Rate And Regulatory Matters

9 Months Ended

Sep. 30, 2020

Public Utilities, General Disclosures [Abstract]

RATE AND REGULATORY MATTERS

RATE AND REGULATORY MATTERS

Below is a summary of updates to significant regulatory proceedings and related legal proceedings. See Note 2 – Rate and Regulatory Matters under Part II, Item 8, of the Form 10-K for additional information and a summary of our regulatory frameworks. We are unable to predict the ultimate outcome of these matters, the timing of the final decisions of the various agencies and courts, or the impact on our results of operations, financial position, or liquidity.

Missouri

March 2020 MoPSC Electric Rate Order

In March 2020, the MoPSC issued an order in Ameren Missouri’s July 2019 electric service regulatory rate review, approving nonunanimous stipulation and agreements. The order resulted in a decrease of $32 million to Ameren Missouri's annual revenue requirement for electric retail service, which reflects infrastructure investments as of December 31, 2019. The order also provided for the continued use of the FAC and trackers for pension and postretirement benefits, uncertain income tax positions, and certain excess deferred income taxes that the MoPSC previously authorized in earlier electric rate orders. The order reduced the annualized base level of net energy costs pursuant to the FAC by approximately $115 million from the base level established in the MoPSC’s March 2017 electric rate order. The order also changed the annualized regulatory asset and liability amortization amounts and the base level of expenses for regulatory tracking mechanisms. On an annualized basis, these changes reflect approximately $20 million of increased revenues and approximate decreases in purchased power expenses of $15 million, other operating and maintenance expenses of $60 million, and income tax expenses of $20 million. Additionally, the annual revenue requirement incorporated increases of approximately $50 million for the reduction in sales volumes resulting from MEEIA programs and approximately $50 million of depreciation and amortization expense for amounts previously deferred under PISA. The increase in the annual revenue requirement related to the MEEIA programs is seasonally weighted to the summer. One of the stipulation and agreements approved by the MoPSC’s March 2020 order states that the net impact of the revenue and expense changes noted above reflects a 9.4% to 9.8% ROE on an unspecified percent of common equity applicable to rate base. In addition, the order required Ameren Missouri to donate $8 million to low-income assistance programs, which was reflected in results of operations in the first quarter of 2020. The new rates, base level of expenses, and amortizations became effective on April 1, 2020. In April 2020, the MoPSC issued another order in Ameren Missouri’s July 2019 electric service regulatory rate review, reaffirming the existing percentage of net energy cost variances allowed to be recovered or refunded under the FAC.

Wind Generation Facilities

In 2019, Ameren Missouri entered into a build-transfer agreement to acquire, after construction, an up-to 300-megawatt wind generation facility. In 2018, Ameren Missouri entered into a build-transfer agreement to acquire, after construction, an up-to 400-megawatt wind generation facility. These two agreements are subject to customary contract terms and conditions. The two build-transfer acquisitions collectively represent $1.2 billion of capital expenditures and would support Ameren Missouri’s compliance with the Missouri renewable energy standard. Both acquisitions have received all regulatory approvals, and both projects have received all applicable zoning approvals, have entered into RTO interconnection agreements, and are under construction.

In 2020, the developers of the wind generation facilities received notices from the wind turbine supplier to each facility, and the developer of the up-to 300-megawatt project received a notice from the construction contractor, of changes in supply and/or construction activities resulting from the COVID-19 pandemic. There have been changes to the schedules for both projects, particularly with regard to wind turbine deliveries. During the third quarter of 2020, all remaining wind turbine deliveries for the up-to 400-megawatt project were completed. Based on the construction schedule, Ameren Missouri expects this project to be placed in-service by the end of 2020. At this time, due to manufacturing, shipping, and other supply chain issues in 2020, and, based on an updated construction schedule from the developer, Ameren Missouri expects the up-to 300-megawatt project to be partially placed in-service by the end of 2020, and the remaining portion of the project, representing approximately $200 million of investment, to be placed in-service in the first quarter of 2021. Ameren Missouri and the developer of the up-to 300-megawatt project continue to monitor the impact to this project's schedule. In May 2020, the IRS issued guidance that extended the in-service date criteria to December 31, 2021, for qualifying for federal production tax credits. As a result of this extension, Ameren does not anticipate that delays in the completion of the wind generation facilities will affect Ameren’s ability to realize anticipated federal production tax credits.

MEEIA

In August 2020, the MoPSC issued an order approving a unanimous stipulation and agreement with respect to the 2022 program year of Ameren Missouri’s six-year MEEIA 2019 program. The order established performance incentives that would provide Ameren Missouri an opportunity to earn additional revenues, including $11 million if Ameren Missouri achieves certain energy-efficiency goals during the 2022

program year and an additional $1 million if Ameren Missouri exceeds its targeted energy-efficiency goals. Ameren Missouri intends to invest $70 million in energy-efficiency programs during the 2022 program year. The August 2020 order also approved Ameren Missouri’s energy savings results for the first year of the MEEIA 2019 program. As a result of this order and in accordance with revenue recognition guidance, Ameren Missouri recognized revenues of $6 million in the third quarter of 2020. As a result of MoPSC orders issued in September 2017, October 2018, January 2019, and September 2019 related to performance incentives for the MEEIA 2013 and MEEIA 2016 programs, and in accordance with revenue recognition guidance, Ameren Missouri recognized revenues of $38 million during the first nine months of 2019.

Requests for Accounting Authority Orders Related to COVID-19 Pandemic Costs

Ameren Missouri suspended disconnections for customer nonpayment and charging late fees in mid-March 2020, and resumed those activities for commercial and industrial customers in mid-July 2020 and residential customers in early August 2020. In October 2020, Ameren Missouri filed requests with the MoPSC for accounting authority orders related to its electric and natural gas services. The orders would allow Ameren Missouri to accumulate certain costs incurred related to the COVID-19 pandemic and forgone customer late fee revenues from March 2020 to June 2021, for potential recovery in future electric and natural gas service regulatory rate reviews. These costs would be net of any cost savings Ameren Missouri realizes as a result of the COVID-19 pandemic. The orders would also allow Ameren Missouri to accumulate bad debt write-offs incurred from March 2020 to September 2021 due to the COVID-19 pandemic, for potential recovery in future electric and natural gas service regulatory rate reviews. The requests include an estimated $9 million of costs incurred, net of savings, and forgone customer late fee revenues related to the COVID-19 pandemic from March 2020 through September 2020. The requests did not seek accumulation for potential recovery of forgone revenues associated with decreased sales volumes related to the COVID-19 pandemic. The MoPSC is under no deadline to issue orders, and Ameren Missouri cannot predict the ultimate outcome of these regulatory proceedings.

Illinois

Electric Distribution Service Rates

In April 2020, Ameren Illinois filed its annual electric distribution service formula rate update with the ICC, requesting a reduction of $45 million in its rates. This update reflects a decrease to the annual formula rate based on 2019 actual costs, a decrease to include the 2019 revenue requirement reconciliation adjustment, and a decrease for the conclusion of the 2018 revenue requirement reconciliation adjustment, which will be fully collected from customers in 2020, consistent with the ICC’s December 2019 annual update filing order. It also reflects an increase based on expected net plant additions for 2020. In September 2020, the ICC staff submitted its revised calculation of the revenue requirement included in Ameren Illinois’ update filing, recommending a $49 million decrease in Ameren Illinois’ electric distribution service rates. An ICC decision in this proceeding is expected by December 2020, with new rates effective January 2021.

Electric Customer Energy-Efficiency Investments

In May 2020, Ameren Illinois filed its annual electric customer energy-efficiency formula rate update to increase its rates by $7 million with the ICC. In August 2020, the ICC staff submitted a calculation of the revenue requirement included in Ameren Illinois’ filing, recommending an amount comparable to that included in Ameren Illinois’ filing. An ICC decision in this proceeding is expected by December 2020, with new rates effective January 2021.

2020 Natural Gas Delivery Service Regulatory Rate Review

In February 2020, Ameren Illinois filed a request with the ICC seeking approval to increase its annual revenues for natural gas delivery service. In September 2020, Ameren Illinois filed a revised request seeking to increase its annual revenues for natural gas delivery service by $97 million, which includes an estimated $46 million of annual revenues that would otherwise be recovered under the QIP and other riders. The request is based on a 10.5% ROE, a capital structure composed of 54.1% common equity, and a rate base of $2.1 billion. Ameren Illinois used a 2021 future test year in this proceeding. In October 2020, the ICC staff recommended an increase to annual revenues for natural gas delivery service of $69 million, based on a 9.3% ROE, a capital structure composed of 50.4% common equity, and a rate base of $2.1 billion. A decision by the ICC in this proceeding is required by January 2021, with new rates expected to be effective in February 2021. Ameren Illinois cannot predict the level of any delivery service rate change the ICC may approve, nor whether any rate change that may eventually be approved will be sufficient to enable Ameren Illinois to earn a reasonable return on investments when the rate changes go into effect.

QIP Reconciliation Hearing

In March 2019, Ameren Illinois filed its annual request with the ICC for a reconciliation hearing to determine the accuracy and prudence of natural gas capital investments recovered under the QIP rider during 2018. In November 2019, the Illinois Attorney General's office challenged the recovery of capital investments, among other things, that were made during 2018, alleging that the amount of investments is excessive based on a comparison to historical investment levels. The Illinois Attorney General's office is not alleging project imprudence or that the investments do not qualify for recovery. In March 2020, the ICC staff filed testimony that supports the prudence and reasonableness

of the capital investments made during 2018. Ameren Illinois’ 2018 QIP rate recovery request under review by the ICC is within the rate increase limitations allowed by law. The ICC is under no deadline to issue an order in this proceeding.

Service Disconnection Moratorium Proceeding

In March 2020, the ICC issued an order requiring all Illinois electric distribution and natural gas utilities to suspend disconnections and late fees for customer nonpayment, on an interim basis, effective March 18, 2020. Pursuant to an ICC order issued in June 2020 and a voluntary extension of the suspension of residential disconnections, Ameren Illinois resumed disconnection activities for commercial and industrial customers for nonpayment in early August 2020 and residential customers in mid-September 2020, with the exception of residential customers classified as low income, expressing a financial hardship, or relying on medical equipment. Disconnections for nonpayment for these residential customers are expected to begin in April 2021, which is after the annual winter moratorium period on disconnections from December 1, 2020 to March 31, 2021. Ameren Illinois also resumed charging late fees to all customers in late July 2020. The June 2020 order requires Ameren Illinois to implement more flexible credit and collection practices, on a temporary basis, including longer deferred payment arrangements, extending to 24 months in certain cases, and programs to provide financial assistance to customers. In addition, the order allows Ameren Illinois to recover up to $8 million in costs incurred related to the financial assistance programs. These costs will be deferred as regulatory assets and the portion associated with Ameren Illinois’ electric distribution business will be recovered through its bad debt rider and the portion associated with its natural gas distribution business will be recovered through a special purpose rider established by the order. The order also allows Ameren Illinois to recover forgone customer late fees and costs incurred related to the COVID-19 pandemic. The portion of these forgone late fees and costs associated with Ameren Illinois’ electric distribution business will be recovered through formula rates and the portion associated with its natural gas distribution business will be recovered through the special purpose rider. In addition, the order allows Ameren Illinois’ electric distribution business to recover bad debt expense, instead of write-offs net of subsequent recoveries, through its bad debt rider until the end of 2020.

Federal

Transmission Formula Rate Revisions

In February 2020, the MISO, on behalf of Ameren Missouri, Ameren Illinois, and ATXI, filed requests with the FERC to revise each company’s transmission formula rate calculations with respect to calculation inputs for materials and supplies. In May 2020, the FERC issued orders approving the revisions prospectively. In addition, the FERC declined to order refunds for earlier periods, as requested by intervenors in Ameren Illinois’ filing, but directed its audit staff to review historical rate recovery in connection with an ongoing FERC audit. This review could lead the FERC to ultimately require refunds for periods prior to 2019. In June 2020, Ameren Missouri, Ameren Illinois, and ATXI filed requests for rehearing arguing, among other things, the revisions should be applied retrospectively to include the period January 1, 2019, to June 1, 2020, and that the FERC should not require refunds for periods prior to 2019. In July 2020, the FERC denied the rehearing requests without addressing the issues raised. In July 2020, Ameren Missouri, Ameren Illinois, and ATXI filed an appeal of the July 2020 rehearing denials to the United States Court of Appeals for the District of Columbia Circuit, which is under no deadline to address the appeal. In October 2020, the FERC issued an order reaffirming its May 2020 order and denying the arguments raised in the rehearing requests filed by Ameren Missouri, Ameren Illinois, and ATXI. Pursuant to the May 2020 order, in the second quarter of 2020, Ameren and Ameren Illinois recorded a $2 million reduction to revenue for the period of January 2019 through May 2020. Regardless of the outcome of the appeal, the impacts of the May 2020 and October 2020 orders are not expected to be material to Ameren’s, Ameren Missouri’s, or Ameren Illinois’ results of operations, financial position, or liquidity.

FERC Complaint Cases

In November 2013, a customer group filed a complaint case with the FERC seeking a reduction in the allowed base ROE for FERC-regulated transmission rate base under the MISO tariff from 12.38% to 9.15%. In September 2016, the FERC issued an order in the November 2013 complaint case, which lowered the allowed base ROE to 10.32%, or a 10.82% total allowed ROE with the inclusion of a 50 basis point incentive adder for participation in an RTO, that was effective from late September 2016 forward. The September 2016 order also required refunds for the period November 2013 to February 2015, which were paid in 2017. With the maximum FERC-allowed refund period for the November 2013 complaint case ending in February 2015, another customer complaint case was filed in February 2015, seeking a further reduction in the allowed base ROE for the period of February 2015 to May 2016. In November 2019, the FERC issued an order addressing the November 2013 complaint case, which set the allowed base ROE at 9.88%, superseding the 10.32% previously ordered, and required refunds, with interest, for the periods November 2013 to February 2015 and from late September 2016 forward. The order also dismissed the February 2015 complaint case. In December 2019, the MISO transmission owners, including Ameren Missouri, Ameren Illinois, and ATXI, filed requests for rehearing with the FERC. Additionally, in December 2019, various parties filed requests for rehearing with the FERC, challenging the dismissal of the February 2015 complaint case. In May 2020, the FERC issued an order addressing the requests for rehearing, which set the allowed base ROE at 10.02%, superseding the 9.88% previously ordered, and required refunds, with interest, for the periods November 2013 to February 2015 and from late September 2016 forward. The May 2020 order also denied rehearing of the FERC's dismissal of the February 2015 complaint case. In June 2020, various parties filed requests for rehearing with the FERC, challenging the new

ROE methodology established by the May 2020 order. In July 2020, the FERC denied the rehearing requests without addressing the issues raised, and indicated it will address the requests for rehearing in a future order. Also in July 2020, Ameren Missouri, Ameren Illinois, and ATXI filed an appeal of the May 2020 order to the United States Court of Appeals for the District of Columbia Circuit challenging the refunds required for the period from September 2016 to May 2020. The court is under no deadline to address the appeal.

As a result of the May 2020 order, which increased the FERC-allowed base ROE from 9.88% to 10.02% for the periods November 2013 to February 2015 and late September 2016 forward, Ameren and Ameren Illinois recognized income of $13 million and $7 million, respectively, during the second quarter of 2020. As of September 30, 2020, Ameren and Ameren Illinois had recorded current regulatory liabilities of $15 million and $7 million, respectively, to reflect the expected refunds, including interest, associated with the allowed base ROE set by the May 2020 order in the November 2013 complaint case. The increase in the FERC-allowed base ROE resulting from the May 2020 order is not material to Ameren Missouri’s results of operations, financial position, or liquidity.

In March 2019, the FERC issued separate Notices of Inquiry regarding its allowed base ROE policy and its transmission incentives policy. The Notice of Inquiry addressing the FERC’s base ROE policy, among other things, broadened the ability to comment on the new methodology beyond electric utilities that are participants in the complaint cases. The transmission incentives Notice of Inquiry was open for comment on the FERC’s transmission incentive policy, including incentive adders to the base ROE. In March 2020, the FERC issued a Notice of Proposed Rulemaking on its transmission incentives policy, which addressed many of the issues in the Notice of Inquiry on transmission incentives. The Notice of Proposed Rulemaking included an increased incentive in the allowed base ROE for participation in an RTO to 100 basis points from the current 50 basis points and revised the parameters for awarding incentives, while limiting the overall incentives to a cap of 250 basis points, among other things. Initial comments were due by July 2020. While the FERC has not formally terminated the Notice of Inquiry regarding its transmission incentives policy, Ameren does not expect further actions relating to it. Ameren is unable to predict the ultimate impact of the Notice of Inquiry regarding its allowed base ROE policy or the Notice of Proposed Rulemaking at this time.