8-KOther Events

AMEREN CORP 8-K Report, Corporate Update (May 23, 2007)

Filed May 23, 2007For Securities:AEE

Summary

Ameren Corporation (AEE) and its subsidiary, AmerenUE, reported on May 23, 2007, a significant development regarding a rate case filed with the Missouri Public Service Commission (MoPSC). AmerenUE had initially sought a $361 million increase in base electric rates. The MoPSC, in an order effective June 1, 2007, authorized an increase of approximately $43 million, a considerably lower amount than requested, based on a 10.2% return on equity. This decision will necessitate accounting adjustments for certain expenses, including depreciation, to align with the MoPSC's directive. While the authorized rate increase is substantially less than anticipated, the MoPSC did accept AmerenUE's existing accounting treatment for a cost-based power supply contract that expired in December 2005. However, AmerenUE's request for a fuel and purchased power cost recovery mechanism was denied. Ameren Corporation is currently evaluating the full implications of this MoPSC order, which remains subject to appeal.

Key Highlights

  • 1AmerenUE's rate increase request of $361 million has been significantly reduced by the MoPSC to approximately $43 million.
  • 2The new base electric rates, authorized by the MoPSC, are set to become effective on June 1, 2007.
  • 3The authorized return on equity for AmerenUE has been set at 10.2%.
  • 4AmerenUE will need to adjust its accounting practices for certain expenses, including depreciation, as per the MoPSC's order.
  • 5The MoPSC denied AmerenUE's request to implement a fuel and purchased power cost recovery mechanism.
  • 6The MoPSC accepted AmerenUE's existing accounting treatment for a cost-based power supply contract that expired in December 2005.

Frequently Asked Questions

AmerenUE, a subsidiary of Ameren Corporation, initially requested a $361 million increase in base electric rates. The Missouri Public Service Commission (MoPSC) authorized an increase of approximately $43 million, effective June 1, 2007. This is a substantially lower amount than originally requested.

The authorized increase of $43 million is considerably less than the $361 million requested, which suggests a potentially negative impact on revenue growth expectations compared to what the company had sought. Investors should monitor Ameren's analysis of the order's full financial implications, including the impact of denied cost recovery mechanisms.

The denial of a fuel and purchased power cost recovery mechanism means AmerenUE will likely bear the risk of fluctuations in fuel and purchased power costs directly, rather than being able to automatically pass these costs on to customers through rates. This could impact margins if costs rise unexpectedly.

The MoPSC order requires AmerenUE to conform its accounting for certain expenses, including a reduction in depreciation expense, with the treatment prescribed in the rate order. This means the company will need to make adjustments to its financial reporting to reflect these regulatory directives.