Ameren invested about $270 million in 1Q15 on FERC-regulated electric transmission projects, Ameren Chairman, President and CEO Warner Baxter said on May 7 during the company’s 1Q15 earnings conference call.
“Work on the $1.4 billion Illinois Rivers transmission project is advancing as planned,” he said. “Line construction is expected to begin on the first line segment this month, with completion planned for next year. We have begun foundation construction on the second line segment.”
Further, he said, Ameren Illinois’ modernization action plan is on track to meet its reliability, advanced metering and job creation goals for this year.
“In Illinois, policymakers continue to be forward-thinking in implementing constructive frameworks to support the modernization for the state’s aging energy infrastructure,” he said. “In particular, I am very pleased to note that legislation extending constructive electric formula ratemaking through 2019 was passed by a wide margin in the General Assembly [and] is now law. This enables Ameren Illinois’ modernization of the electric grid to continue with the regulatory and financial certainty needed to replace aging infrastructure, make investments in new technology, upgrade equipment, [as well as] hire and train new Illinois coworkers, all in an effort to deliver higher quality service to our customers.”
At the federal level, Ameren continues to collaborate with industry leaders, stakeholders and policymakers across the country to advocate for constructive and responsible improvements to the U.S. Environmental Protection Agency’s (EPA) proposed Clean Power Plan, he said.
“Simply put, we have serious concerns with the EPA’s current proposed rules,” Baxter said. “Aside from the legal challenges that the Clean Power Plan will face in the future, we believe that many of the underlying assumptions that are the foundation of these proposed rules are unreasonable. Most important, we, along with experts across the country, have stated that implementation of these rules in their current form will … raise reliability risks for the grid and electricity costs for our customers are projected to rise significantly under the current proposed rules.”
He continued: “While we have serious concerns with these rules, we are not just saying no. Instead, we have proposed several common sense solutions, including eliminating unrealistic interim targets and allowing the states to determine the best path to address the EPA’s … targets. Also, we are strongly advocating that the rules include protections to ensure that our nation’s grid is able to operate in a reliable fashion. Our plan will materially reduce greenhouse gas emissions, while saving customers billions of dollars and preserving the reliable service U.S. citizens have enjoyed for decades.”
Ameren also remains focused on achieving operational improvements and efficiencies across all of its businesses, and it remains committed to its goal of closing gaps between earned and allowed returns on equity (ROE), he said.
Baxter discussed some legislative and regulatory matters, noting, for instance, that the Missouri Public Service Commission (PSC) approved a $122 million increase in Ameren Missouri’s electric service rates in a decision issued last week.
The primary drivers of that rate case include significant investments made over the past couple of years to improve the quality of service that the company provides to customers in terms of safety, reliability and environmental stewardship, he said.
“While we are pleased that the [PSC’s] order allows for the recovery of these important infrastructure investments and increased net energy costs, other aspects of the decision were disappointing,” he said. “This includes the 9.53 percent allowed ROE, which is a decrease from the current allowed ROE of 9.8 percent, authorized back in December 2012. In addition, the [PSC] eliminated our ability to recover changes in transmission revenues and expenses for the fuel adjustment clause and discontinued tracking mechanisms, vegetation management and storm cost recovery.”
The company is moving forward with action plans to address the outcome of the rate case, he said, adding that Ameren will request a rehearing on several aspects of the order, including the allowed ROE and the elimination of recovery of changes in transmission revenues and expenses for the fuel adjustment clause.
“As we have done in the past, we will seek to align our overall operating and capital spending with this regulatory outcome while maintaining our goal of earning at or very close to our new allowed ROE,” he said.
Ameren will also continue to be relentless in its pursuit of modernizing the regulatory framework in Missouri in order to support investment to upgrade the state’s aging electric utility infrastructure and to reduce regulatory lag.
The Missouri General Assembly is not expected to advance legislation to modernize the state’s regulatory framework this year, he said.
“As the energy industry continues to change and advance, we remain committed to educate our stakeholders in our effort to help Missouri remain competitive and build the grid of the future,” Baxter said. “We are convinced such an enhancement is in the best long-term interest of our customers and the state. As a result, we will continue to work with the commission, legislators and others, and aggressively advocate for improvement for Missouri’s regulatory framework.”
Also speaking on the call, Martin Lyons, Ameren executive vice president and CFO, noted that last month, Ameren Illinois made its required annual electric delivery rate update filing with the Illinois Commerce Commission (ICC).
The filing seeks a $110 million increase in net annual electric rates and reflects 2014 actual costs, as well as expected 2015 infrastructure investment and prior period under recoveries of cost, he said.
The ICC will review the matter in the months ahead, with a decision expected in December, and new rates going into effect early next year, he said.
Among other things, Baxter addressed the complaint cases pending at FERC challenging the Midcontinent ISO’s (MISO) base allowed ROE of 12.38 percent for transmission services.
“We, and other MISO transmission owners, are strongly advocating for an ROE level that is fair and that will continue to incentivize the transmission investment needed to ensure a robust grid for our nation,” he said. “To that end, we and others filed testimony in April. I strongly believe that the FERC supports additional investment in our nation’s transmission infrastructure and will continue to provide a regulatory framework, including an ROE, that will incentivize that investment.”
Lyons noted that FERC’s schedule on the matter calls for hearings to begin in mid-August, with an initial order from an administrative law judge expected by the end of November, and a final order from FERC expected next year.
Discussing the company’s long-term growth outlook, Baxter noted, for instance, that Ameren is executing on numerous FERC-regulated electric transmission projects, including multi-value projects like the Illinois Rivers project, as well as local reliability projects.