8-KOther EventsExhibits & Filings

AMEREN CORP 8-K Report, Corporate Update (Sep 15, 2005)

Filed September 15, 2005For Securities:AEE

Summary

This 8-K filing from Ameren Corporation (AEE) dated September 15, 2005, details significant regulatory and legal challenges concerning the future of electric generation procurement and rate recovery for its Illinois subsidiaries (AmerenCIPS, AmerenCILCO, and AmerenIP). The core issue revolves around the proposed reverse auction process for procuring electricity and a rate mechanism to pass these generation costs to customers, intended to take effect after the current electric rate freeze expires on January 1, 2007. This proposal faces opposition from key stakeholders, including the Illinois Attorney General, Governor, Citizens Utility Board, and Environmental Law & Policy Center. Two major developments are highlighted: a lawsuit filed by the Illinois Attorney General and other parties seeking to block the Illinois Commerce Commission (ICC) from approving market-based rates for electricity not declared 'competitive', and a letter from the Governor of Illinois expressing similar concerns and opposition to the proposed auction process. Ameren views these challenges as unfounded and intends to vigorously defend its proposals, including intervening in the lawsuit. The company emphasizes that an inability to fully recover purchased power costs could lead to severe financial consequences, including a significant credit rating downgrade, loss of market access, and potential insolvency.

Key Highlights

  • 1Ameren's Illinois utilities filed a proposal for a reverse auction process to procure electricity and a rate mechanism for cost pass-through, effective post-2006.
  • 2The Illinois Attorney General, Governor, CUB, and ELPC are opposing Ameren's proposed generation procurement and rate recovery mechanisms.
  • 3A lawsuit was filed by the Illinois Attorney General and others against the ICC, challenging the ICC's authority to approve market-based rates for non-declared competitive electric service.
  • 4Illinois Governor Blagojevich sent a letter opposing the proposed auction process and questioning the ICC's authority.
  • 5Ameren intends to vigorously oppose the lawsuit and defend its proposed auction process before the ICC.
  • 6The company highlights potential material adverse financial consequences if purchased power costs cannot be fully recovered, including credit rating downgrades and insolvency risk.
  • 7Ameren plans to file revised electric delivery service rates by year-end 2005 for effectiveness in January 2007.

Frequently Asked Questions

Ameren's Illinois utilities are facing challenges to their proposed reverse auction process for procuring electricity and a rate mechanism that would allow them to pass generation costs to customers. This is intended to take effect after the current rate freeze expires on January 1, 2007.

Opposition comes from the Illinois Attorney General, the Governor of Illinois, the Citizens Utility Board (CUB), and the Environmental Law & Policy Center (ELPC). Their main concern is the ICC's alleged lack of authority to approve market-based rates for electricity that has not been formally declared 'competitive' under Illinois law.

Ameren warns of significant material adverse consequences, including a sharp drop in credit ratings (potentially below investment grade), loss of access to capital markets, increased borrowing costs, higher power supply expenses, inability to invest in infrastructure, reduced customer service, job losses, and financial insolvency.

Ameren plans to vigorously oppose the lawsuit filed by the Attorney General by intervening in the case and denying its allegations. They will also defend their proposed auction process before the Illinois Commerce Commission (ICC) and will file revised electric delivery service rates by the end of 2005. Ameren is also exploring various other legal and regulatory actions.