Missouri PSC Should Reject Ameren's Bid for Higher Fixed Charges

Today, NRDC is filing testimony in a proceeding before the Missouri Public Service Commission opposing Ameren Missouri’s request to raise fixed charges it bills customers each month.  NRDC’s expert witness, Pamela Morgan, who has more than twenty years of experience in the electric utility industry, explains that raising fixed charges will undermine the effectiveness of the energy efficiency programs that were approved by the Commission in a landmark agreement less than a month ago.  The following post was co-written with NRDC’s Bruce Ho and the testimony will be linked here as soon as it is posted on the Commission’s electronic website. 

Last month, when the Missouri Public Service Commission (MPSC) recently approved Ameren Missouri’s first-ever energy efficiency plan under the Missouri Energy Efficiency Investment Act (MEEIA), environmental groups, state regulators, consumer advocates, and the utility itself hailed the plan as a milestone in Missouri’s effort to capture energy savings and lower bills for customers. This plan, reached by unanimous agreement, aligns the interests of the utility and its customers by providing significant new incentives that will enable Ameren Missouri to achieve energy savings benefits on the order of $350 million, the majority of which will accrue to bill payers.

So why is Ameren Missouri proposing to undermine this plan just as its new MEEIA energy efficiency programs are scheduled to start?

In the rate case now before the Commission, Ameren Missouri has asked for permission to increase the fixed charge on customers’ bills.  Essentially, they would shift more of the costs that customers currently pay in variable rates – those parts of the electricity bill that correspond to a customer’s monthly electricity use – to fixed charges – those parts of the bill that all customers must pay regardless of the amount of electricity they use. Residential customers would see their current $8 fixed monthly charge increase by 50%, to $12 a month.

Ameren Missouri’s proposed hike in fixed customer charges would undermine two of the most important drivers of energy efficiency: (1) the ability of customers to see immediate benefits from lower electricity bills when they invest in new efficient technologies, and (2) the ability of customers to recover – as quickly as possible – any investments they make in efficiency through these bill savings. Think, for example, of a customer switching out old light bulbs for highly efficient but initially more expensive LEDs. For the customer to save money on her investment, there must be a clear link between her use of the LEDs and the amount she spends each month on her electricity bill. Substantial research shows that when this link is weak, i.e., when bill savings are small relative to upfront costs, customers are much less likely to invest in energy saving technologies.

Ameren Missouri’s proposal would weaken the link between efficiency investments and customer bill savings, and will discourage customer participation in the Ameren Missouri MEEIA programs that the Commission approved not even one month ago. Moreover, forcing all customers to pay a new, higher fixed monthly charge, regardless of their actual energy use, will shift costs from, and result in a new subsidy to, the utility’s highest energy users, to be paid for on the backs of customers who do invest in efficiency and do reduce their energy use.

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