Monday, March 12, 2007 11:18 PM CDT
Credit agency rating threatens Ameren's plan for customer rebate
By LAUREL JORGENSEN, Associated Press Writer
CHICAGO (AP) -- Utility giant Ameren received Illinois Commerce Commission approval Monday for a plan to give residential customers an automatic one-time credit on their electric bills, but a downgrade from a credit rating agency threatened the proposed rebate.
Ameren had sought the ICC's approval of the plan to spend $20 million on rebates for residential customers who use the most electricity. The proposal also would eliminate interest charged customers who phase-in higher electric rates over the coming years.
But also Monday, Moody's Investor Services cut the credit rating for Ameren's Illinois utilities -- IP, CIPS and CILCO -- to below investment grade, or junk.
Ameren had said in a statement last week that the proposed $20 million in rebates and the zero-percent interest phase-in plan would be eliminated in the event of a credit downgrade.
Ameren spokesman Neal Johnson said Monday night that the company would be contacting the ICC Tuesday to inform them of the credit downgrade.
"This credit action triggers a most regrettable event in the history of the Ameren Illinois utilities," spokesman Leigh Morris said in a statement.
"The Company's next steps are being finalized."
Utilities in Illinois, including Ameren, have claimed they could face bankruptcy if forced to provide electricity at a higher cost than they could recoup from customers.
The decision by Moody's to cut Ameren's credit rating shows "there is some weight behind what they're saying," said Paul Justice, an analyst who follows the electric industry for Morningstar Inc.
"Once you start getting into the business of selling goods for less than you originally paid, it's the start of an unsuccessful business plan in any industry," he said.
John Hendrickson, a rate analyst for the energy division of the ICC, said under the rebate plan approved Monday, refunds would have started at $5 for customers who use 1,250 kilowatt hours of energy per monthly billing cycle and gone up based on power usage. He said typical winter usage for a customer is about 900 to 1,000 kilowatt hours, but those who use space heaters can use around 2,500 kilowatt hours.
Ameren had said the one-time credit would have been calculated from a customer's prior monthly bill. For example, a customer who used 2,000 kilowatt hours of energy and received a bill of about $195 would receive a $40 credit.
Half the money for the rebates would have come from a fund set aside to cover costs for litigation related to asbestos claims. The other $10 million would have come out of Ameren's pocket.
Rates were expected to rise an average of 55 percent for Ameren customers when a 10-year rate freeze ended at the beginning of the year. But some residents and businesses in Ameren's territory have complained that bills doubled or tripled under the new rates.
David Kolata, executive director of the Citizens Utility Board, described the proposed relief plan as "a very, very small step forward, but nowhere near enough to solve the crisis."
"The General Assembly is the only body that can solve this crisis, and the Legislature needs to take this issue up as soon as possible and provide real rate relief, not one-time credits," Kolata said.
Ameren President Scott Cisel had first announced the relief plan at a special legislative hearing last month where customers lambasted the company for higher electric bills.
The Illinois House voted 92-5 last week to roll back the rate increases that took effect in January and freeze them at the lower levels for at least three years. But the measure faces little hope as it heads to the Senate, where President Emil Jones remains opposed to it.
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Stephen wrote on Jul 17, 2006 8:22 AM: