Business Context and Reporting Period
This Form 8-K is filed by Ameren Corporation and Union Electric Company (Ameren Missouri) on December 12, 2012. The filing reports a regulatory decision by the Missouri Public Service Commission (MoPSC) regarding Ameren Missouri's request to increase annual revenues for electric service.
Key Financial Metrics and Regulatory Order
The MoPSC issued an order approving an increase in Ameren Missouri's annual revenues of approximately $260 million. The breakdown of this increase is as follows:
- Total Revenue Increase: Approximately $260 million.
- Net Fuel Costs: Approximately $84 million (above costs in the July 2011 Order).
- Energy Efficiency Programs: Approximately $80 million (under the Missouri Energy Efficiency Investment Act).
- Other Non-Fuel Costs: Approximately $96 million, including $10 million for pension/post-employment benefits and $6 million for regulatory asset amortization.
- Rate Base: Approximately $6.8 billion.
- Return on Equity: 9.8%.
- Capital Structure: 52.3% common equity.
The filing does not provide specific figures for current revenue, profit, cash flow, margins, debt, or liquidity, as this report focuses on a specific regulatory event rather than a full financial statement.
Material Changes and Regulatory Adjustments
The MoPSC approved the continued use of the Fuel Adjustment Clause (FAC), which allows for the pass-through of 95% of changes in fuel and purchased power costs. A significant regulatory change involves the treatment of transmission charges:
- Transmission charges previously in the FAC remain there.
- Transmission revenues previously in base rates will move to the FAC prospectively.
- This shift reduced the rate increase attributed to net fuel costs by $33 million and increased the portion attributed to other non-fuel costs by $33 million compared to the July 2011 Order.
- The order clarified that costs for activated carbon, limestone, and urea are included in the FAC.
- Ameren Missouri was granted a storm restoration cost tracking mechanism and allowed to retain a refund from Entergy Arkansas, Inc.
- Denied Requests: The MoPSC did not approve plant-in-service accounting treatment for assets placed in service between rate cases or the recovery of 2011 severance costs.
Outlook, Risks, and Contingencies
Rate changes consistent with the order are expected to become effective on or before January 2, 2013, pending the filing and acceptance of conforming tariffs. Ameren Missouri is evaluating the order and has not decided whether to seek a rehearing or appeal. Similarly, the Missouri Office of Public Counsel and intervenor parties may seek rehearing or appeal.
Management highlighted several risks that could cause actual results to differ from expectations, including:
- Regulatory, judicial, or legislative actions, including the outcome of appeals related to this order.
- Changes in fuel costs and availability (coal, natural gas, uranium).
- Environmental regulations and renewable energy portfolio requirements.
- Weather conditions, system outages, and natural phenomena.
- Capital market disruptions and credit rating agency actions.
- Legal proceedings and insurance claims related to the Taum Sauk incident.
Investor Verification Checklist
- Confirm the effective date of the new rates (expected on or before January 2, 2013).
- Monitor for any filings regarding rehearing requests or appeals by Ameren Missouri or intervenor parties.
- Review the impact of the $33 million shift in regulatory treatment between fuel and non-fuel costs on future earnings.
- Assess the status of the denied requests regarding plant-in-service accounting and 2011 severance costs.
- Track the implementation of the new storm restoration cost tracking mechanism.