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Rate And Regulatory Matters
9 Months Ended
Sep. 30, 2016
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
2016 Electric Rate Case
On July 1, 2016, Ameren Missouri filed a request with the MoPSC seeking approval to increase its annual revenues for electric service by $206 million. The electric rate increase request is based on a 9.9% return on equity, a capital structure comprised of 51.8% equity, a rate base of $7.2 billion, and a test year ended March 31, 2016, with certain pro-forma adjustments through the true-up date of December 31, 2016. The rate request includes $74 million that primarily relates to nearly $1.4 billion of new gross electric infrastructure investments since the true-up date in Ameren Missouri’s last electric rate case. This $74 million includes depreciation expenses of $39 million, return on rate base of $25 million, and increased property taxes of $10 million. The rate request also includes $51 million related to reduced customer sales volumes, including reductions from the suspended operations at the New Madrid Smelter, and $34 million related to increases in transmission charges. Other changes in expenses reflected in the rate request include decreases in pension and other post-employment benefit plan expenses of $24 million and solar rebate expenses of $15 million, both of which are subject to regulatory tracking mechanisms; increased net energy costs, excluding the impact of the suspended operations at the New Madrid Smelter and other customer sales volumes, of $23 million; and increased income taxes of $15 million.
As a part of its filing, Ameren Missouri requested the amortization over ten years of an estimated $81 million of lost fixed cost recovery due to lower sales volumes, as discussed below, from the New Madrid Smelter during the period April 2015 through May 2017.
Ameren Missouri also requested continued use of its FAC and the regulatory tracking mechanisms for pension and postretirement benefits and uncertain income tax positions that the MoPSC previously authorized in earlier electric rate orders. Additionally, Ameren Missouri requested the implementation of a new regulatory tracking mechanism for transmission charges and revenues.
The MoPSC proceeding relating to the proposed electric service rate changes will take place over a period of up to 11 months, with a decision by the MoPSC expected by late April 2017 and new rates effective in late May 2017. Ameren Missouri cannot predict the level of any electric service rate change the MoPSC may approve, when any rate change may go into effect, whether the requested regulatory tracking mechanisms will be approved, or whether any rate increase that may eventually be approved will be sufficient for Ameren Missouri to recover its costs and earn a reasonable return on its investments when the increase goes into effect.
Noranda and New Madrid Smelter
In the first quarter of 2016, Noranda suspended operations at the New Madrid Smelter and filed voluntary petitions for a court-supervised restructuring process under Chapter 11 of the United States Bankruptcy Code. In October 2016, Noranda sold the New Madrid Smelter to ARG International AG. As of September 30, 2016, Ameren Missouri has been paid in full for all previous electric service amounts, and expects to continue to be paid in full for the minimal amount of electric service it is currently providing to the New Madrid Smelter.
In its April 2015 electric rate order, the MoPSC approved a rate design that established $78 million in annual revenues, net of fuel and purchased power costs, as the New Madrid Smelter’s portion of Ameren Missouri’s revenue requirement. In 2016, as a result of the suspended operations, actual sales volumes to the New Madrid Smelter are significantly below the sales volumes reflected in rates. As a result, full recovery by Ameren Missouri of its revenue requirement has not occurred and will not occur until rates are adjusted prospectively by the MoPSC in the July 2016 electric rate case to accurately reflect the actual sales volumes to the New Madrid Smelter. In its July 2016 electric rate case, Ameren Missouri is seeking to recover the April 2015 through May 2017 lost fixed costs caused by the lower sales volumes to New Madrid Smelter. Also, as a result of the New Madrid Smelter’s suspended operations, Ameren Missouri is applying a provision in its FAC tariff that, under certain circumstances, allows Ameren Missouri to retain a portion of the revenues from any off-system sales it makes as a result of reduced sales to the smelter. The current market price of electricity is less than the New Madrid Smelter’s electric rate, and Ameren Missouri expects market prices to remain below the New Madrid Smelter’s electric rate through the date that new rates in the July 2016 rate case become effective. Accordingly, this FAC-tariff provision will not enable Ameren Missouri to fully recover its revenue requirement under current market conditions. Operations at the New Madrid Smelter remain suspended and Ameren Missouri is uncertain of future sales to the smelter.
MEEIA 2013
The MEEIA 2013 performance incentive allowed Ameren Missouri an opportunity to earn additional revenues by achieving certain customer energy efficiency goals, including $19 million if 100% of the goals were achieved during the three-year period, with the potential to earn a larger performance incentive if Ameren Missouri’s energy savings exceeded those goals. In September 2016, Ameren Missouri and the MoPSC staff filed a stipulation agreement with the MoPSC that supported a $29 million MEEIA 2013 performance incentive. The MoOPC opposed this stipulation agreement; however, it did not oppose the conclusion that Ameren Missouri achieved at least 100% of the customer energy efficiency goals. As there was no challenge to the achievement of at least 100% of the customer energy efficiency goals, Ameren Missouri recognized $19 million of revenue during the third quarter of 2016 related to the MEEIA 2013 performance incentive. In November 2016, the MoPSC approved a $28 million MEEIA 2013 performance incentive based on a revised stipulation agreement between Ameren Missouri, the MoPSC staff, and the MoOPC. As a result, Ameren Missouri will recognize $9 million of additional revenues in the fourth quarter of 2016 relating to the MEEIA 2013 performance incentive. Further, the revised stipulation agreement included a provision to incorporate the results of the appeal, discussed below, regarding the determination of an input used to calculate the performance incentive.
In November 2015, the MoPSC issued an order regarding the determination of an input used to calculate the performance incentive. Ameren Missouri filed an appeal of the order with the Missouri Court of Appeals, Western District, which is expected to issue a decision in 2016. If the Missouri Court of Appeals, Western District, overturns the November 2015 MoPSC order, Ameren Missouri may recognize additional revenues in excess of the $28 million approved by the MoPSC in November 2016.
ATXI’s Mark Twain Project
The Mark Twain project is a MISO-approved 95-mile transmission line to be located in northeast Missouri. In April 2016, the MoPSC granted ATXI a certificate of convenience and necessity for the Mark Twain project. Before starting construction, ATXI must obtain assents for road crossings from the five counties where the line will be constructed. None of the five county commissions approved ATXI’s requests for the assents. In October 2016, ATXI filed suit in each of the five county circuit courts to obtain the assents. A decision from each of the county circuit courts is expected in 2017. ATXI plans to complete the project in 2018; however, delays in obtaining the assents could delay the completion date.
Illinois
IEIMA
Under the provisions of the IEIMA's performance-based formula rate-making framework, which currently extends through 2019, Ameren Illinois’ electric distribution service rates are subject to an annual revenue requirement reconciliation to its actual recoverable 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 recoverable costs incurred. As of September 30, 2016, Ameren Illinois had recorded regulatory assets of $23 million, $66 million, and $22 million to reflect its expected 2016 and 2015 revenue requirement reconciliation adjustments, and the approved 2014 revenue requirement reconciliation adjustment, with interest, respectively.
In April 2016, Ameren Illinois filed with the ICC its annual electric distribution service formula rate update to establish the revenue requirement used for 2017 rates. Pending ICC approval, Ameren Illinois’ update filing will result in a $14 million decrease in Ameren Illinois’ electric distribution service revenue requirement, beginning in January 2017. This update reflects an increase to the annual formula rate based on 2015 actual costs and expected net plant additions for 2016, an increase to include the 2015 revenue requirement reconciliation adjustment, and a decrease for the conclusion of the 2014 revenue requirement reconciliation adjustment, which will be fully collected from customers in 2016, consistent with the ICC’s December 2015 annual update filing order. As of December 31, 2015, Ameren Illinois had recorded a regulatory asset of $103 million related to the approved 2014 revenue requirement reconciliation adjustment. In October 2016, an administrative law judge issued a proposed order that reflected a decrease to Ameren Illinois’ electric distribution service revenue requirement of $14 million. An ICC decision on the revenue requirement used for 2017 rates is expected by December 2016.
Federal
FERC Complaint Cases
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 transmission rate base under the MISO tariff from 12.38% to 9.15%. In September 2016, the FERC issued a final order in the November 2013 complaint case which lowered the allowed base return on common equity to 10.32%. The order was consistent with the initial decision an administrative law judge issued in December 2015 and requires customer refunds, with interest, to be issued for the 15-month period ended February 2015. In addition, the new allowed base return on common equity is reflected in rates prospectively from the September 2016 effective date of the order. Refunds for the November 2013 complaint case are expected to be issued in the first half of 2017.
After 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 transmission rate base under the MISO tariff to 8.67%. In June 2016, an administrative law judge issued an initial decision in the February 2015 complaint case which would lower the allowed base return on common equity to 9.70% and would require customer refunds, with interest, to be issued for the 15-month period ended May 2016. The FERC is expected to issue a final order in the February 2015 complaint case in the second quarter of 2017. The final order in the February 2015 complaint case will determine the allowed base return on common equity for the 15-month period ended May 2016. The final order in the February 2015 complaint case will also establish the allowed base return on common equity that will apply prospectively from its expected second quarter 2017 effective date, replacing the 10.32% allowed base return on common equity, which became effective in September 2016. The 12.38% allowed base return on common equity was effective for the period that began at the conclusion of the 15-month period for the February 2015 complaint case in May 2016 through the September 2016 effective date of the final order in the November 2013 complaint case.
On January 6, 2015, a FERC-approved incentive adder of up to 50 basis points on the allowed base return on common equity for our participation in an RTO became effective. Beginning with its January 6, 2015 effective date, the incentive adder reduces any refund to customers relating to a reduction of the allowed base return on common equity from the complaint cases discussed above and will also be applied prospectively from the effective date of the September 2016 FERC order, resulting in a current allowed return on common equity of 10.82%.
As of September 30, 2016, Ameren and Ameren Illinois recorded current regulatory liabilities of $61 million and $42 million, respectively, to reflect the expected refunds, including interest, associated with the reduced allowed base returns on common equity in the September 2016 FERC order and the initial decision in the February 2015 complaint case. Ameren Missouri did not record a liability as of September 30, 2016, as it 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.
Combined Construction and Operating License
In 2008, Ameren Missouri filed an application with the NRC for a COL for a second nuclear unit at Ameren Missouri's existing Callaway County, Missouri, energy center site. In 2009, Ameren Missouri suspended its efforts to build a second nuclear unit at its existing Callaway site, and the NRC suspended review of the COL application. Prior to suspending its efforts, Ameren Missouri had capitalized $69 million related to the project. Primarily because of changes in vendor support for licensing efforts at the NRC, Ameren Missouri’s assessment of long-term capacity needs, declining costs of alternative generation technologies, and the regulatory framework in Missouri, Ameren Missouri discontinued its efforts to license and build a second nuclear unit at its existing Callaway site. As a result of this decision, in the second quarter of 2015, Ameren and Ameren Missouri recognized a $69 million noncash pretax provision for all of the previously capitalized COL costs. Ameren Missouri has withdrawn its COL application with the NRC.