8-KOther Events

AMEREN CORP 8-K Report, Corporate Update (Jul 15, 2011)

Filed July 15, 2011For Securities:AEE

Summary

This 8-K filing from Ameren Corporation (AEE) on July 15, 2011, primarily addresses a significant regulatory decision by the Missouri Public Service Commission (MoPSC) regarding Ameren Missouri's (a subsidiary) rate increase request and a related impairment charge. The MoPSC approved a lower-than-requested annual revenue increase for electric service, impacting the company's expected returns and operational cost recovery. Crucially, the MoPSC disallowed the recovery of certain costs associated with the rebuilding of the Taum Sauk plant that exceeded insurance proceeds. This regulatory disallowance will result in Ameren Corporation and Ameren Missouri recording a pre-tax charge of $90 million in the third quarter of 2011 for these unrecoverable enhancement costs. While the company received an overall revenue increase, the specific disallowance on Taum Sauk rebuilding costs represents a notable setback for cost recovery and may signal a more conservative regulatory approach to certain capital expenditures.

Key Highlights

  • 1Missouri Public Service Commission (MoPSC) approved an annual revenue increase of $172 million for Ameren Missouri, falling short of the requested $210 million.
  • 2The MoPSC disallowed the recovery of Taum Sauk plant rebuilding enhancement costs exceeding insurance proceeds.
  • 3Ameren Corporation and Ameren Missouri will record a $90 million pre-tax charge in Q3 2011 due to the Taum Sauk cost disallowance.
  • 4The approved revenue increase includes $52 million for anticipated increases in normalized net fuel costs.
  • 5Ameren Missouri's rate increase was based on a 10.2% return on equity, lower than the 10.7% requested.
  • 6The MoPSC approved the continued use of Ameren Missouri's existing fuel adjustment clause (FAC) for 95% of fuel cost changes, subject to prudency review.
  • 7The company is evaluating the MoPSC order and has not yet decided whether to seek a rehearing or appeal any aspect of the decision.

Frequently Asked Questions

The most significant financial impact is a $90 million pre-tax charge that Ameren Corporation and Ameren Missouri will record in the third quarter of 2011. This charge stems from the MoPSC disallowing the recovery of certain costs related to the Taum Sauk plant rebuilding that were not covered by insurance.

No, Ameren Missouri requested an increase of approximately $210 million in annual revenues for electric service but was approved for an increase of $172 million by the MoPSC. The approved increase includes amounts for fuel costs but is lower than the company's total request.

This disallowance means that Ameren Missouri will not be able to recover certain capital expenditures related to the Taum Sauk plant from its customers. This directly impacts the company's profitability and could indicate a more cautious regulatory environment regarding the recovery of costs for certain projects.

Ameren Missouri is currently evaluating the MoPSC's order and has not yet decided whether to seek a rehearing or appeal any part of it. The company, along with intervenor parties, has the option to pursue further regulatory or legal action, but the outcome and likelihood of such actions are currently uncertain.