Gary Romine, R-Ste. Genevieve, said. “The absence of Noranda’s nearly 1,000 jobs is certain to have a ripple effect on the livelihoods of countless Missourians that I am confident that neither my constituents nor the member of the Public Service Commission would want.”
“The request to shift more burden to Missouri consumers, that’s a bad direction,” Lager said.
“With over 900 good paying manufacturing jobs it is obvious why Noranda is so important to our economy and why we want to keep there here and operating profitably,” – Sen. Doug Libla, R-Butler County.
“It is not easy to bring manufacturing jobs to Missouri. Competition for these jobs is strong. Southeast Missouri has benefited greatly from the presence of Noranda’s smelter, and the good jobs it provides,” – Sen. Wayne Wallingford, R-Cape Girardeau.
“Noranda provides 970 jobs that pay good wages and provide benefits such as health insurance and retirement plans. These jobs allow people to stay in this area and raise their families here. The loss of Noranda would be a devastating blow to southeast Missouri.” – Rep. Shelley Keeney, R-Marble Hill.