Summary Of Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

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 is a rapidly evolving situation. While the COVID-19 pandemic did not have a material impact on our results of operations, financial position, or liquidity for the three months ended March 31, 2020, it may adversely affect our results of operations, financial position, or liquidity in subsequent periods. The effect will depend on the severity and longevity of the COVID-19 pandemic and the resulting impact on business, economic, and capital market conditions. As a result of the COVID-19 pandemic, measures have been taken by local, state, and federal governments, such as travel bans, quarantines, and shelter-in place orders. On March 21, 2020, a shelter-in-place order for the state of Illinois became effective and will remain in effect until at least May 30, 2020. Similar orders became effective for Saint Louis City and County on March 23, 2020, and the state of Missouri on April 6, 2020. The state of Missouri order was effective through May 3, 2020, while Saint Louis City and County are expected to begin easing restrictions on May 18, 2020. These orders generally preclude or limit the operation of businesses that are deemed nonessential. Ameren's business operations are deemed essential and are not directly impacted by the shelter-in-place orders. As a result of the COVID-19 pandemic, economic activity has been disrupted in the service territories of Ameren Missouri and Ameren Illinois. It has also caused disruptions in the capital markets, which could adversely affect our ability to access these markets on reasonable terms and when needed. These disruptions could continue for a prolonged period of time or become more severe. On March 13, 2020, and March 16, 2020, Ameren Illinois and Ameren Missouri, respectively, suspended customer disconnections for non-payment and began to waive late fees. Regarding bad debt expense, Ameren Illinois' electric distribution and natural gas distribution businesses have bad debt riders, which would provide for recovery of increased bad debt expense. However, Ameren Missouri’s earnings are exposed to potential increases in future bad debt expense, which could result in incremental accounts receivable write-offs in future periods as Ameren Missouri does not have a bad debt rider or regulatory tracking mechanism. Our customers’ ability to pay for our services may be adversely affected by the COVID-19 pandemic. A reduction in collections from our tariff-based revenues could reduce our cash from operations and cause an adverse impact to our liquidity.

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, temporary suspension of the payment of the employer portion of Social Security taxes, and additional funding for customer energy assistance, among other things. Ameren has implemented certain provisions of the act, and is currently evaluating other provisions of the act. As of March 31, 2020, there was no material impact to Ameren’s, Ameren Missouri’s, and Ameren Illinois’ 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. 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 March 31, 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 March 31, 2020, the maximum exposure to loss related to these variable interest entities was approximately $15 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 March 31, 2020, and December 31, 2019, Ameren had unconsolidated variable interests as a limited partner in various equity method investments, totaling $31 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 March 31, 2020, the maximum exposure to loss related to these variable interests is limited to the investment in these partnerships of $31 million plus associated outstanding funding commitments of $34 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 March 31, 2020, the cash surrender value of company-owned life insurance at Ameren and Ameren Illinois was $245 million (December 31, 2019 – $264 million) and $118 million (December 31, 2019 – $123 million), respectively, while total borrowings against the policies were $109 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. The cash surrender value decreased during the three months ended March 31, 2020, primarily because of a decrease in the market value of underlying investments.

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 recently issued authoritative accounting guidance relating to defined benefit plan disclosures.

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.