AmerenUE seeks to recover costs for reliability improvements

St. Louis, September 7, 2010 — AmerenUE, the Missouri utility company of Ameren Corp., will file an electric rate increase request with the Missouri Public Service Commission.

UE is committed to providing customers with safe, reliable, affordable and environmentally responsible energy. To achieve these objectives, UE is investing more than $1 billion in its energy infrastructure and is seeking to recover those costs in rates. Customers are already benefiting from these reliability improvements.

UE is asking for a $263 million rate increase. If approved, that would be an increase of about 11 percent for customers across all rate classes.

Average residential electric bills would increase by about 31 cents a day (based on about 1,100 kWh of usage per month).

UE is seeking to recover investments made primarily to improve the reliability of its aging infrastructure and comply with environmental regulations. About $200 million (or about 75 percent) of the increase request is due to energy infrastructure investments, environmental controls, and other reliability costs. More than $1 billion of new energy infrastructure investments will be serving customers when new rates from this case go into effect.

In particular, UE is seeking to recover the cost of installing two scrubbers at the company’s Sioux Power Plant at a cost of about $600 million. These scrubbers will eliminate nearly 100 percent of sulfur dioxide emissions from the plant, providing cleaner air for the Midwest. (About $110 million of the $263 million request relates to the Sioux scrubber project.)

Higher net fuel costs for power plants account for about 25 percent, or around $70 million, of the request.

UE understands that this electric rate increase, coupled with the challenging economy, will create a hardship for some of its customers. UE is taking several steps to help its customers with their future energy bills by reducing its costs and providing energy efficiency and energy assistance programs to its customers.

The MPSC and many other parties will review UE’s request. The process typically takes 11 months.

Today, UE’s residential rates are about 35 percent below the national average and the lowest of any investor-owned utility in Missouri.

A portion of this rate case is to recover infrastructure investments UE is making to serve its customers. Infrastructure investments are a key driver in this case and future cases because of the need to meet stricter environmental regulations and make improvements to an aging infrastructure to meet customers’ number one priority — reliability.

Building two scrubbers at the Sioux Power Plant is a nearly $600 million investment to reduce air emissions from the plant. UE is taking a proactive approach to protecting Missouri and the Midwest by implementing these environmental measures, which will keep 45,000 tons of sulfur dioxide emissions from going into the air next year.

Installation of the two scrubbers began in 2006. The scrubbers are expected to begin operations by the end of 2010. So far, UE has not recovered any of these investments in customers’ rates. Under the regulatory framework in Missouri, UE must first spend money and have the investments serving customers before the company can recover those costs in rates.

This delay, or “regulatory lag,” can be as long as 18 months to several years after the company makes an investment. In the case of the Sioux scrubber project, it will take more than four years. Regulatory lag reduces the cash the company has available from its operations for future reliability projects or to meet future regulatory requirements. Therefore, it has been necessary for UE to file for frequent rate increases to recover its costs.

UE also made infrastructure improvements at its Taum Sauk Power Plant. Customers are not paying for the rebuilding of the upper reservoir, and UE is not seeking to recover costs already paid by insurance carriers. However, the company is able to seek recovery of enhancement costs or costs that would have been necessary absent the breach.

These enhancements were made to improve the safety, security and reliability of the plant, while providing a cleaner source of power for at least another 80 years. In addition, some of these enhancements would have been needed to the old reservoir to meet current federal dam safety standards.

Enhancements include: more robust construction to comply with more stringent earthquake standards; a new instrumentation and controls system; an overflow release structure; and a drainage gallery — where operators and engineers are able to monitor the “health” of the new dam. UE is seeking to recover $15 million in Taum Sauk investments in this rate request, or about 6 percent of the total request.

In addition, net fuel costs are rising, primarily because UE is paying higher coal prices for fuel to generate electricity and higher costs to transport the coal to its facilities.

While UE must recover its costs and make a reasonable return on its investments, the company recognizes this creates a hardship for some customers.

UE offers a variety of energy assistance programs to help customers, including weatherization assistance, Budget Billing, the Lighting and Appliance Program, Refrigerator Recycling, HVAC New and Tune Up Program and, soon, Keeping Current (October 2010).



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