8-KOther Events

AMEREN CORP 8-K Report, Corporate Update (Jan 28, 2009)

Filed January 28, 2009For Securities:AEE

Summary

Ameren Corporation (AEE) and its subsidiary Union Electric Company (UE) filed a Current Report on Form 8-K on January 28, 2009, to report on a Missouri Public Service Commission (MoPSC) order concerning UE's electric service revenue increase. The MoPSC approved an annual revenue increase of approximately $162 million, lower than the $251 million requested by UE, based on a 10.76% return on equity. This is a significant development for investors as it directly impacts the company's revenue generation and profitability from its Missouri operations. In addition to the revenue increase, the MoPSC approved the implementation of mechanisms for recovering fuel, purchased power, and certain infrastructure-related costs. The fuel and purchased power cost recovery mechanism allows for rate adjustments up to three times a year to pass through 95% of cost changes to customers, subject to prudency review. A vegetation management and infrastructure inspection cost tracking mechanism was also approved, allowing for the tracking of expenditures above or below amounts in annual revenues, with limitations. The order also allows for the amortization of previously expensed storm and FERC-related costs, creating regulatory assets that will be recovered over specific periods. These mechanisms are designed to provide greater revenue stability and predictability, which is a positive factor for investors seeking consistent returns.

Key Highlights

  • 1MoPSC approved an annual electric service revenue increase of approximately $162 million for Union Electric Company (UE), falling short of the requested $251 million.
  • 2The approved return on equity (ROE) for UE is 10.76%, with a capital structure of 52% common equity and a rate base of $5.8 billion.
  • 3UE's electric rates will be adjusted to reflect the revenue increase, expected to be effective March 1, 2009, upon tariff filings and acceptance.
  • 4A fuel and purchased power cost recovery mechanism was approved, allowing for rate adjustments three times annually to recover 95% of changes in fuel and purchased power costs, subject to prudency review.
  • 5A vegetation management and infrastructure inspection cost tracking mechanism was also approved, allowing for the tracking of significant expenditures outside of normal revenue allowances.
  • 6The MoPSC will allow the amortization of $25 million in storm-related operations and maintenance expenses over five years, starting March 1, 2009.
  • 7Recovery of $12 million in costs related to a FERC order will be recognized as a regulatory asset and amortized over two years.

Frequently Asked Questions

The Missouri Public Service Commission (MoPSC) approved an annual revenue increase of approximately $162 million for Ameren's subsidiary, Union Electric Company (UE). While this is less than the $251 million UE requested, it still represents a net positive increase in revenue, impacting the company's top line and profitability from its Missouri electric service operations.

The approval of the fuel and purchased power cost recovery mechanism, and the vegetation management and infrastructure inspection cost tracking mechanism, are designed to improve revenue stability. These mechanisms allow UE to pass through a significant portion of fluctuating fuel and power costs, as well as significant infrastructure expenses, to customers, reducing the risk of unrecovered costs and providing greater predictability in earnings.

The MoPSC approved a 10.76% return on equity for UE. This ROE is a key metric for regulated utilities, determining the profitability of their investments. Investors will assess whether this ROE is sufficient to generate adequate returns for shareholders while meeting the company's operational and capital needs.

Yes, the MoPSC order is subject to potential rehearing or appeal by UE, the MoPSC Staff, the Missouri Office of Public Counsel, or other intervenor parties. UE is still evaluating the order and has not made a final decision on whether to pursue any such actions. Any rehearing or appeal could alter the outcome or delay the implementation of the approved rate changes and cost recovery mechanisms.