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Rate And Regulatory Matters
3 Months Ended
Mar. 31, 2015
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 lawsuits. See also Note 2 - Rate and Regulatory Matters under Part II, Item 8, of the Form 10-K. 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
2015 Electric Rate Order
In April 2015, the MoPSC issued an order approving an increase in Ameren Missouri’s annual revenues for electric service of $122 million, including $109 million related to the increase in net energy costs above the net energy costs included in base rates previously authorized by the MoPSC. The remaining increase of $13 million approved by the order was for non-energy costs. The revenue increase was based on a 9.53% return on common equity, a capital structure composed of 51.8% common equity, and a rate base of $7.0 billion to reflect investments through December 31, 2014. Rate changes consistent with the order will become effective on May 30, 2015.
The order approved Ameren Missouri’s request for continued use of the FAC; however, it changed the FAC to exclude substantially all transmission charges and revenues. In addition, the order did not approve the continued use of the regulatory tracking mechanisms for storm costs and vegetation management and infrastructure inspection costs. The order did approve the continued use of the regulatory tracking mechanisms for pension and postretirement benefits, renewable energy standard cost, solar rebates, and uncertain tax positions that the MoPSC authorized in earlier electric rate orders.
In addition, the order approved a reduction to Noranda’s electric rates with an offsetting increase in electric rates for Ameren Missouri’s other customers. The rate shift will be revenue neutral to Ameren Missouri. Ameren Missouri supplies electricity to Noranda’s aluminum smelter in southeast Missouri under a 15-year agreement, which is subject to termination as early as May 31, 2020, and on each May 31 thereafter, upon at least five years notice by either party. Termination of the agreement by Ameren Missouri would require MoPSC approval.
Ameren Missouri will request a rehearing on several aspects of the MoPSC’s order, including the allowed return on common equity and the elimination of recovery of changes in transmission charges and revenues through the FAC. The MoOPC and the intervenor parties in this case may similarly seek rehearing or subsequently appeal any aspect of the order. Ameren Missouri cannot predict whether any such application for rehearing or appeal will be filed, or the outcome if so filed.
Accounting Authority Order
In November 2013, the MoPSC issued an accounting authority order that allowed Ameren Missouri to seek recovery of fixed costs totaling $36 million that were not previously recovered from Noranda as a result of the loss of load caused by a severe 2009 ice storm in a future electric rate case. In its April 2015 electric rate order, the MoPSC did not approve recovery of these fixed costs. Ameren Missouri had not recorded any revenue associated with this accounting authority order and will not record a charge to earnings based on the outcome of the MoPSC’s April 2015 electric rate order.
MEEIA Filing
In December 2014, Ameren Missouri filed an energy efficiency plan with the MoPSC under the MEEIA. This filing proposed a three-year plan that includes a portfolio of customer energy efficiency programs along with a cost recovery mechanism. If the plan is approved, beginning in January 2016, Ameren Missouri intends to invest $135 million over three years in the proposed customer energy efficiency programs. Ameren Missouri requested continued use of a MEEIA rider, which allows it to collect from or refund to customers any difference in the actual amounts incurred and the amounts collected from customers for the MEEIA program costs and net shared benefits. In addition, Ameren Missouri requested incentives to earn additional revenues by achieving certain customer energy efficiency goals, including $25 million if 100% of its customer energy efficiency goals are achieved during the three-year period. Ameren Missouri must achieve at least 70% of its customer energy efficiency goals before it earns any incentive award.
Illinois
IEIMA
Under the provisions of the IEIMA, Ameren Illinois’ electric delivery service rates are subject to an annual revenue requirement reconciliation to its actual costs.Throughout each year, Ameren Illinois records a regulatory asset or a regulatory liability and a corresponding increase or decrease to operating revenues for any differences between the revenue requirement reflected in customer rates for that year and its estimate of the probable increase or decrease in the revenue requirement expected to ultimately be approved by the ICC based on that year's actual costs incurred. As of March 31, 2015, Ameren Illinois had recorded regulatory assets of $8 million, $101 million, and $52 million, to reflect its expected 2015, 2014 and 2013 revenue requirement reconciliation adjustments, with interest, respectively. Ameren Illinois is collecting the 2013 revenue requirement reconciliation adjustment from customers during 2015.
In April 2015, Ameren Illinois filed with the ICC its annual electric delivery service formula rate update to establish the revenue requirement used for 2016 rates. Pending ICC approval, Ameren Illinois’ update filing will result in a $110 million increase in Ameren Illinois’ electric delivery service revenue requirement, beginning in January 2016. This update reflects an increase to the annual formula rate based on 2014 actual costs and expected net plant additions for 2015, an increase to include the 2014 revenue requirement reconciliation adjustment, and a decrease for the conclusion of the 2013 revenue requirement reconciliation adjustment, which will be fully collected from customers in 2015.
In April 2015, the IEIMA’s formula rate framework was extended until the end of 2019, with further extensions possible through 2022.
2015 Natural Gas Delivery Service Rate Case
In January 2015, Ameren Illinois filed a request with the ICC seeking approval to increase its annual revenues for natural gas delivery service by $53 million. The request was based on a 10.25% return on common equity, a capital structure composed of 50% common equity, and a rate base of $1.2 billion. In an attempt to reduce regulatory lag, Ameren Illinois used a 2016 future test year in this proceeding. Included in the request was a proposal to implement a decoupling rider mechanism for residential and small nonresidential customers. The decoupling rider would ensure that changes in natural gas sales volumes do not affect Ameren Illinois' annual natural gas revenues for these rate classes.
A decision by the ICC in this proceeding is required by December 2015, with new rates expected to be effective in January 2016. Ameren Illinois cannot predict the level of any delivery service rate changes the ICC may approve, whether the ICC will approve the decoupling rider, or whether any rate changes that may eventually be approved will be sufficient to enable Ameren Illinois to recover its costs and to earn a reasonable return on investments when the rate changes go into effect.
2013 Natural Gas Delivery Service Rate Order
In December 2013, the ICC issued a rate order that approved an increase in Ameren Illinois’ revenues for natural gas delivery service based on a 9.1% return on common equity. The rate changes became effective January 1, 2014. In March 2014, Ameren Illinois filed with the Appellate Court of the Fourth District of Illinois an appeal of the allowed return on common equity included in the ICC's order. Ameren Illinois sought a 10.4% return on common equity in this rate case. A decision is expected in 2015.
2015 ICC Purchased Power Reconciliation
In January 2015, the ICC issued an order that approved Ameren Illinois' reconciliation of revenues collected under its purchased power rider mechanism and Ameren Illinois' related cumulative power usage cost. In the first quarter of 2015, based on the January 2015 order, both Ameren and Ameren Illinois recorded a $15 million increase to electric revenues for the recovery of this cumulative power usage cost from electric customers.
ATXI Transmission Project
In August 2014, ATXI made a filing with the ICC requesting a certificate of public convenience and necessity and project approval for the Spoon River project, a MISO-approved transmission line project located in northwest Illinois. A decision is expected from the ICC in 2015. A certificate of public convenience and necessity is required before ATXI can proceed with right-of-way acquisition.
Federal
Ameren Illinois Electric Transmission Rate Refund
In July 2012, the FERC issued an order concluding that Ameren Illinois improperly included acquisition premiums, including goodwill, in determining the common equity used in its electric transmission formula rate and thereby inappropriately recovered a higher amount from its electric transmission customers. The order required Ameren Illinois to make refunds to customers for such improperly included amounts.
Ameren Illinois submitted a refund report in November 2012, which concluded that no refund was warranted. Several wholesale customers filed a protest with the FERC regarding that conclusion. In June 2013, the FERC issued an order that rejected Ameren Illinois' November 2012 refund report and provided guidance as to the filing of a new refund report. In July 2013, Ameren Illinois filed a revised refund report based on the guidance provided in the June 2013 order, which also concluded that no refund was warranted. In June 2014, the FERC issued an order establishing settlement procedures and, if necessary, hearing procedures regarding Ameren Illinois’ July 2013 refund report.
In March 2015, Ameren Illinois reached a settlement agreement with the wholesale customers that resolves the issues in this proceeding. The settlement agreement requires FERC approval. Upon approval by the FERC, the settlement agreement will require Ameren Illinois to make refunds and payments of $8 million to transmission customers. It will also require Ameren Illinois to take other actions, such as reducing common equity for electric transmission ratemaking purposes on a prospective basis. There is no date by which the FERC must act with respect to the settlement agreement. Ameren Illinois estimates the maximum refund obligation through March 31, 2015, to be $23 million. Ameren Illinois’ March 31, 2015 and December 31, 2014 balance sheets included an $8 million and a $7 million current liability, respectively, for its estimate of the probable refund to transmission customers. If Ameren Illinois were to determine that a refund to its electric transmission customers in excess of the amount already recorded is probable, an additional charge to earnings would be recorded in the period in which that determination was made.
FERC Complaint Cases
Currently, the FERC-allowed base return on common equity for MISO transmission owners is 12.38%. In November 2013, a customer group filed a complaint case with the FERC seeking a reduction in the allowed base return on common equity for the FERC-regulated MISO transmission rate base under the MISO tariff to 9.15%. The FERC scheduled the case for hearing proceedings, requiring an initial decision to be issued no later than November 30, 2015. As the maximum FERC-allowed refund period for the November 2013 complaint case ended in February 2015, another customer complaint case was filed in February 2015. The February 2015 complaint case seeks a reduction in the allowed base return on common equity for the FERC-regulated MISO transmission rate base under the MISO tariff to 8.67%.
In 2014, the FERC issued orders in a proceeding, in which the Ameren Companies were not involved, reducing the allowed base return on common equity for New England transmission owners from 11.14% to 10.57%, with rate incentives allowed up to 11.74%. The FERC order in the New England transmission owners’ case applied observable market data from October 2012 to March 2013 to determine the allowed base return on common equity. The evidence and the calculation used in the New England transmission owners’ case may guide the FERC’s decision in the MISO complaint cases discussed above. The FERC calculation will establish the allowed base return on common equity, which specifies a unique time period for each complaint case, and will require multiple inputs based on observable market data specific to the utility industry and broader macroeconomic data. In January 2015, the settlement judge for the initial MISO complaint case ordered that July 13, 2015, be the cut-off date for the observable market data to be used in the calculation of the allowed base return on common equity. Based on the information in these orders, Ameren and Ameren Illinois recorded current liabilities on their respective balance sheets as of March 31, 2015, and December 31, 2014, representing their estimate of the refunds from the refund effective date of November 12, 2013, through the respective balance sheet date. A 50 basis point reduction in the FERC-allowed return on common equity would reduce Ameren's and Ameren Illinois' 2015 earnings by an estimated $4 million and $2 million, respectively, based on 2015 projected rate base. Ameren Missouri did not record a liability as of March 31, 2015, and does not expect that a reduction in the FERC-allowed base return on common equity for MISO transmission owners would be material to its results of operations, financial position, or liquidity.
Based on a November 2014 request, the FERC approved an incentive adder of up to 50 basis points on the allowed base return on common equity for our participation in an RTO. The incentive adder became effective on January 6, 2015. The FERC also approved our request to defer collection of the incentive adder until the issuance of the final order addressing the initial MISO complaint case.
Ameren Missouri Power Purchase Agreement with Entergy
Beginning in 2005, the FERC issued a series of orders addressing a complaint filed in 2001 by the Louisiana Public Service Commission against Entergy and certain of its affiliates. The complaint alleged unjust and unreasonable cost allocations. As a result of the FERC orders, Entergy began billing Ameren Missouri in 2007 for additional charges under a 165-megawatt power purchase agreement, which expired August 31, 2009. In May 2012, the FERC issued an order stating that Entergy should not have included additional charges to Ameren Missouri under the power purchase agreement. Pursuant to the order, in June 2012, Entergy paid Ameren Missouri $31 million. In November 2013, Entergy filed an appeal of the FERC's May 2012 order with the United States Court of Appeals for the District of Columbia Circuit. In March 2015, the United States Court of Appeals for the District of Columbia Circuit upheld the FERC’s May 2012 order. Ameren Missouri believes the outstanding issues relating to its power purchase agreement with Entergy have been resolved and will not result in a charge to earnings.
Combined Construction and Operating License
In 2008, Ameren Missouri filed an application with the NRC for a COL for a new nuclear unit at Ameren Missouri's existing Callaway County, Missouri, energy center site. In 2009, Ameren Missouri suspended its efforts to build a new nuclear unit at the Callaway site, and the NRC suspended review of the COL application. The suspended status of the COL application currently extends through the end of 2015.
Ameren Missouri estimates the total cost to obtain a COL for the Callaway site to be approximately $100 million. As of March 31, 2015, Ameren Missouri had capitalized investments of $69 million for the development of a new nuclear energy center. Ameren is currently evaluating all potential nuclear technologies in order to maintain an option for nuclear power in the future.
All of Ameren Missouri's capitalized investments for the development of a new nuclear energy center will remain capitalized while management pursues options to maximize the value of its investment. If efforts to license additional nuclear generation are abandoned, if the NRC does not extend the COL application suspended status, or if management concludes it is probable that the costs incurred will be disallowed in rates, a charge to earnings would be recognized in the period in which that determination is made.