On July 24, 2009, Union Electric Company, doing business as AmerenUE (“UE”), will be filing a request with the Missouri Public Service Commission (“MoPSC”) seeking approval to increase its annual revenues for electric service by approximately $402 million. Included in this increase is approximately $227
million of anticipated increases in normalized net fuel costs above the net fuel costs included in base rates previously authorized by the MoPSC in its January 2009 electric rate order which, absent initiation of this general rate proceeding, would have been reflected in rate adjustments implemented under UE’s existing fuel and purchased power cost recovery mechanism (“FAC”). The balance of the increase request is based primarily on investments made to continue system-wide reliability improvements
for customers, increases in costs essential to generating and delivering electricity and higher financing costs. The electric rate increase request is based on an 11.5 percent return on equity, a capital structure composed of 47.4 percent equity, an aggregate rate base for UE of $6.0 billion, and a test year ended March 31, 2009, with certain pro-forma adjustments through the anticipated true-up date of February 28, 2010.
UE’s filing includes a request for interim rate relief which, if approved, would place into effect approximately $37.3 million of the requested increase on October 1, 2009, subject to refund with interest based on the final outcome of the rate proceeding. The amount of this interim increase request reflects the increased revenue requirement
associated with rate base additions made by UE between October 2008 and May 2009.
As a part of its filing, UE also requested the MoPSC to approve the implementation of an environmental cost recovery mechanism and the continued use of the FAC that the MoPSC previously authorized in its January 2009 electric rate order. The environmental cost recovery mechanism, if approved, would allow UE to periodically adjust
electric rates outside of general rate proceedings to reflect changes in its prudently incurred costs to comply with federal, state or local environmental laws, regulations or rules above or below the amount set in base rates. Rate adjustments pursuant to this cost recovery mechanism would not be permitted to exceed an annual amount equal to 2.5 percent of UE’s gross jurisdictional electric revenues and would be subject to prudency reviews of the MoPSC. The FAC allows UE to periodically
adjust electric rates outside of general rate proceedings to reflect 95 percent of changes in prudently incurred fuel (coal, coal transportation, natural gas for generation and nuclear) and purchased power costs, net of off-system revenues, including Midwest Independent Transmission System Operator, Inc. costs and revenues, above or below the amount set in base rates.
In addition, UE’s filing with the MoPSC seeks approval to revise the tariff under which it serves Noranda Aluminum, Inc. (“Noranda”), UE’s largest electric customer, to prospectively address the significant lost revenues UE can incur due to Noranda’s operational issues at its smelter plant in southeastern Missouri,
like the revenue losses resulting from the January 2009 storm-related power outage. The tariff change that UE is proposing would permit it to collect from Noranda the revenue authorized by the MoPSC in this rate case regardless of the level at which the Noranda plant is operating at prospectively. If the plant is operating below the levels assumed in rates, Noranda would receive a credit reflecting any revenues received by UE from energy sales resulting from the decrease in actual energy sales to Noranda. The
result would be that UE is able to recover its costs without impacting other customers regardless of Noranda’s actual energy use.
The MoPSC proceeding relating to the proposed electric service rate changes will take place over a period of up to 11 months and a decision by the MoPSC in such proceeding is required by the end of June 2010. UE cannot predict the level of any electric service rate change the MoPSC may approve, when any rate change (interim or
final) may go into effect, whether the environmental cost recovery mechanism and continuation of the FAC will be approved, or whether any rate increase that may eventually be approved will be sufficient for UE to recover its costs and earn a reasonable return on its investments when the increase goes into effect. Attached as Exhibit 99.1 and incorporated herein by reference is the UE press release regarding its filing with the MoPSC.
ITEM 9.01 Financial Statements and Exhibits.