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Goodbye formula rates: CUB helps cut Ameren’s final “formula” hike by millions

In the final ruling under an anti-consumer “formula” rate-setting system, the Illinois Commerce Commission (ICC) granted Ameren Illinois a $61 million electric delivery rate hike, after CUB and other consumer advocates helped knock about $22 million off the proposed increase.

“While we’re glad Ameren didn’t get the $83 million rate hike it wanted, it’s still tough news for customers who have been suffering under high bills over the past year,” CUB Communications Director Jim Chilsen said. “This formula rate system was a raw deal for customers, and we’re glad to be saying goodbye to it. But our work isn’t over. Now we’re focused on implementing a new, more consumer-friendly rate-setting system that gives ICC commissioners more authority, under the Climate and Equitable Jobs Act (CEJA).”

Under the outgoing formula system, Ameren proposed an $83,187,000 increase back in April, and the ICC granted an increase of about $61 million on Dec. 1. The increase, which takes effect on Jan. 1, impacts delivery charges—what all customers pay to have the electricity delivered to their homes. Those charges take up about a third to a half of the bill.

The rate hike comes at a horrible time, after consumers suffered through an expensive winter and summer. Given that this winter could be even worse than last, CUB’s legal team of General Counsel Julie Soderna and Regulatory Counsel Eric DeBellis were pleased that the hours upon hours they spent on the case helped to soften the blow a bit.

In the case, CUB recommended adjustments to the cost of capital structure–which has to do with the return Ameren argued for on capital projects. That cut the increase by about $16.5 million. Overall, adding adjustments from other parties, the hike was reduced by about $22 million, or 26 percent. That’s a better result than consumer advocates usually got under the controversial system that set electric delivery rates by formula and made it difficult for consumer advocates to challenge increases.

This is the last formula rate hike consumers will get under the state’s “Energy Infrastructure and Modernization Act,” or the “smart-grid bill.” The legislation set rates by formula for a decade to pay for upgrades to the power grid. While CUB saw possible promise in those upgrades to make the grid more reliable and affordable for consumers, the watchdog opposed the bill saying it had too few protections against unfair rate hikes.

Ameren has received hundreds of millions of dollars in rate hikes over the last decade, under the controversial system. In 2021, CUB helped pass CEJA, which called for replacing formula rates with a system that gives the ICC more authority and puts more emphasis on customer priorities like affordability and reliability.

So what happens now that the old formula system is dead? State regulators recently approved a set of performance metrics to be paired with a new multi-year rate plan that will be filed next year. While there’s a lot of work to be done to implement this new system, CUB said these metrics “prioritize climate, equity and consumers.”

ComEd and Ameren are expected to file their proposed plans in January, for rates effective 2024-2027.  CUB will be part of those cases, fighting for consumer interests.