Rate And Regulatory Matters

3 Months Ended

Mar. 31, 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

2019 Electric Service Regulatory Rate Review

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. 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. These changes will result in 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. An estimated $70 million would have otherwise been deferred under the PISA. A stipulation and agreement approved by the MoPSC’s March 2020 order states that the net impact of the revenue and expense changes noted above reflect 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 for the three months ended March 31, 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 have begun construction activities.

In 2020, the developers of the wind generation facilities received notices from the wind turbine supplier, 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. Ameren Missouri and the developers continue to monitor the impact to each project schedule. To date, neither developer has reported to Ameren Missouri that the projects will not be completed in 2020. Ameren Missouri expects the up-to 400-megawatt project to be placed in-service by the end of 2020. However, at this time, due to manufacturing, shipping, and other supply chain issues, and based on Ameren Missouri’s discussions with the developer, Ameren Missouri expects that a portion of the up-to 300-megawatt project, representing approximately $100 million of investment, could be placed in-service in the first quarter of 2021. The build-transfer agreements include provisions for the event in which any portion of either project is completed after 2020. In such an event, according to the terms of the agreements, Ameren Missouri would pay a reduced contract price on the portion of the project completed after 2020, to account for risks associated with qualifying for production tax credits, subject to an obligation to later pay such price differential should Ameren Missouri be entitled to receive production tax credits.

MEEIA

As a result of MoPSC orders issued in September 2017, October 2018, and January 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 $20 million during the first quarter of 2019. Ameren Missouri did not recognize revenues related to MEEIA performance incentives during the first quarter of 2020.

Illinois

Electric Distribution Service Rates

In April 2020, Ameren Illinois filed its annual electric distribution service formula rate update to establish the revenue requirement to be used for 2021 rates with the ICC. Pending ICC approval, this update filing will result in a $45 million decrease in Ameren Illinois’ electric distribution service rates, beginning in January 2021. 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. An ICC decision in this proceeding is expected by December 2020.

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 by $102 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% allowed 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. 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 a request with the ICC for a reconciliation hearing to determine the accuracy and prudence of natural gas infrastructure 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 capital investments made during 2018. Ameren Illinois’ 2018 QIP rate recovery 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, natural gas, water, and sewer utilities to suspend disconnections for customer non-payment and waive late fees, on an interim basis, effective March 18, 2020, and for as long as the public health emergency related to the COVID-19 pandemic remains in effect for the state of Illinois. At this time, the state of Illinois’ public health emergency remains in effect until May 30, 2020. The order also requires utilities to design and implement, upon ICC approval and on a temporary basis, more flexible credit and collection practices. In March 2020, Ameren Illinois filed a response to the ICC order stating their compliance with the suspension of disconnections and late fees for electric distribution and natural gas customers, and proposing more flexible credit and collection practices, including longer deferred payment arrangements for customers that fall behind on bill payments. In April 2020, similar to other utilities in Illinois, Ameren Illinois also requested approval to recover forgone late fees related to natural gas service through its existing bad debt rider and the ability to defer, as a regulatory asset, costs incurred related to the COVID-19 pandemic. Recovery of electric distribution forgone late fees and costs incurred related to the COVID-19 pandemic are included in Ameren Illinois’ electric distribution formula rates. In April 2020, the ICC staff recommended extending the suspension of disconnections and late fees for 60 days beyond when the state of Illinois’ public health emergency has ended. The ICC is under no deadline to issue an order in this proceeding.

Federal

Ameren Illinois Transmission Formula Rate Revisions

In February 2020, MISO, on behalf of Ameren Illinois, filed a request with the FERC to revise Ameren Illinois’ transmission formula rate calculation with respect to calculation inputs for materials and supplies. In May 2020, the FERC issued an order approving the revisions prospectively. In addition, the FERC noted that the FERC staff should review historical rate recovery in connection with an ongoing FERC audit. At this time, Ameren and Ameren Illinois are evaluating this order, but do not expect the impact to be material on their 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% 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.

As of March 31, 2020, Ameren and Ameren Illinois had recorded current regulatory liabilities of $40 million and $23 million, respectively, to reflect the expected refunds, including interest, associated with the reduced ROEs in the November 2019 order in the November 2013 complaint case. The reduction in the FERC-allowed base ROE from 10.32% to 9.88% is not material to Ameren Missouri’s results of operations, financial position, or liquidity.

In December 2019, Ameren and 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. The FERC has not ruled on the merits of the rehearing requests and is under no deadline to do so. The allowed base ROE for the 15-month period related to the February 2015 complaint case was 12.38%. Each 50 basis point

reduction in the allowed base ROE for this 15-month period would reduce Ameren’s and Ameren Illinois’ net income by an estimated $11 million and $6 million, respectively.

In March 2019, the FERC issued separate Notices of Inquiry regarding its allowed base ROE policy and its transmission incentives policy. Initial comments were due by June 2019, and reply comments were due by late August 2019. 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 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 improved parameters for awarding incentives, while limiting the overall incentives to a cap of 250 basis points, among other things. Initial comments are due by July 2020. Ameren is unable to predict the ultimate impact of the Notices of Inquiry or the Notice of Proposed Rulemaking at this time.