Stakes High For Missouri Electricity Customers In Battle Between Ameren And Noranda
On Tuesday night at Harris Stowe University, St. Louis area residents will finally get a chance to weigh in on a utility battle that – one way or another -- will likely affect how much they pay for electricity.
Conducted by Missouri’s Public Service Commission (PSC), which oversees utilities, the 6 p.m. hearing will center on two dueling narratives:
- That Ameren has been “overearning” for years by collecting more money than allowed from its customers and is preparing to ask the PSC for permission to increase electrical rates even more;
- That Noranda Aluminum – the state’s largest user of electricity -- is unfairly seeking a 25 percent cut in its electrical rates, which critics say would force Ameren to raise rates for everybody else.
Noranda says its real aim is to stay in business in a competitive aluminum market and to force electrical rate cuts for all Ameren customers.
Ameren denies any overearning, saying the New York-based hedge fund controlling Noranda is seeking to milk more profits by shifting electrical costs to other Missouri consumers.
The dispute has been going on for months, with local governments, businesses and consumer groups taking sides. St. Louis and the Metropolitan Sewer District are among the latest backing Ameren, while the Ford Motor Co. and the Missouri Association of Retailers are among Noranda’s allies.
Two outside groups also are heavily involved: the Fair Energy Rate Action Fund, which sides with Noranda (one of the fund’s members) and Missourians for a Balanced Energy Future, which has ties to Ameren. Each organization has been firing off press releases for weeks that attack the rival.
The public hearings will kick off the final stretch of a process that is likely to result in a PSC decision later this summer.
Those in both camps expect that this week’s sessions – which include hearings in Caruthersville and Jefferson City as well -- could finally spark interest among the general public, especially as it becomes clear that their electrical rates could be affected.
In fact, one of the interesting elements of the dispute is both parties claim that if their side loses, the public’s electrical rates will go up.
Noranda declares its future is at stake
Based in Tennessee, Noranda operates an aluminum-smelting plant near New Madrid, Mo. that employs about 900 people and is the region’s largest non-agricultural source of jobs.
Noranda also is, by far, Ameren’s largest electrical customer. “They take as much power as the city of Springfield, Mo.,” said Warren Wood, Ameren’s vice president for external affairs and communications. “It takes a lot of electricity to make aluminum.”
For Noranda, its electrical bill is its most expensive item, outstripping even labor costs. Couple that with a continued drop in aluminum prices, and you have what Noranda vice president John Parker succinctly describes as “a liquidity problem.”
“We have reduced cost in every area that we can control,” Parker said. “If it’d weren’t for power, we’d be making… aluminum today for less than what we made it for in 2009.”
Noranda says its Ameren bill is the second highest in the country among the nine remaining aluminum smelters, and its suggested lower utility price -- $30 a megawatt from the $41 a megawatt that it pays now – would still be more than Ameren could make by selling the electricity on the open market.
“We can’t continue to pay such high rates because it’s going to use up all of our money,” Parker added.
Back at Ameren, Wood says Noranda is inaccurate as market rates for electricity have gone up since Noranda filed its initial complaints last February against the utility with the PSC. Ameren could definitely sell its electricity for more than Noranda’s target price, Wood said. He also emphasized that Ameren’s rates must meet the approval of the PSC.
In any case, Ameren and its allies note that Noranda already pays a lower electric rate than any other customer in Missouri. The utility says that a rate cut for Noranda would force the utility to raise prices for everybody else.
“It would cost our other customers, collectively, likely $500 million (over 10 years) if this proposal is granted to Noranda,” Wood said.
Ameren blames New York hedge fund
Noranda’s efforts to curb its power costs goes back years. Noranda used to purchase electrical power from the rural cooperative by its smelter. But with the help of a law passed solely for its benefit by the Missouri General Assembly, Noranda was allowed to switch electricity providers. As of 2005, it has purchased electricity from Ameren at a cheaper rate than the cooperative had offered.
Wood confirmed that Ameren and Noranda were engaging in private talks last year over the cost, but those ended when Noranda filed the complaints in February with the PSC.
Wood blames the private hedge fund, Apollo Holding Corporation, for much of the current dispute. Apollo, which first invested in Noranda in 2007, now controls about a third of its board. Noranda’s chief executive came from Apollo.
Ameren says that Apollo has been taking excessive profits from Noranda for years, saddling the company with a huge debt. Ameren and its allies also point to the layoff several years ago of 340 workers at the New Madrid smelter and raise concerns that Noranda may lay off more employees, or close the operation, even if it gets the electric-rate relief its seeking.
Chris Roepe with the Fair Energy Rate Action Fund – which sides with Noranda -- says that the company’s 900 remaining jobs at the New Madrid operation are at risk but primarily blames Ameren.
“Ameren has already increased rates 43 percent over the past 6 years, charged an additional $500 million in surcharges since 2009 and pays its CEO over $6 million a year,” Roepe said. “We want to see fair and affordable rates for all consumers and the fact that Ameren profited in excess of $100 million more of consumers' money than authorized by the PSC should lead to lower rates for all consumers.”
If Noranda closes, Roepe said, all other Ameren customers would see their rates increase since Noranda currently consumes about 10 percent of the utility’s electricity.
The executives for Ameren and Noranda repeatedly emphasized that they do care about the New Madrid jobs at stake.
At the Public Service Commission, a spokesman said that its five commissioners – who will make the final decision – look forward to this week’s hearings. He added, “It’s an opportunity for customers to tell the commission their feelings on this case.”
The PSC staff, by the way, has recommended against giving Noranda that rate reduction.
In a summary released Friday, the staff also disagreed with the "overearning'' complaint against Ameren. Said the report: "Staff completed a limited review of Ameren Missouri’s rates, and has concluded that Ameren Missouri’s rates do not warrant opening an extensive earnings investigation at this time.”