Rate And Regulatory Matters

3 Months Ended

Mar. 31, 2021

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 final decisions of the various agencies and courts, or the impact on our results of operations, financial position, or liquidity.

Missouri

2021 Electric Service Regulatory Rate Review

In March 2021, Ameren Missouri filed a request with the MoPSC seeking approval to increase its annual revenues for electric service by $299 million. The electric rate increase request is based on a 9.9% ROE, a capital structure composed of 51.9% common equity, a rate base of $10.0 billion, and a test year ended December 31, 2020, with certain pro-forma adjustments expected through an anticipated true-up date of September 30, 2021. Ameren Missouri also requested 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. Additionally, Ameren Missouri requested to recover certain estimated costs associated with the Meramec Energy Center, which is expected to be retired in 2022, over a five-year period. Ameren Missouri requested the use of a tracker for any variances between certain costs collected in customer rates associated with the Meramec Energy Center and actual costs incurred after the date new rates become effective, which would be considered for recovery or refund in a future electric regulatory rate review. The electric rate increase request reflects the following:

•increased infrastructure investments made under Ameren Missouri’s Smart Energy Plan;

•the impact of the transition to a cleaner generation portfolio, including advancing the retirement dates of the Sioux and Rush Island energy centers consistent with Ameren Missouri’s 2020 IRP and 700 MWs of wind generation investment for the High Prairie and Atchison renewable energy centers, which are mitigated by reductions resulting from the request to recover certain Meramec Energy Center costs over a five-year period and the associated tracker;

•decreased weather-normalized customer sales volumes; and

•increased pension and other post-retirement benefits and tax amortization expenses, partially offset by decreased other operations and maintenance expenses.

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 February 2022 and new rates effective by March 2022. Ameren Missouri cannot predict the level of any electric service rate change the MoPSC may approve, whether the requested regulatory recovery mechanisms will be approved, or whether

any rate change 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 rate change goes into effect.

Wind Generation Facility

In January 2021, Ameren Missouri acquired an up-to 300-MW wind generation project located in northwestern Missouri and partially placed it in service as the Atchison Renewable Energy Center. As of the date of this filing, Ameren Missouri has placed approximately half of the project in service, representing a purchase price of approximately $250 million, including an immaterial amount of transaction costs. Ameren Missouri expects the remaining MWs of the project to be in service by the end of September 2021. The Atchison Renewable Energy Center will support Ameren Missouri’s compliance with the Missouri renewable energy standard.

2021 Natural Gas Delivery Service Regulatory Rate Review

In March 2021, Ameren Missouri filed a request with the MoPSC seeking approval to increase its annual revenues for natural gas delivery service by $9 million. The natural gas rate increase request is based on a 9.8% ROE, a capital structure composed of 51.9% common equity, a rate base of $310 million, and a test year ended December 31, 2020, with certain pro-forma adjustments expected through an anticipated true-up date of September 30, 2021. The request includes the continued use of the PGA, ISRS, and DCA and trackers for pension and other postretirement benefits and certain excess deferred taxes that the MoPSC previously authorized in earlier natural gas rate orders.

The MoPSC proceeding relating to the proposed natural gas delivery service rate changes will take place over a period of up to 11 months, with a decision by the MoPSC expected by February 2022 and new rates effective by March 2022. Ameren Missouri cannot predict the level of any natural gas delivery service rate change the MoPSC may approve, or whether any rate change 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 rate change goes into effect.

Accounting Authority Orders Related to COVID-19 Pandemic Costs

In March 2021, the MoPSC issued orders approving nonunanimous stipulation and agreements related to Ameren Missouri’s electric and natural gas service accounting authority order requests. The orders allowed Ameren Missouri to accumulate $9 million of certain costs incurred related to the COVID-19 pandemic, net of cost savings, as well as forgone customer late fee and reconnection fee revenues from March 2020 to March 2021, for potential recovery in the electric and natural gas service regulatory rate reviews discussed above. As of March 31, 2021, Ameren Missouri deferred other operations and maintenance expenses of $5 million as a regulatory asset related to the accounting authority orders. If approved for recovery, Ameren Missouri would recognize the remaining $4 million associated with forgone customer late fee and reconnection fee revenue when billed to customers.

Illinois

Electric Distribution Service Rates

In April 2021, Ameren Illinois filed its annual electric distribution service performance-based formula rate update with the ICC, requesting an increase of $64 million in its rates. This update reflects an increase to the annual performance-based formula rate based on 2020 actual costs, an increase to include the 2020 revenue requirement reconciliation adjustment, and an increase for the conclusion of the 2019 revenue requirement reconciliation adjustment, which will be fully refunded to customers in 2021, consistent with the ICC’s December 2020 annual update filing order. It also reflects an increase based on expected net plant additions for 2021. An ICC decision in this proceeding is expected by December 2021, with new rates effective January 2022.

Electric Distribution Service Rate Reconciliation Tariff

In March 2021, the ICC issued an order approving Ameren Illinois’ requested tariff to reconcile its electric distribution service revenue requirement for a period of up to two years after the final customer rate update under performance-based formula ratemaking. To utilize the reconciliation, the ICC-approved tariff requires Ameren Illinois to file a traditional regulatory rate review for its electric distribution service, which may be based on a future test year, by the end of March in the year following the last year in which an annual performance-based formula rate update was permitted. Pursuant to this order, and without legislative change or Ameren Illinois’ election to no longer use performance-based formula ratemaking, Ameren Illinois’ 2022 and 2023 revenues would reflect each year’s actual costs, year-end rate base, and a return at the applicable WACC, with the ROE based on the annual average of the monthly yields of the 30-year United States Treasury bonds plus 580 basis points. The revenue requirement adjustment will be collected from, or refunded to, customers within two years from the end of the reconciled year.

Electric Energy Efficiency Plan

In March 2021, Ameren Illinois filed with the ICC an energy-efficiency plan which includes annual investments in electric energy-efficiency programs up to approximately $100 million per year from 2022 through 2025. The ICC has the ability to reduce the amount of electric energy-efficiency savings goals in future plan program years if there are insufficient cost-effective programs available, which could reduce the investments in electric energy-efficiency programs. The electric energy-efficiency program investments and the return on those investments are collected from customers through a rider and are not included in the electric distribution service performance-based formula ratemaking framework. A decision by the ICC in this proceeding is expected by September 2021.

QIP Reconciliation Order

In March 2021, the ICC issued an order approving Ameren Illinois’ QIP reconciliation for 2018. The ICC also found that Ameren Illinois’ natural gas capital investments recovered under the QIP during 2018 were accurate and prudent. The ICC order effectively dismissed the Illinois Attorney General’s challenge with respect to 2018 capital investments.

Service Disconnection Moratorium

From March 2020 through March 2021, the ICC limited disconnection activities and late fees for customer nonpayment to varying degrees based on customer class. In March 2021, the ICC issued an order allowing Ameren Illinois to resume disconnection activities for all residential customers through a phased-in approach, which began in April 2021 for customers with the largest past due balances and will resume by June 2021 for all remaining residential customers. The March 2021 order also requires Ameren Illinois to offer deferred payment arrangements, extending to 18 months, to all residential customers through June 2021. In addition, the order requires Ameren Illinois to extend the financial assistance program established by a June 2020 ICC order through 2021. Ameren Illinois is allowed to recover up to $4 million in costs incurred during 2021 related to this financial assistance program. 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.

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 the calculation used for materials and supplies inventories included in rate base. 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. 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. 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.

In March 2021, the FERC issued an order related to an intervenor challenge to Ameren Illinois’ 2020 transmission formula rate update. As a result of this order, in March 2021, Ameren Illinois recorded a regulatory liability of $9 million, largely as a reduction of electric operating revenues, to reflect expected refunds, including interest, primarily related to the historical rate recovery of materials and supplies inventories included in rate base. In April 2021, Ameren Illinois filed a request for rehearing with the FERC regarding its March 2021 order.

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. 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. In December 2019, the MISO transmission owners, including Ameren Missouri, Ameren Illinois, and ATXI, filed requests for rehearing with the FERC. 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. 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 of March 31, 2021, Ameren and Ameren Illinois had recorded current regulatory liabilities of $17 million and $9 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.