- Associated Press - Tuesday, March 11, 2014

St. Louis Post-Dispatch, March 8

PSC needs to put gluttonous giants on a diet:

To understand the latest dispute between Ameren Missouri and its biggest electricity customer, Noranda Aluminum, think about pie.

Ameren, the investor-owned monopoly utility company, is always hungry. It likes pie.

When Ameren wants to charge more for the electricity you use, it asks the Public Service Commission for more pie. Over the past six years, Ameren has been gluttonously successful in grabbing a 43 percent bigger pie.

When rates go up, the PSC does a couple of important things. First, it sets a profit target for Ameren which the company isn’t supposed to regularly exceed. Second, it divides shares of the pie among all the consumers. Those consumers, from big industrial users of the most power to senior citizens on a fixed income, generally negotiate and come to consensus on which part of the pie they will fund.

The biggest consumers, such as the New Madrid aluminum smelter owned by Noranda, get the lowest rates. Other big manufacturing companies, like Boeing and Anheuser-Busch InBev, also pay less per kilowatt hour. Residential customers pay the most per kilowatt hour because it is less efficient to distribute electricity to individual homes than big manufacturing plants.

Usually, the consumers, big and small, gang up on Ameren to try to make the entire pie smaller.

That context is important in understanding two recent filings with the Public Service Commission by Noranda.

The company, which is owned by private equity giant Apollo Global Management, is asking the PSC to lower its rate, already the lowest rate in the state. Noranda currently pays a little more than 4 cents per kilowatt hour of electricity; it wants to cut that by 25 percent, to 3 cents.

For comparison, the rest of us pay a little more than 7 cents per kilowatt hour. Noranda also wants the PSC to declare that Ameren has been making more money than it is supposed to.

In many ways, the first request is just another case of a big company exerting its oversized influence to obtain a taxpayer (or ratepayer) subsidy. How big? The rate cut would shift about $500 million over 10 years onto the rest of us. For what Ameren calls its typical residential electric customer, that increase could cause a monthly bill of $104.50 to go up by about $2.09.

That doesn’t sound like a lot. But it adds up. So it’s curious that consumer groups aren’t making much noise about Noranda’s rate-cut request.

Joan Bray, executive director of the Consumers Council of Missouri, says this about Noranda: “They have been on the side of consumers.”

Indeed, that’s true. Hence Noranda’s second filing, which accuses Ameren of eating an extra helping of pie.

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