PSC sounds open to slight rate cut for Noranda

Several members of the Missouri Public Service Commission appear to be leaning toward a slight reduction in the electric bills of the state’s largest energy

The PSC hopes to decide on Ameren Missouri’s request for a rate increase by the end of the month, after almost a year of scrutiny. Along with the price Ameren customers will pay for electricity, several other policy issues need to be decided in the case, including the rate for Noranda, a southeast Missouri aluminum smelter.

In a discussion on issues in the case this week, a majority of commissioners signaled they might consider a lower rate for the power-hungry aluminum smelter, Ameren’s largest electricity customer. However, it didn’t appear commissioners would go as low as Noranda wants.

Noranda has been arguing it faces closure without a lower electricity rate, one of its largest expenses in the power-intensive aluminum smelting process. A lower rate for Noranda would likely be made up by other Ameren Missouri customers.

Noranda currently pays about $42.35 a megawatt hour. It pitched a $32.50 rate during Ameren’s rate case, slightly higher than the $30 per megawatt hour it asked for in a separate complaint that was denied last year.

Commissioner Scott Rupp suggested $38 per megawatt hour. He and other commissioners expressed skepticism that Noranda was suffering a “liquidity crisis,” as it had claimed, noting that its management tended to paint a rosier picture while speaking to investors.

“The truth is somewhere in the middle,” Rupp said. “I am open to the idea of some type of economic development rate to ensure they can be competitive.”

Commissioner Daniel Hall also sounded open to some sort of adjustment, though he too said the situation is not as dire as Noranda says it is.

“I think it’s crystal clear as well that Noranda told one story to this commission and told another story to bondholders, shareholders and bondholder rating agencies,” Hall said.

However, Hall said in order to grant a rate adjustment for Noranda, “we have to believe – and I do – that there is some danger of Noranda’s load going away.”

In addition to Noranda, the commissioners also hinted at how they would treat Ameren’s request for a general rate increase. Ameren initially filed for a $264 million, or 10 percent, rate increase, but staff recommendations have indicated the final amount could be somewhere around half of that.

Part of that increase was Ameren’s request to raise its return on equity, or profit it is allowed to earn, to 10.4 percent from 9.8 percent.

Most commissioners, however, appeared to be leaning toward lowering Ameren’s allowed return. They suggested returns of between 9.3 percent and 9.63 percent, although Rupp suggested a slightly higher 9.93 percent.