Ameren spells “customer relief”
By Mike Kroll
Wednesday morning Ameren Illinois president Scott Cisel announced an eight-point plan to help ease the impact of the electricity rate increases that began January 2nd. Cisel's company is offering a initiative estimated to cost $20 million in customer credits aimed primarily at low-income residential customers. Chief among these adjustments is an offer to “eliminate the 3.25 percent interest rate for customers who enroll in the Ameren Customer Elect Plan (CEP) for phasing in the higher electricity rates.” While not actually reducing the new higher rate the CEP allows customers to defer payment for a declining portion of the increase. Additionally, Ameren proposes (subject to approval by the Illinois Commerce Commission) to provide one-time credits for residential customers ranging from $40-$300 depending upon their March electric usage over 2,000 kilowatt-hours. Customers using less electricity that month would not see any credit.
For many Ameren customers this offer appears too little, too late. During the later months of 2006 most electricity customers of Ameren's three delivery subsidiaries in Illinois were warned to expect markedly higher electric rates beginning January 2nd. Those warnings proved excruciatingly correct as actual bills jumped not just the official company estimate of around 50 percent but often multiples of that. Some residential and small business customers, particularly those with electric heating have seen electricity bills up to three times those of one year ago. And rate-shocked electric customers have shared their distress with Illinois lawmakers after the Citizens Utility Board called upon angry ratepayers to contact their state representative or state senator.
Thousands took CUB's advice and the Illinois General Assembly held a special hearing on the subject where citizens and lawmakers alike blasted Ameren for that doubled or tripled since last year at the same time. There has been a move by some lawmakers to reimpose the rate freeze for periods ranging from one to three years during which time utility regulations and rates would be reexamined by the legislature.
The affected utility companies, including Ameren, claim that such a move will financially ruin them. But there is a distinction that bears noting here, only the power distribution companies would show poor financial results under a continued freeze while the parent company and sister subsidiaries that sell generated power at unregulated rates do quite well financially. Ameren Corporation posted higher income , earnings, and assets in financial reports released just over one week ago. The Ameren Corporation stock price has climbed throughout the ten-year period of the rate freeze and corporate profits have been impressive.
During a telephone press conference Wednesday morning Cisel told reporters that Ameren's current rates are on-par with national averages for electricity but that the rate-shock is the result of implementing this change all at once. “We are taking this initiative because the sharp increase in rates has created a significant burden for many of our customers – a burden that has created a hardship for some customers. While we acknowledge these proposals will place a financial constraint on the Ameren Illinois utilities, this comprehensive proposal will be of real benefit to our customers and provide our utilities with sufficient financial stability to keep the lights on and the natural gas flowing.”
Cisel announced proposals to spend $15 million for energy assistance and to fund energy efficiency for low-income customers. Low-income customers would receive $6 million of this in direct energy assistance while another $4 million would fund a rebate program for the purchase of high efficiency light bulbs. Residential energy audits and assistance in paying for improved insulation will cost about $3 million. Ameren proposes to fund educational programs on energy efficiency to the tune of another million dollars.
The end of the ten-year rate freeze and the resultant massive rate increases have resulted in massively negative public relations for Ameren and Commonwealth Edison, Illinois' two principal energy distribution utilities and re-energized the debate over utility regulation in Illinois. Surprisingly, Cisel doesn't dismiss offhand talk or re-regulating the electric generation business in Illinois. “We at Ameren are more than willing to meet and explore the return to regulation of electricity generation.” And Cisel admitted that Ameren has not handled customer communications well during this process.
He acknowledged that the estimated rate increase percentage was based upon an aggregation across all customer classes and clearly does not represent the experience of certain specific customer groups. Notably residential and small business customers who heat with electricity. Coupled with the severity of this winter season it is not uncommon for such heating customers to see their electricity bill double, or worse. “Unfortunately, the weather we’ve recently experienced has been anything but normal,” noted Cisel. “The cold weather during mid January to mid February has caused customers to use more electricity than a year ago or during December. Understandably, the current winter increase is terrifying to many customers. It’s creating hardships on family budgets, business operations and not for profit services. And understandably, we are being criticized for these very high bills.“
When utility deregulation was first discussed in Illinois it was expected that the newly deregulated electricity generation business would foster competition and hold down rates. Except for the largest users this simply hasn't been the case and small businesses, like residential customers, have felt the new rates severely impact their cash flow. One of Ameren's proposals is to extend the current “Budget Billing” alternative to small businesses allowing them to spread their electricity costs across the year. Many small businesses are now in fear of the new rates on their air conditioning bills this coming summer. For many businesses air conditioning is their biggest electricity usage in the summer. Cisel also said that his company would work with the ICC to help make it easier for groups of electricity users to aggregate to make themselves more attractive to alternative electricity providers that may result in lower rates.
Concluding his testimony Tuesday before the Illinois House of Representatives Cisel said:
“I will close by saying that throughout this entire process, our Ameren Illinois utilities have simply complied with existing laws and regulations. However, we have listened to our customers and to you about the real life impact of the new electric rates and have come forward to do all we can to assist while still maintaining our financial credit rating. Today’s comprehensive proposal reflects our commitment to do our part to assist our customers. In total, the proposal presented to you represents a $35 million pledge. This is in addition to the interest cost that the utility will incur in waiving the carrying costs associated with the Customer Elect Plan. I also commit, we will not seek recovery of these expenses from our customers.”
Cisel and his company are hoping that this “last best offer” might assuage lawmakers from reimplementing some form of a rate freeze while simultaneously redefining his company from consumer predator to kindly Uncle Wilber who just wants to help. As long as Senate president Emil Jones and governor Rod Blagojevich stand behind the current deregulation legislation it seems unlikely that House speaker Michael Madigan will be able to force some changes beyond the House itself.