Business Context and Reporting Period
This Form 8-K was filed on July 24, 2009, by Ameren Corporation and its subsidiary, Union Electric Company (AmerenUE). The filing reports a regulatory event wherein AmerenUE submitted a request to the Missouri Public Service Commission (MoPSC) for approval to increase annual electric service revenues.
Key Financial Metrics and Request Details
- Total Revenue Increase Requested: Approximately $402 million annually.
- Component Breakdown:
- $227 million attributed to anticipated increases in normalized net fuel costs.
- Remaining balance attributed to system reliability investments, essential generation/delivery costs, and higher financing costs.
- Interim Rate Relief: A request for $37.3 million to take effect on October 1, 2009, subject to refund with interest pending final approval.
- Rate Base and Assumptions:
- Aggregate rate base: $6.0 billion.
- Return on equity: 11.5 percent.
- Capital structure: 47.4 percent equity.
- Test year: Ended March 31, 2009.
Material Changes and Regulatory Mechanisms
The filing outlines several proposed changes to rate structures and recovery mechanisms:
- Environmental Cost Recovery: A new mechanism to adjust rates for environmental compliance costs, capped at 2.5 percent of gross jurisdictional electric revenues annually, subject to prudency reviews.
- Fuel and Purchased Power Cost Recovery (FAC): Continued use of the existing mechanism to recover 95 percent of changes in fuel and purchased power costs outside of general rate proceedings.
- Noranda Aluminum Tariff Revision: A proposed tariff change for Noranda Aluminum, Inc. (the largest customer) to recover authorized revenues regardless of the customer's operational levels, addressing revenue losses from past outages. Credits would be issued if actual energy sales decrease.
Outlook, Risks, and Management Commentary
Management notes that the MoPSC proceeding may last up to 11 months, with a decision required by the end of June 2010. The filing explicitly states that AmerenUE cannot predict:
- The level of any rate change the MoPSC may approve.
- When interim or final rate changes may go into effect.
- Whether the environmental cost recovery mechanism or the FAC will be approved.
- Whether any approved increase will be sufficient to recover costs and earn a reasonable return.
The interim rate increase of $37.3 million is subject to refund with interest based on the final outcome of the proceeding.
Investor Verification Checklist
- Verify the final MoPSC decision on the $402 million revenue increase request by June 2010.
- Monitor approval status of the new environmental cost recovery mechanism and the continuation of the FAC.
- Track the implementation date and potential refund requirements for the $37.3 million interim rate relief.
- Assess the impact of the revised tariff for Noranda Aluminum on revenue stability.
- Review the final approved return on equity and rate base adjustments compared to the requested 11.5% ROE and $6.0 billion rate base.