Summary Of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

Ameren, headquartered in St. Louis, Missouri, is a public utility holding company whose primary assets are its equity interests in its subsidiaries. Ameren’s subsidiaries are separate, independent legal entities with separate businesses, assets, and liabilities. Dividends on Ameren’s common stock and the payment of expenses by Ameren depend on distributions made to it by its subsidiaries. Ameren’s principal subsidiaries are listed below. Ameren has other subsidiaries that conduct other activities, such as providing shared services.

•Union Electric Company, doing business as Ameren Missouri, operates a rate-regulated electric generation, transmission, and distribution business and a rate-regulated natural gas distribution business in Missouri.

•Ameren Illinois Company, doing business as Ameren Illinois, operates rate-regulated electric transmission, electric distribution, and natural gas distribution businesses in Illinois.

•ATXI operates a FERC rate-regulated electric transmission business in the MISO.

The COVID-19 pandemic continues to be a rapidly evolving situation. In the first nine months of 2020, we experienced a net decrease in our sales volumes, an increase in our accounts receivable balances that were past due or that were a part of a deferred payment arrangement, and a decline in our cash collections from customers. The continued effect of the COVID-19 pandemic on our results of operations, financial position, and liquidity in subsequent periods will depend on its severity and longevity, future regulatory or legislative actions with respect thereto, and the resulting impact on business, economic, and capital market conditions. Shelter-in-place orders began taking effect in our service territories in mid-March 2020. These orders generally required individuals to remain at home and precluded or limited the operation of businesses that were deemed nonessential. While our business operations were deemed essential and were not directly impacted by the shelter-in-place orders, approximately 65% of our workforce transitioned to remote working arrangements in mid-March 2020. In early June 2020, a small portion of our workforce began the process of returning to our work locations under a phased approach and approximately 50% of our workforce continues to work remotely. In mid-May 2020, shelter-in-place orders effective in our service territories began to be relaxed, with fewer restrictions on social activities and nonessential businesses beginning to reopen. However, certain restrictions remain in place that limit individual activities and the operation of nonessential businesses. Additional restrictions may be imposed in the future.

We continue to assess the impacts the pandemic is having on our businesses, including but not limited to impacts on our liquidity; demand for residential, commercial, and industrial electric and natural gas services; more flexible payment plans for customers; the timing and extent to which recovery of incremental costs incurred, net of savings, and forgone customer late fee revenues at Ameren Missouri is allowed by the MoPSC; changes in our ability to disconnect customers for nonpayment; bad debt expense; supply chain operations; the availability of our employees and contractors; counterparty credit; capital construction; infrastructure operations and maintenance; energy-efficiency programs; and pension valuations. While the revenues from Ameren Illinois’ electric distribution business, residential and small nonresidential customers of Ameren Illinois’ natural gas distribution business, and Ameren Illinois’ and ATXI’s electric transmission businesses are decoupled from changes in sales volumes, earnings at Ameren Missouri and those associated with Ameren Illinois’ large nonresidential natural gas customers are exposed to such changes. Regarding uncollectible accounts receivable, Ameren Illinois’ electric distribution and natural gas distribution businesses have bad debt riders, which provide for recovery of bad debt write-offs, net of any subsequent recoveries. Pursuant to a June 2020 ICC order, Ameren Illinois’ electric bad debt rider provides for the recovery of bad debt expense in 2020. Ameren Missouri does not have a bad debt rider or regulatory tracking mechanism and its earnings are exposed to increases in bad debt expense. In October 2020, Ameren Missouri filed requests with the MoPSC for accounting authority orders related to costs incurred, net of savings, and forgone customer late fee revenues resulting from the COVID-19 pandemic. Our customers’ payment for our services has been adversely affected by the COVID-19 pandemic, resulting in a decrease to our cash flow from operations. As of September 30, 2020, accounts receivable balances that were 30 days or greater past due or that were a part of a deferred payment arrangement represented 26%, 18%, and 35%, or $151 million, $49 million, and $102 million, of Ameren’s, Ameren Missouri’s, and Ameren Illinois’ customer trade receivables before allowance for doubtful accounts, respectively. As of September 30, 2019, these percentages were 13%, 9%, and 18%, or $65 million, $23 million, and $42 million, for Ameren, Ameren Missouri, and Ameren Illinois, respectively. For information regarding Ameren Missouri’s and Ameren Illinois’ suspension and subsequent reinstatement of customer disconnections and late fee charges for nonpayment and Ameren Missouri’s requests for accounting authority orders related to the COVID-19 pandemic, see Note 2 – Rate and Regulatory Matters below.

The Coronavirus Aid, Relief, and Economic Security Act is a federal law enacted in March 2020. Provisions in the act include temporary changes to the utilization of net operating losses, deferral of the payment of the employer portion of Social Security taxes, and additional funding for customer energy assistance, among other things. As of September 30, 2020, the implementation of the act by the Ameren Companies had no material impact to their financial statements.

Ameren’s financial statements are prepared on a consolidated basis and therefore include the accounts of its majority-owned subsidiaries. All intercompany transactions have been eliminated, except as disclosed in Note 8 – Related-party Transactions. Ameren Missouri and Ameren Illinois have no subsidiaries. All tabular dollar amounts are in millions, unless otherwise indicated.

Our accounting policies conform to GAAP. Our financial statements reflect all adjustments (which include normal, recurring adjustments) that are necessary, in our opinion, for a fair statement of our results. The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. Such estimates and assumptions affect reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of financial statements, and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. The results of operations of an interim period may not give a true indication of results that may be expected for a full year. These financial statements should be read in conjunction with the financial statements and accompanying notes included in the Form 10-K.

Variable Interest Entities

As of September 30, 2020, Ameren and Ameren Missouri had interests in unconsolidated variable interest entities that were established to construct wind generation facilities and, ultimately, sell those constructed facilities to Ameren Missouri. Neither Ameren nor Ameren Missouri are the primary beneficiary of these variable interest entities because neither has the power to direct matters that most significantly affect the entities' activities, which include designing, financing, and constructing the wind generation facilities. As a result, these variable interest entities have not been consolidated. As of September 30, 2020, the maximum exposure to loss related to these variable interest entities was approximately $18 million, which primarily represents due diligence and legal costs incurred by Ameren Missouri associated with the acquisitions. The risk of a loss was assessed to be remote and, accordingly, Ameren and Ameren Missouri have not recognized a liability associated with any portion of the maximum exposure to loss. See Note 2 – Rate and Regulatory Matters for additional information on the agreements to acquire these wind generation facilities.

As of September 30, 2020, and December 31, 2019, Ameren had unconsolidated variable interests as a limited partner in various equity method investments, totaling $34 million and $28 million, respectively, included in “Other assets” on Ameren’s consolidated balance sheet. Ameren is not the primary beneficiary of these investments because it does not have the power to direct matters that most significantly affect the activities of these variable interest entities. As of September 30, 2020, the maximum exposure to loss related to these variable interests is limited to the investment in these partnerships of $34 million plus associated outstanding funding commitments of $37 million.

Company-owned Life Insurance

Ameren and Ameren Illinois have company-owned life insurance, which is recorded at the net cash surrender value. The net cash surrender value is the amount that can be realized under the insurance policies at the balance sheet date. As of September 30, 2020, the cash surrender value of company-owned life insurance at Ameren and Ameren Illinois was $260 million (December 31, 2019 – $264 million) and $114 million (December 31, 2019 – $123 million), respectively, while total borrowings against the policies were $107 million (December 31, 2019 – $114 million) at both Ameren and Ameren Illinois. Ameren and Ameren Illinois have the right to offset the borrowings against the cash surrender value of the policies and, consequently, present the net asset in “Other assets” on their respective balance sheets.

Accounting and Reporting Developments

See Note 1 – Summary of Significant Accounting Policies under Part II, Item 8, of the Form 10-K for additional information about authoritative accounting guidance relating to defined benefit plan disclosures that will be effective for the Ameren Companies in the fourth quarter of 2020.

Measurement of Credit Losses on Financial Instruments

On January 1, 2020, the Ameren Companies adopted authoritative accounting guidance that requires credit losses on most financial assets carried at amortized cost and off-balance sheet credit exposures, such as financial guarantees or loan commitments, to be measured using a current expected credit loss (CECL) model. The guidance requires an entity to measure expected credit losses using relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. In addition, the guidance made certain changes to the impairment model applicable to available-for-sale debt securities, such as requiring credit losses to be presented as an allowance rather than a write-down on impaired debt securities for which there is neither an intent nor a more-likely-than-not requirement to sell. Our adoption of this guidance did not have a material impact on the Ameren Companies’

financial statements and did not result in a cumulative effect adjustment to retained earnings as of the adoption date. See Note 13 – Supplemental Information for additional information regarding credit losses on accounts receivable.