Ameren rate case
An expanded role for the PSC?
Monday, May 4, 2015
Last week the state Public Service Commission stepped a bit out of its traditional role. It granted an electric rate increase for Ameren Missouri but carved out special consideration for Noranda Aluminum Inc., by far Ameren’s largest customer.
Noranda, located near Cape Girardeau in southeast Missouri, is an unusual case, but does that justify special notice by the PSC?
Noranda is a large employer with some 900 on payroll. Fully one-third of its cost of operation is the cost of electricity to run its smelter. Noranda already has the lowest rate Ameren offers, but Noranda said if its rate were increased along with other Ameren rates, it would consider leaving the state.
Ameren said if Noranda got the special consideration it wanted, other customers would have to pay millions more in higher rates to make up the shortfall.
In the end, the PSC granted the special consideration for Noranda and allows Ameren to raise its other rates accordingly.
I’m not a student of PSC happenings, but in my limited memory I don’t remember a similar case in which the commission took such overt action to provide an incentive to a particular company.
Ameren already had incentivized Noranda, presumably in the utility company’s self-interest. It’s not unheard of for a company to give special rates to its largest customers, as Ameren had done with Noranda, but in this case Ameren proposed no additional subsidy. Ameren wanted Noranda to share the rate increase along with all other customers, arguing Noranda already had enough rate favoritism. Noranda argued otherwise, and the commission bought its argument.
Would Noranda really have left Missouri over this issue? The commission found the extra cost to other Ameren customers from the Noranda special rate would be less than the cost if Noranda left the state. The Noranda threat paid off. Some would call it a bluff that should have been called.
The commission said the rate break is temporary and that it would watch carefully to ensure Noranda meets associated conditions.
“The rate today does not amount to an infinite corporate bailout,” commission Chairman Robert Kenney said. “The commission retains oversight, and we will be watching.”
Commissioners deny they are making an economic development decision but are considering the effect on other Ameren customers if Noranda were to cease operations. On this basis, where is the stopping point?
Noranda is adept at turning the screw. It threatened to lay off 200 employees last September after the commission refused the company’s request for a 25 percent rate decrease, then decided to postpone the layoffs while the commission decided the recent case. Apparently Noranda is able to fine-tune its number of employees based entirely on electric rates, an interesting quid pro quo threat.
