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| | Ameren Missouri | | | Ameren Illinois Electric Distribution | | Ameren Transmission | | | Other/Intersegment Eliminations | |
Natural Gas Margins
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| | | Increase by Segment | |
| | | Overall Ameren Increase of $10 Million (QTD YoY) | | Overall Ameren Increase of $33 Million (YTD YoY) | |
| Total by Segment | | | |
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| | Ameren Missouri | | | Ameren Illinois Natural Gas | |
The following tables present the favorable (unfavorable) variations by Ameren segment for electric and natural gas margins for the three and six months ended June 30, 2022, compared with the year-ago periods:
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| Electric and Natural Gas Margins | | | | | |
| Three Months | Ameren Missouri | | Ameren Illinois
Electric Distribution | | Ameren Illinois
Natural Gas | | Ameren Transmission(a) | | Other /Intersegment Eliminations | | Ameren | | | | | |
| Electric revenue change: | | | | | | | | | | | | | | | | |
Effect of weather (estimate)(b) | $ | 21 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 21 | | | | | | |
Base rates (estimate)(c) | 59 | | | 28 | | | — | | | 14 | | | — | | | 101 | | | | | | |
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| Off-system sales, capacity, and FAC revenues, net | 2 | | | — | | | — | | | — | | | — | | | 2 | | | | | | |
| Ameren Illinois energy-efficiency program investment revenues | — | | | 3 | | | — | | | — | | | — | | | 3 | | | | | | |
| Other | 2 | | | 2 | | | — | | | — | | | — | | | 4 | | | | | | |
Cost recovery mechanisms – offset in fuel and purchased power(d) | 4 | | | 83 | | | — | | | — | | | (2) | | | 85 | | | | | | |
Other cost recovery mechanisms(e) | 13 | | | — | | | — | | | — | | | — | | | 13 | | | | | | |
| Total electric revenue change | $ | 101 | | | $ | 116 | | | $ | — | | | $ | 14 | | | $ | (2) | | | $ | 229 | | | | | | |
| Fuel and purchased power change: | | | | | | | | | | | | | | | | |
| Energy costs (excluding the estimated effect of weather) | $ | (8) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (8) | | | | | | |
Effect of weather (estimate)(b) | (4) | | | — | | | — | | | — | | | — | | | (4) | | | | | | |
| Effect of higher net energy costs included in base rates | (3) | | | — | | | — | | | — | | | — | | | (3) | | | | | | |
| Transmission services charges | (1) | | | — | | | — | | | — | | | — | | | (1) | | | | | | |
| Other | (1) | | | — | | | — | | | — | | | 3 | | | 2 | | | | | | |
Cost recovery mechanisms – offset in electric revenue(d) | (4) | | | (83) | | | — | | | — | | | 2 | | | (85) | | | | | | |
| Total fuel and purchased power change | $ | (21) | | | $ | (83) | | | $ | — | | | $ | — | | | $ | 5 | | | $ | (99) | | | | | | |
| Net change in electric margins | $ | 80 | | | $ | 33 | | | $ | — | | | $ | 14 | | | $ | 3 | | | $ | 130 | | | | | | |
| Natural gas revenue change: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Base rates (estimate) | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2 | | | | | | |
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| QIP rider | — | | | — | | | 6 | | | — | | | — | | | 6 | | | | | | |
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| Other | — | | | — | | | 2 | | | — | | | — | | | 2 | | | | | | |
Cost recovery mechanisms – offset in natural gas purchased for resale(d) | 7 | | | — | | | 8 | | | — | | | — | | | 15 | | | | | | |
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| Total natural gas revenue change | $ | 9 | | | $ | — | | | $ | 16 | | | $ | — | | | $ | — | | | $ | 25 | | | | | | |
| Natural gas purchased for resale change: | | | | | | | | | | | | | | | | |
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Cost recovery mechanisms – offset in natural gas revenue(d) | $ | (7) | | | $ | — | | | $ | (8) | | | $ | — | | | $ | — | | | $ | (15) | | | | | | |
| Total natural gas purchased for resale change | $ | (7) | | | $ | — | | | $ | (8) | | | $ | — | | | $ | — | | | $ | (15) | | | | | | |
| Net change in natural gas margins | $ | 2 | | | $ | — | | | $ | 8 | | | $ | — | | | $ | — | | | $ | 10 | | | | | | |
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| Six Months | Ameren Missouri | | Ameren Illinois
Electric Distribution | | Ameren Illinois
Natural Gas | | Ameren Transmission(a) | | Other /Intersegment Eliminations | | Ameren | | | | | |
| Electric revenue change: | | | | | | | | | | | | | | | | |
Effect of weather (estimate)(b) | $ | 28 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 28 | | | | | | |
Base rates (estimate)(c) | 77 | | | 47 | | | — | | | 30 | | | — | | | 154 | | | | | | |
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| Sales volumes and changes in customer usage patterns (excluding the estimated effects of weather and MEEIA) | 4 | | | — | | | — | | | — | | | — | | | 4 | | | | | | |
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| Off-system sales, capacity, and FAC revenues, net | 54 | | | — | | | — | | | — | | | — | | | 54 | | | | | | |
| Ameren Illinois energy-efficiency program investment revenues | — | | | 6 | | | — | | | — | | | — | | | 6 | | | | | | |
| Other | 1 | | | 2 | | | — | | | — | | | — | | | 3 | | | | | | |
Cost recovery mechanisms – offset in fuel and purchased power(d) | 28 | | | 112 | | | — | | | — | | | (7) | | | 133 | | | | | | |
Other cost recovery mechanisms(e) | 6 | | | 3 | | | — | | | — | | | — | | | 9 | | | | | | |
| Total electric revenue change | $ | 198 | | | $ | 170 | | | $ | — | | | $ | 30 | | | $ | (7) | | | $ | 391 | | | | | | |
| Fuel and purchased power change: | | | | | | | | | | | | | | | | |
| Energy costs (excluding the estimated effect of weather) | $ | (55) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (55) | | | | | | |
Effect of weather (estimate)(b) | (5) | | | — | | | — | | | — | | | — | | | (5) | | | | | | |
| Effect of higher net energy costs included in base rates | (3) | | | — | | | — | | | — | | | — | | | (3) | | | | | | |
| Transmission services charges | (1) | | | — | | | — | | | — | | | — | | | (1) | | | | | | |
| Other | (2) | | | — | | | — | | | — | | | 3 | | | 1 | | | | | | |
Cost recovery mechanisms – offset in electric revenue(d) | (28) | | | (112) | | | — | | | — | | | 7 | | | (133) | | | | | | |
| Total fuel and purchased power change | $ | (94) | | | $ | (112) | | | $ | — | | | $ | — | | | $ | 10 | | | $ | (196) | | | | | | |
| Net change in electric margins | $ | 104 | | | $ | 58 | | | $ | — | | | $ | 30 | | | $ | 3 | | | $ | 195 | | | | | | |
| Natural gas revenue change: | | | | | | | | | | | | | | | | |
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| Base rates (estimate) | $ | 3 | | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | 6 | | | | | | |
| Change in rate design | — | | | — | | | 1 | | | — | | | — | | | 1 | | | | | | |
| QIP rider | — | | | — | | | 15 | | | — | | | — | | | 15 | | | | | | |
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| Other | — | | | — | | | 4 | | | — | | | — | | | 4 | | | | | | |
Cost recovery mechanisms – offset in natural gas purchased for resale(d) | 22 | | | — | | | 121 | | | — | | | — | | | 143 | | | | | | |
Other cost recovery mechanisms(e) | 1 | | | — | | | 6 | | | — | | | — | | | 7 | | | | | | |
| Total natural gas revenue change | $ | 26 | | | $ | — | | | $ | 150 | | | $ | — | | | $ | — | | | $ | 176 | | | | | | |
| Natural gas purchased for resale change: | | | | | | | | | | | | | | | | |
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Cost recovery mechanisms – offset in natural gas revenue(d) | $ | (22) | | | $ | — | | | $ | (121) | | | $ | — | | | $ | — | | | $ | (143) | | | | | | |
| Total natural gas purchased for resale change | $ | (22) | | | $ | — | | | $ | (121) | | | $ | — | | | $ | — | | | $ | (143) | | | | | | |
| Net change in natural gas margins | $ | 4 | | | $ | — | | | $ | 29 | | | $ | — | | | $ | — | | | $ | 33 | | | | | | |
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(a)Includes an increase in transmission margins of $17 million and $34 million at Ameren Illinois for the three and six months ended June 30, 2022, compared with the year-ago periods.
(b)Represents the estimated variation resulting primarily from changes in cooling and heating degree-days on electric and natural gas demand compared with the year-ago periods; this variation is based on temperature readings from the National Oceanic and Atmospheric Administration weather stations at local airports in our service territories.
(c)For Ameren Illinois Electric Distribution and Ameren Transmission, base rates include increases or decreases to operating revenues related to the revenue requirement reconciliation adjustment under formula rates. For Ameren Missouri, base rates exclude an increase for the recovery of lost electric margins resulting from the MEEIA customer energy-efficiency programs and an increase in base rates for RESRAM. These changes in Ameren Missouri base rates are included in the “Sales volumes and changes in customer usage patterns (excluding the estimated effects of weather and MEEIA)” and “Cost recovery mechanisms - offset in fuel and purchased power” line items, respectively.
(d)Electric and natural gas revenue changes are offset by corresponding changes in “Fuel,” “Purchased power,” and “Natural gas purchased for resale” on the statement of income, resulting in no change to electric and natural gas margins. Activity in Other/Intersegment Eliminations represents the elimination of related-party transactions between Ameren Missouri, Ameren Illinois, and ATXI, as well as Ameren Transmission revenue from transmission services provided to Ameren Illinois Electric Distribution. See Note 8 – Related-party Transactions and Note 14 – Segment Information under Part I, Item 1, of this report for additional information on intersegment eliminations.
(e)Offsetting expense increases or decreases are reflected in “Other operations and maintenance,” “Depreciation and amortization,” or in “Taxes other than income taxes,” within the “Operating Expenses” section and "Income Taxes" in the statement of income. These items have no overall impact on earnings.
Ameren
Ameren’s electric margins increased $130 million, or 13%, and $195 million, or 10%, for the three and six months ended June 30, 2022, respectively, compared with the year-ago periods, due to increased margins at Ameren Missouri, Ameren Illinois Electric Distribution, and Ameren Transmission, as discussed below. Ameren’s natural gas margins increased $10 million, or 8%, and $33 million, or 9%, for the three and six months ended June 30, 2022, respectively, compared with the year-ago periods, due to increased margins at Ameren Illinois Natural Gas and Ameren Missouri, as discussed below.
Ameren Transmission
Ameren Transmission’s margins increased $14 million, or 10%, and $30 million, or 11%, for the three and six months ended June 30, 2022, respectively, compared with the year-ago periods. Base rate revenues were favorably affected by increased capital investment (+$5 million and +$10 million, respectively), as evidenced by a 10% increase in rate base used to calculate the revenue requirement, as well as higher recoverable expenses (+$9 million and +$13 million, respectively), and the absence in 2022 of the FERC’s March 2021 order (+$7 million) for the six months ended June 30, 2022. See Transmission Formula Rate Revisions in Note 2 – Rate and Regulatory Matters under Part I, Item 1, of this report for additional information regarding the March 2021 FERC order.
Ameren Missouri
Ameren Missouri’s electric margins increased $80 million, or 14%, and $104 million, or 10%, for the three and six months ended June 30, 2022, respectively, compared with the year-ago periods. Revenues associated with “Cost recovery mechanisms – offset in fuel and purchased power” increased $4 million and $28 million, respectively, for the three and six months ended June 30, 2022. The increased revenues are fully offset by an increase in fuel and purchased power costs, which increased primarily due to 2022 amortization of costs previously deferred under the FAC that were reflected in customer rates. The changes to “Cost recovery mechanisms - offset in fuel and purchased power” are fully offset by “Cost recovery mechanisms - offset in electric revenue,” in the table above, and result in no impact to margins. Ameren Missouri’s 5% exposure to net energy cost variances under the FAC is reflected within “Off-system sales, capacity, and FAC revenues, net” and “Energy costs (excluding the estimated effect of weather)”.
The following items had a favorable effect on Ameren Missouri’s electric margins for the three and six months ended June 30, 2022, compared with the year-ago periods (except where a specific period is referenced):
•The December 2021 MoPSC electric rate order effective February 28, 2022, that resulted in higher electric base rates, excluding the change in base rates for the MEEIA customer energy efficiency programs and the RESRAM, partially offset by higher net energy costs included in base rates, increased margins $56 million and $74 million, respectively. The change in electric base rates is the sum of the change in “Base rates (estimate)” (+$59 million and +$77 million, respectively) and the “Effect of higher net energy costs included in base rates” (-$3 million and -$3 million, respectively) in the table above.
•Summer temperatures were warmer as cooling degree days increased 12% for the three months ended June 30, 2022, and winter temperatures were colder as heating degree days increased 1% for the three months ended March 31, 2022. The aggregate effect of weather increased margins an estimated $17 million and $23 million, respectively. The change in margins due to weather is the sum of the “Effect of weather (estimate)” on electric revenues (+$21 million and +$28 million, respectively) and the “Effect of weather (estimate)” on fuel and purchased power (-$4 million and -$5 million, respectively) in the table above.
•Other cost recovery mechanisms increased margins $13 million and $6 million, respectively, due to increased RESRAM revenues (+$8 million and +$12 million, respectively) primarily resulting from higher off-system sales recoverable under the RESRAM, increased excise taxes (+$4 million and +$6 million, respectively), and a change in recoverable MEEIA program costs (+$1 million and -$12 million, respectively).
•Excluding the estimated effects of weather and the MEEIA customer energy-efficiency programs, electric revenues increased an estimated $4 million for the six months ended June 30, 2022. The increase was primarily due to an increase in retail sales volumes, partially offset by a decrease in the average retail price per kilowatthour due to changes in customer usage patterns.
Ameren Missouri’s electric margins decreased $6 million and $1 million due to Ameren Missouri’s 5% exposure to net energy cost variances under the FAC for the three and six months ended June 30, 2022, respectively. Net energy costs were higher than those reflected in base rates, primarily because of higher purchased power costs due to higher energy prices and the absence of electric revenues from insurance recoveries related to the Callaway Energy Center maintenance outage in 2021 in both periods, partially offset in the six months ended June 30, 2022, by an increase in off-system sales revenue due to higher energy prices and increased generation from the Callaway Energy Center. In the three and six months ended June 30, 2022, higher capacity revenues were almost entirely offset by higher capacity costs included in “Purchased power” on Ameren’s and Ameren Missouri’s consolidated income statements, with the increase in both revenues and expenses caused by the capacity prices set in the April 2022 MISO capacity auction, which became effective in June 2022. See Outlook for additional information related to the April 2022 MISO capacity auction. The change in net energy costs is the sum of “Off-system sales, capacity and FAC revenues, net” (+$2 million and +$54 million, respectively) and “Energy costs (excluding the estimated effect of weather)” (-$8 million and -$55 million, respectively) in the table above.
Ameren Missouri’s natural gas margins increased $2 million, or 13%, and $4 million, or 9%, for the three and six months ended June 30, 2022, respectively, compared with the year-ago periods, primarily due to increased base rates as a result of the December 2021 MoPSC gas rate order effective February 28, 2022. Purchased gas costs increased $7 million and $22 million for the three and six months ended June 30, 2022, respectively, due to 2022 amortization of natural gas costs previously deferred under the PGA, driven by a significant increase in cost and customer demand as result of the extremely cold weather in mid-February 2021, partially offset by lower natural gas prices in 2022. The increased purchased natural gas costs are fully offset by an increase in natural gas revenues under the PGA rider, resulting in no impact to margin. The increase in purchased natural gas cost is reflected in “Cost recovery mechanisms – offset in natural gas revenue” and the associated recoverability from customers is reflected in “Cost recovery mechanisms – offset in natural gas purchased for resale” in the table above.
Ameren Illinois
Ameren Illinois’ electric margins increased $50 million, or 13%, and $92 million, or 12%, for the three and six months ended June 30, 2022, respectively, compared with the year-ago periods, driven by increased margins at Ameren Illinois Electric Distribution and Ameren Illinois Transmission. Ameren Illinois Natural Gas’ margins increased $8 million, or 7%, and $29 million, or 9%, for the three and six months ended June 30, 2022, respectively, compared with the year-ago periods.
Ameren Illinois Electric Distribution
Ameren Illinois Electric Distribution’s margins increased $33 million, or 11%, and $58 million, or 10%, for the three and six months ended June 30, 2022, respectively, compared with the year-ago periods. Purchased power costs increased $83 million and $112 million for the three and six months ended June 30, 2022, respectively, primarily resulting from higher electric prices. The increased purchased power costs are fully offset by an increase in electric revenues under the cost recovery mechanisms for purchased power, resulting in no impact to margin. The increase in purchased power cost is reflected in “Cost recovery mechanisms – offset in electric revenue” and the associated recoverability from customers is reflected in “Cost recovery mechanisms – offset in fuel and purchased power” in the table above.
The following items had a favorable effect on Ameren Illinois Electric Distribution’s margins for the three and six months ended June 30, 2022, compared with the year-ago periods:
•Base rates increased due to a higher recognized ROE (+$6 million and +$8 million, respectively), as evidenced by an increase of 79 basis points in the estimated annual average of the monthly yields of the 30-year United States Treasury bonds, increased capital investment (+$2 million and +$4 million, respectively), as evidenced by a 6% increase in rate base used to calculate the revenue requirement, and higher recoverable non-purchased power expenses (+$20 million and +$39 million, respectively), partially offset by the absence in 2022 of revenue requirement reconciliation adjustment true-ups (-$4 million) recorded in the first quarter of 2021. The sum of these changes collectively increased margins $28 million and $47 million, respectively.
•Revenues increased $3 million and $6 million, respectively, due to the recovery of and return on increased energy-efficiency program investments under performance-based formula ratemaking.
Ameren Illinois Natural Gas
Ameren Illinois Natural Gas’ margins increased $8 million, or 7%, and $29 million, or 9%, for the three and six months ended June 30, 2022, respectively, compared with the year-ago periods. Purchased gas costs increased $8 million and $121 million for the three and six months ended June 30, 2022, respectively, due to 2022 amortization of natural gas costs previously deferred under the PGA, driven by a significant increase in cost and customer demand as a result of the extremely cold weather in mid-February 2021, partially offset by lower natural gas costs in 2022. The increased purchased natural gas costs are fully offset by an increase in natural gas revenues under the PGA rider, resulting in no impact to margin. The increase in purchased natural gas cost is reflected in “Cost recovery mechanisms – offset in natural gas revenue” and the associated recoverability from customers is reflected in “Cost recovery mechanisms – offset in natural gas purchased for resale” in the table above.
The following items had a favorable effect on Ameren Illinois Natural Gas’ margins for the three and six months ended June 30, 2022 (except where a specific period is referenced):
•Revenues increased $6 million and $15 million, respectively, due to additional investment in natural gas infrastructure under the QIP.
•Other cost recovery mechanisms increased revenues $6 million, primarily due to increased revenues for excise taxes, for the six months ended June 30, 2022.
•Revenues increased $3 million in January 2022 due to higher base rates as a result of the January 2021 natural gas rate order.
Ameren Illinois Transmission
Ameren Illinois Transmission’s margins increased $17 million, or 19%, and $34 million, or 20%, for the three and six months ended June 30, 2022, respectively, compared with the year-ago periods. Base rate revenues were favorably affected by increased capital investment (+$6 million and +$11 million, respectively), as evidenced by a 16% increase in rate base used to calculate the revenue requirement, the absence in 2022 of the FERC’s March 2021 order (+$7 million) for the six months ended June 30, 2022, and higher recoverable expenses (+$11 million and +$16 million, respectively). See Transmission Formula Rate Revisions in Note 2 – Rate and Regulatory Matters under Part I, Item 1, of this report for additional information regarding the March 2021 FERC order.
Other Operations and Maintenance Expenses
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| | | Increase by Segment | |
| | | Overall Ameren Increase of $79 Million (QTD YoY) | | Overall Ameren Increase of $120 Million (YTD YoY) | |
| Total by Segment(a) | | | |
(a)Includes $16 million and $14 million at Ameren Transmission in the three months ended June 30, 2022 and 2021, respectively. Also includes other/intersegment eliminations of $4 million, $(2) million, $7 million, and $(4) million in the three months ended June 30, 2022 and 2021, and in the six months ended June 30, 2022 and 2021, respectively.
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| | Ameren Missouri | | | Ameren Illinois Natural Gas | | | Other/Intersegment Eliminations |
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| | Ameren Illinois Electric Distribution | | Ameren Transmission | | | | |
Ameren
Other operations and maintenance expenses increased $79 million and $120 million in the three and six months ended June 30, 2022, compared with the year-ago periods. In addition to changes by segments discussed below, other operations and maintenance expenses increased $6 million and $11 million in the three and six months ended June 30, 2022 for activity not reported as part of a segment, as reflected in “Other/Intersegment Eliminations” above, primarily because of an increase in the elimination of the non-service cost component of net periodic benefit income at Ameren Services, which is allocated to the segments and primarily included in the segments’ other operations and maintenance expenses.
Ameren Transmission
Other operations and maintenance expenses were comparable between periods.
Ameren Missouri
Other operations and maintenance expenses increased $42 million and $49 million in the three and six months ended June 30, 2022, compared with the year-ago periods. The following items increased other operations and maintenance expenses in the three and six months ended June 30, 2022, compared with the year-ago periods (except where a specific period is referenced):
•The cash surrender value of company-owned life insurance decreased $12 million and $18 million, respectively, primarily because of unfavorable market returns in 2022, compared with favorable market returns in 2021.
•The absence in 2022 of $6 million and $12 million, respectively, in service fees received under refined coal production agreements, as the result of the expiration of refined coal tax credits at the end of 2021, which impact was reflected in electric services rates pursuant to the December 2021 MoPSC rate order.
•Labor and benefit costs increased $7 million and $11 million, respectively, primarily because of increased pension service costs due to a higher base level of expenses reflected in electric service rates pursuant to the December 2021 MoPSC rate order.
•Transmission and distribution expenditures increased $6 million in both periods, primarily due to disciplined project management and increased storm costs.
•The absence of a $5 million deferral to a regulatory asset of certain costs previously incurred related to the COVID-19 pandemic, pursuant to the March 2021 MoPSC orders, which decreased other operations and maintenance expenses in the six months ended June 30, 2021.
•Energy center operating costs increased $3 million in the six months ended June 30, 2022, primarily because of costs related to new wind generation facilities, which are recovered under the RESRAM.
•Customer billing costs increased $2 million in both periods, primarily because credit card fees charged to customers were discontinued in March 2022 pursuant to the December 2021 MoPSC rate order, which incorporated an amount of fees in electric service rates.
The above increases in the six months ended June 30, 2022, compared with the year-ago period, were partially offset by a $12 million decrease in MEEIA customer energy-efficiency program spend as approved by the MoPSC.
Ameren Illinois
Other operations and maintenance expenses increased $32 million and $61 million in the three and six months ended June 30, 2022, compared with the year-ago periods, as discussed below. Other operations and maintenance expenses increased $3 million at Ameren Illinois Transmission in the three and six months ended June 30, 2022, compared with the year-ago periods, primarily because of decreases in the cash surrender value of company-owned life insurance related to unfavorable market returns in 2022, compared with favorable market returns in 2021.
Ameren Illinois Electric Distribution
Other operations and maintenance expenses increased $19 million and $41 million in the three and six months ended June 30, 2022, compared with the year-ago periods. The following items increased other operations and maintenance expenses in the three and six months ended June 30, 2022, compared with the year-ago periods (except where a specific period is referenced):
•Distribution system expenditures increased $5 million and $15 million, respectively, primarily because of projects deferred in 2021 as a result of storm restoration efforts for which the associated costs were deferred as a regulatory asset in 2021.
•The cash surrender value of company-owned life insurance decreased $6 million and $9 million, respectively, primarily because of unfavorable market returns in 2022, compared with favorable market returns in 2021.
•Increased bad debt expense of $2 million and $7 million, respectively, primarily because of increased recovery of bad debt costs allowed by the ICC.
•Injuries and damages increased $4 million in both periods, primarily because of an increase in claims compared with the year-ago periods.
•Amortization of regulatory assets associated with customer energy-efficiency program investments under formula ratemaking increased $2 million and $4 million, respectively.
Ameren Illinois Natural Gas
Other operations and maintenance expenses increased $10 million and $17 million in the three and six months ended June 30, 2022, compared with the year-ago periods, primarily because of increased distribution system expenditures of $5 million and $9 million, respectively, primarily because of a shift from capital to operations and maintenance activity, which is expected to largely reverse in the second half of the year. Other operations and maintenance expenses also increased $3 million and $5 million, respectively, because of decreases in the cash surrender value of company-owned life insurance related to unfavorable market returns in 2022, compared with favorable market returns in 2021.
Depreciation and Amortization Expenses
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| | | Increase (Decrease) by Segment | |
| | | Overall Ameren Increase of $31 Million (QTD YoY) | | Overall Ameren Increase of $49 Million (YTD YoY) | |
| Total by Segment(a) | | | |
(a)Includes other/intersegment eliminations of $1 million, $2 million, $2 million, and $2 million in the three months ended June 30, 2022 and 2021, and in the six months ended June 30, 2022 and 2021, respectively
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Ameren Missouri | | | Ameren Illinois Natural Gas | | | Other/Intersegment Eliminations |
| | | | | | | | | |
| | Ameren Illinois Electric Distribution | | Ameren Transmission | | | | |
Depreciation and amortization expenses increased $31 million, $21 million, and $11 million in the three months ended June 30, 2022, and $49 million, $29 million, and $20 million in the six months ended June 30, 2022, compared with the year-ago periods, at Ameren, Ameren Missouri, and Ameren Illinois, respectively, primarily because of additional property, plant, and equipment investments across their respective segments. Ameren’s and Ameren Missouri’s depreciation and amortization expenses for the three and six months ended June 30, 2022, compared with the year-ago periods, were affected by the following, which include the effect of the additional investments:
•Depreciation and amortization rate changes pursuant to the December 2021 MoPSC electric rate order, which increased depreciation and amortization expenses by $17 million and $23 million, respectively.
•Increased depreciation and amortization expenses of $17 million and $23 million, respectively, for amounts previously deferred under the PISA and RESRAM and subsequently reflected in base rates pursuant to the December 2021 MoPSC electric rate order, largely due to investments in wind generation.
•Fewer deferrals of depreciation and amortization expenses of $15 million in both periods due to less property, plant, and equipment eligible for recovery under the PISA and RESRAM as a result of the December 2021 MoPSC electric rate order.
•The net deferral related to the Meramec Energy Center retirement, which decreased depreciation and amortization expenses by $15 million and $20 million, respectively, pursuant to the December 2021 MoPSC electric rate order.
•The net under-recovery of RESRAM eligible expenses, which decreased depreciation and amortization expenses by $9 million and $14 million, respectively.
Taxes Other Than Income Taxes
| | | | | | | | | | | | | | | | | | | | |
| | | Increase by Segment | |
| | | Overall Ameren Increase of $7 Million (QTD YoY) | | Overall Ameren Increase of $21 Million (YTD YoY) | |
| Total by Segment(a) | | | |
(a)Includes $2 million, $2 million, $4 million, and $4 million at Ameren Transmission in the three months ended June 30, 2022 and 2021, and in the six months ended June 30, 2022 and 2021, respectively. Also includes other/intersegment eliminations of $2 million, $2 million, $6 million, and $6 million in the three months ended June 30, 2022 and 2021, and in the six months ended June 30, 2022 and 2021, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Ameren Missouri | | | Ameren Illinois Natural Gas | | | Other/Intersegment Eliminations |
| | | | | | | | | |
| | Ameren Illinois Electric Distribution | | Ameren Transmission | | | | |
Taxes other than income taxes increased $7 million in the three months ended June 30, 2022, compared with the year-ago period, primarily because of a $4 million increase in excise taxes at Ameren Missouri, primarily because of increased sales. Taxes other than income taxes increased $21 million in the six months ended June 30, 2022, compared with the year-ago period, primarily because of $7 million increases in excise taxes at both Ameren Missouri and Ameren Illinois Natural Gas, primarily because of increased sales. Taxes other than income taxes also increased $6 million in the six months ended June 30, 2022, compared with the year-ago period, at Ameren Missouri because of increased property taxes, primarily resulting from higher assessed values and lower property tax refunds.
Other Income, Net
| | | | | | | | | | | | | | | | | | | | |
| | | Increase by Segment | |
| | | Overall Ameren Increase of $13 Million (QTD YoY) | | Overall Ameren Increase of $27 Million (YTD YoY) | |
| Total by Segment(a) | | | |
(a)Includes $4 million and $2 million at Ameren Transmission in the three months ended June 30, 2022 and 2021, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Ameren Missouri | | | Ameren Illinois Natural Gas | | | Other/Intersegment Eliminations |
| | | | | | | | | |
| | Ameren Illinois Electric Distribution | | Ameren Transmission | | | | |
Other income, net, increased $13 million in the three months ended June 30, 2022, compared with the year-ago period, primarily because of increases in the non-service cost component of net periodic benefit income of $5 million, $5 million, and $2 million at Ameren Illinois Electric Distribution, activity not reported as part of a segment, and Ameren Illinois Natural Gas, respectively. Other Income, net, increased $27 million in the six months ended June 30, 2022, compared with the year-ago period, primarily because of increases in the non-service cost component of net periodic benefit income of $10 million, $9 million, and $4 million for Ameren Illinois Electric Distribution, activity not reported as part of a segment, and Ameren Illinois Natural Gas, respectively.
See Note 5 – Other Income, Net, under Part I, Item 1, of this report for additional information. See Note 11 – Retirement Benefits under Part I, Item 1, of this report for more information on the non-service cost components of net periodic benefit income.
Interest Charges
| | | | | | | | | | | | | | | | | | | | |
| | | Increase (Decrease) by Segment | |
| | | Overall Ameren Increase of $30 Million (QTD YoY) | | Overall Ameren Increase of $34 Million (YTD YoY) | |
| Total by Segment | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Ameren Missouri | | | Ameren Illinois Natural Gas | | | Other/Intersegment Eliminations |
| | | | | | | | | |
| | Ameren Illinois Electric Distribution | | Ameren Transmission | | | | |
Interest charges increased $30 million and $34 million in the three and six months ended June 30, 2022, compared with the year-ago periods. The following items increased interest charges in the three and six months ended June 30, 2022, compared with the year-ago periods:
•Interest charges at Ameren and Ameren Missouri reflected a deferral to a regulatory asset of interest charges pursuant to PISA and RESRAM. The amount of interest charges included in base rates for PISA and RESRAM deferrals was updated when new customer rates became effective on February 28, 2022, pursuant to the December 2021 MoPSC electric rate order, which incorporated deferrals through September 30, 2021. Lower deferrals due to the inclusion in base rates of interest associated with certain property, plant, and equipment previously deferred under the PISA and RESRAM, increased interest charges by $15 million and $12 million, respectively.
•Issuances of long-term debt at Ameren Missouri in June 2021 and April 2022 collectively increased interest charges by $8 million and $10 million, respectively.
•Issuances of long-term debt at Ameren (parent) in March and November 2021 collectively increased interest charges by $2 million and $6 million, respectively.
Income Taxes
The following table presents effective income tax rates for the three and six months ended June 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months(a) | | Six Months(a) |
| | 2022 | | 2021 | | 2022 | | 2021 |
| Ameren | | 15 | % | | 13 | % | | 13 | % | | 12 | % |
| Ameren Missouri | | (2) | % | | (3) | % | | (3) | % | | (3) | % |
| Ameren Illinois | | 25 | % | | 26 | % | | 26 | % | | 25 | % |
Ameren Illinois Electric Distribution | | 26 | % | | 25 | % | | 25 | % | | 24 | % |
Ameren Illinois Natural Gas | | 25 | % | | 29 | % | | 27 | % | | 27 | % |
Ameren Illinois Transmission | | 25 | % | | 25 | % | | 26 | % | | 25 | % |
| Ameren Transmission | | 26 | % | | 26 | % | | 26 | % | | 26 | % |
| | | | | | | | |
(a)Estimate of the annual effective income tax rate adjusted to reflect the tax effect of items discrete to the three and six months ended June 30, 2022 and 2021.
See Note 12 – Income Taxes under Part I, Item 1, of this report for a reconciliation of the federal statutory corporate income tax rate to the effective income tax rate for the Ameren Companies.
The effective income tax rate was lower at Ameren Illinois Natural Gas in the three months ended June 30, 2022, compared with the year-ago period, primarily because of higher amortization of excess deferred taxes.
LIQUIDITY AND CAPITAL RESOURCES
Collections from our tariff-based revenues are our principal source of cash provided by operating activities. A diversified retail customer mix, primarily consisting of rate-regulated residential, commercial, and industrial customers, provides us with a reasonably predictable source of cash. In addition to using cash provided by operating activities, we use available cash, drawings under committed credit agreements, commercial paper issuances, and/or, in the case of Ameren Missouri and Ameren Illinois, short-term affiliate borrowings to support normal operations and temporary capital requirements. We may reduce our short-term borrowings with cash provided by operations or, at our discretion, with long-term borrowings, or, in the case of Ameren Missouri and Ameren Illinois, with capital contributions from Ameren (parent). As of June 30, 2022, there have been no material changes other than in the ordinary course of business related to cash requirements arising from these long-term commitments provided in Item 7 of the Form 10-K for the year ended December 31, 2021. In April and May 2022, Ameren Illinois conducted procurement events, administered by the IPA, to purchase energy products and acquire capacity through May 2025. As a result, Ameren and Ameren Illinois’ estimated minimum purchase obligations for purchased power increased by $0.5 billion in total over the period of June 2022 through May 2025.
We expect to make significant capital expenditures over the next five years, supported by a combination of long-term debt and equity, as we invest in our electric and natural gas utility infrastructure to support overall system reliability, grid modernization, renewable energy target requirements, environmental compliance, and other improvements. For additional information about our long-term debt outstanding, including maturities due within one year, and the applicable interest rates, see Note 5 – Long-term Debt and Equity Financings under Part II, Item 8 of the Form 10-K and Note 4 – Long-term Debt and Equity Financings under Part I, Item 1, of this report. As part of its funding plan for capital expenditures, Ameren is using newly issued shares of common stock, rather than market-purchased shares, to satisfy requirements under the DRPlus and employee benefit plans and expects to continue to do so through at least 2026. Ameren expects these issuances to provide equity of about $100 million annually. In addition, in 2021, Ameren established an ATM program under which Ameren may offer and sell from time to time up to $750 million of its common stock, which includes the ability to enter into forward sales agreements, subject to market conditions and other factors. There were no shares issued under the ATM program for the three and six months ended June 30, 2022. Ameren has entered into multiple forward sale agreements under the ATM program with various counterparties relating to 5.8 million shares of common stock. As of June 30, 2022, Ameren could have settled the forward sale agreements with physical delivery of 5.6 million shares of common stock to the respective counterparties in exchange for cash of $500 million. As of June 30, 2022, Ameren had approximately $90 million of common stock available under the ATM program, which takes into account the forward sale agreements in effect as of June 30, 2022. Ameren expects to settle approximately $300 million of the forward sale agreements by December 31, 2022. Ameren plans to issue approximately $300 million of equity each year from 2022 to 2026 in addition to issuances under the DRPlus and employee benefit plans. Ameren expects its equity to total capitalization ratio to be approximately 45% through December 31, 2026, with the long-term intent to support solid investment-grade credit ratings. See Long-term Debt and Equity below and Note 4 – Long-term Debt and Equity Financings under Part I, Item 1, of this report for additional information on the ATM program, including the forward sale agreements under the ATM program relating to common stock.
The use of cash provided by operating activities and short-term borrowings to fund capital expenditures and other long-term investments at the Ameren Companies frequently results in a working capital deficit, defined as current liabilities exceeding current assets, as was the case at June 30, 2022, for Ameren and Ameren Illinois. With the credit capacity available under the Credit Agreements, and cash and cash equivalents, Ameren (parent), Ameren Missouri, and Ameren Illinois, collectively, had net available liquidity of $1.3 billion at June 30, 2022. See Credit Facility Borrowings and Liquidity for additional information.
The following table presents net cash provided by (used in) operating, investing, and financing activities for the six months ended June 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Cash Provided By
Operating Activities | | Net Cash Used In
Investing Activities | | Net Cash Provided By
Financing Activities |
| 2022 | | 2021 | | Variance | | 2022 | | 2021 | | Variance | | 2022 | | 2021 | | Variance |
| Ameren | $ | 872 | | | $ | 436 | | | $ | 436 | | | $ | (1,552) | | | $ | (1,760) | | | $ | 208 | | | $ | 686 | | | $ | 1,290 | | | $ | (604) | |
| | | | | | | | | | | | | | | | | |
| Ameren Missouri | 181 | | | 224 | | | (43) | | | (818) | | | (1,053) | | | 235 | | | 636 | | | 701 | | | (65) | |
| Ameren Illinois | 675 | | | 286 | | | 389 | | | (699) | | | (668) | | | (31) | | | 37 | | | 477 | | | (440) | |
Cash Flows from Operating Activities
Our cash provided by operating activities is affected by fluctuations of trade accounts receivable, inventories, and accounts and wages
payable, among other things, as well as the unique regulatory environment for each of our businesses. Substantially all expenditures related to fuel, purchased power, and natural gas purchased for resale are recovered from customers through rate adjustment mechanisms, which may be adjusted without a traditional rate proceeding. Similar regulatory mechanisms exist for certain other operating expenses that can also affect the timing of cash provided by operating activities. The timing of cash payments for costs recoverable under our regulatory mechanisms differs from the recovery period of those costs. Additionally, the seasonality of our electric and natural gas businesses, primarily caused by seasonal customer rates and changes in customer demand due to weather, such as increased demand resulting from the extremely cold weather in mid-February 2021 discussed below, significantly affects the amount and timing of our cash provided by operating activities.
As a result of the significant increase in customer demand and prices for natural gas and electricity experienced in mid-February 2021 due to extremely cold weather, Ameren Missouri and Ameren Illinois had under-recovered costs for the month of February 2021 under their PGA clauses and, for Ameren Missouri, under the FAC (Ameren Missouri - PGA $53 million, FAC $50 million; Ameren Illinois - PGA $221 million). Ameren Missouri’s PGA under-recovery is being collected from customers over 36 months beginning November 2021, pursuant to an October 2021 MoPSC order, and the FAC under-recovery was collected over eight months beginning October 2021. Ameren Illinois is collecting the PGA under-recovery over 18 months beginning April 2021.
Ameren
Ameren’s cash provided by operating activities increased $436 million in the first six months of 2022, compared with the year-ago period. The following items contributed to the increase:
•A $574 million increase resulting from increased customer collections and decreased expenditures under the PGA and FAC, primarily as a result of the significant increase from customer demand and prices for natural gas and electricity experienced in mid-February 2021 due to extremely cold weather, a net increase attributable to other regulatory recovery mechanisms, and higher customer collections resulting from base rate increases pursuant to Ameren Missouri’s December 2021 electric rate order.
•A $20 million decrease in coal inventory levels at Ameren Missouri, as less coal was purchased in 2022 due to service-related delivery disruptions.
•A $14 million decrease in major storm restoration costs at Ameren Illinois, primarily due to a January 2021 storm.
•An $11 million decrease in payments to settle ARO liabilities, primarily related to the closure of Ameren Missouri’s CCR storage facilities.
•An $8 million decrease in the cost of natural gas held in storage, primarily at Ameren Illinois, because of an increase in withdrawals between periods.
The following items partially offset the increase in Ameren’s cash from operating activities between periods:
•A $77 million increase in net collateral posted with counterparties, primarily due to changes in the market prices of power, natural gas, and other fuels.
•A $39 million increase in payments for nuclear refueling and maintenance outages at Ameren Missouri’s Callaway Energy Center. There was no scheduled refueling and maintenance outage in 2021.
•A $30 million increase in purchases of materials and supplies inventories to support operations in 2022 as levels were increased to mitigate against any potential supply disruptions.
•A $23 million increase in payments for certain cloud computing arrangements.
•The absence in 2022 of $15 million in service fees received under refined coal production agreements at Ameren Missouri, as the result of the expiration of refined coal tax credits at the end of 2021.
•A $20 million increase in interest payments, primarily due to an increase in the average outstanding debt.
•A $13 million increase in property tax payments at Ameren Missouri, primarily due to higher assessed property tax values.
Ameren Missouri
Ameren Missouri’s cash provided by operating activities decreased $43 million in the first six months of 2022, compared with the year-ago period. The following items contributed to the decrease:
•An $88 million increase in net collateral posted with counterparties, primarily due to changes in the market prices of power, natural gas, and other fuels.
•A $67 million decrease in income tax refunds from Ameren (parent) pursuant to the tax allocation agreement, primarily due to higher taxable income in 2022.
•A $39 million increase in payments for nuclear refueling and maintenance outages at the Callaway Energy Center. There was no scheduled refueling and maintenance outage in 2021.
•A $20 million increase in purchases of materials and supplies inventories to support operations in 2022 as levels were increased to mitigate against any potential supply disruptions.
•The absence in 2022 of $15 million in service fees received under refined coal production agreements, as the result of the expiration of refined coal tax credits at the end of 2021.
•A $13 million increase in property tax payments, primarily due to higher assessed property tax values.
•A $12 million increase in payments for certain cloud computing arrangements.
•A $9 million increase in interest payments, primarily due to an increase in the average outstanding debt.
The following items partially offset the decrease in Ameren Missouri’s cash from operating activities between periods:
•A $207 million increase from higher customer collections and decreased expenditures under the FAC and PGA due to the significant increase from customer demand and prices for natural gas and electricity experienced in mid-February 2021 due to extremely cold weather and higher customer collections resulting from base rate increases pursuant to the December 2021 electric rate order.
•A $20 million decrease in coal inventory levels, as less coal was purchased in 2022 due to service-related delivery disruptions.
•An $11 million decrease in payments to settle ARO liabilities, primarily related to the closure of CCR storage facilities.
Ameren Illinois
Ameren Illinois’ cash provided by operating activities increased $389 million in the first six months of 2022, compared with the year-ago period. The following items contributed to the increase:
•A $368 million increase resulting from increased customer collections and decreased expenditures under the PGA, primarily as a result of the significant increase from customer demand and prices for natural gas experienced in mid-February due to extremely cold weather and a net increase attributable to other regulatory recovery mechanisms.
•A $14 million decrease in major storm restoration costs, primarily due to a January 2021 storm.
•An $11 million increase in net collateral received from counterparties, primarily due to changes in the market prices of power and natural gas.
•An $8 million decrease in the cost of natural gas held in storage because of an increase in withdrawals between periods.
The following items partially offset the increase in Ameren Illinois’ cash from operating activities between periods:
•A $14 million increase in payments for certain cloud computing arrangements.
•A $10 million increase in purchases of materials and supplies inventories to support operations in 2022 as levels were increased to mitigate against any potential supply disruptions.
Cash Flows from Investing Activities
Ameren’s cash used in investing activities decreased $208 million during the first six months of 2022, compared with the year-ago period, primarily as a result of a $225 million decrease in capital expenditures, largely resulting from a reduction in expenditures related to wind generation assets at Ameren Missouri, partially offset by increased expenditures for electric delivery infrastructure upgrades at Ameren Missouri and for transmission projects at Ameren Illinois. The decrease in Ameren’s cash used in investing activities was partially offset by an $18 million increase due to the timing of nuclear fuel expenditures at Ameren Missouri.
Ameren Missouri’s cash used in investing activities decreased $235 million during the first six months of 2022, compared with the year-ago period, primarily as a result of a $295 million decrease in capital expenditures, primarily resulting from a reduction in expenditures related to wind generation assets partially offset by increased expenditures for electric delivery infrastructure upgrades. This decrease was partially offset by a $47 million return of net money pool advances in the first six months of 2021, and an $18 million increase due to the timing of nuclear fuel expenditures.
Ameren Illinois’ cash used in investing activities increased $31 million during the first six months of 2022, compared with the year-ago period, primarily as a result of a $53 million increase in capital expenditures, largely related to transmission projects. This increase was partially offset by a $20 million decrease in Ameren Illinois’ net money pool advances.
Cash Flows from Financing Activities
Cash provided by, or used in, financing activities is a result of our financing needs, which depend on the level of cash provided by operating activities, the level of cash used in investing activities, the level of dividends, and our long-term debt maturities, among other things. Due to extremely cold winter weather in mid-February 2021, Ameren Missouri and Ameren Illinois experienced higher than anticipated commodity costs for natural gas purchased for resale and purchased power, which contributed to the acceleration of the timing of certain planned 2021 debt issuances.
Ameren’s cash provided by consolidated financing activities decreased $604 million during the first six months of 2022, compared with the year-ago period. During the first six months of 2022, Ameren utilized proceeds of $524 million of long-term debt to repay then-outstanding short-term debt and for near-term capital expenditures. In addition, during the first six months of 2022, Ameren utilized proceeds from net commercial paper issuances of $475 million along with cash provided by operating activities to fund, in part, investing activities. In comparison, during the first six months of 2021, Ameren utilized proceeds from the issuance of $1,423 million of long-term debt for general corporate purposes, including to repay then-outstanding short-term debt, including short-term debt in connection with the increased purchases for natural gas for resale and purchased power costs as a result of the significant increase in customer demand and prices for natural gas and electricity experienced in mid-February 2021 due to extremely cold weather, and to fund, in part, investing activities. During the first six months of 2021, Ameren repaid net short-term debt of $59 million. In addition, Ameren received aggregate cash proceeds of $258 million from the issuance of common stock under the ATM program, the DRPlus, and the 401(k) plan and the settlement of the remaining portion of the 2019 forward sale agreement. These proceeds were used to fund a portion of Ameren Missouri’s wind generation investments and to fund, in part, other investing activities. During the first six months of 2022, Ameren paid common stock dividends of $305 million, compared with $282 million in the year-ago period, as a result of an increase in both the dividend rate and the number of common shares outstanding.
Ameren Missouri’s cash provided by financing activities decreased $65 million during the first six months of 2022, compared with the year-ago period. During the first six months of 2022, Ameren Missouri utilized proceeds from the issuance of $524 million to repay then-outstanding short-term debt and for near-term capital expenditures. In addition, during the first six months of 2022, Ameren Missouri utilized proceeds from net commercial paper issuances of $120 million along with cash provided by operating activities to fund, in part, investing activities. In comparison, during the first six months of 2021, Ameren Missouri utilized net proceeds from the issuance of long-term debt of $524 million to repay then-outstanding short-term debt, including short-term debt incurred in connection with the increased purchases for natural gas for resale and purchased power costs as a result of the significant increase in customer demand and prices for natural gas and electricity experienced in mid-February 2021 due to extremely cold weather. Additionally, proceeds from the issuance of long-term debt and capital contributions of $183 million from Ameren (parent) were used to fund a portion of wind generation investments and to fund, in part, investing activities during the first six months of 2021.
Ameren Illinois’ cash provided by financing activities decreased $440 million during the first six months of 2022, compared with the year-ago period. During the first six months of 2022, Ameren Illinois utilized proceeds from net commercial paper issuances of $38 million and cash provided by operating activities to fund, in part, investing activities. In comparison, during the first six months of 2021, Ameren Illinois utilized net proceeds from the issuance of long-term debt of $449 million to repay then-outstanding short-term debt, including short-term debt incurred in connection with the increased purchases for natural gas for resale and purchased power costs as a result of the significant increase in customer demand and prices for natural gas and electricity experienced in mid-February 2021 due to extremely cold weather, and to fund, in part, investing activities. Ameren Illinois also received a $70 million capital contribution from Ameren (parent) during the first six months of 2021. In addition, Ameren repaid $19 million of money pool borrowings and redeemed $13 million of preferred stock during the first six months of 2021.
See Long-term Debt and Equity in this section for additional information on maturities and issuances of long-term debt, issuances of common stock, and redemptions of preferred stock.
Credit Facility Borrowings and Liquidity
The following table presents Ameren’s consolidated liquidity as of June 30, 2022:
| | | | | | | | | |
| | | | | Available at June 30, 2022 |
Ameren (parent) and Ameren Missouri: | | | | | |
Missouri Credit Agreement – borrowing capacity | | | | | $ | 1,200 | |
| | | | | |
| Less: Ameren (parent) commercial paper outstanding | | | | | 382 | |
Less: Ameren Missouri commercial paper outstanding | | | | | 285 | |
| | | | | |
Less: Ameren Missouri letters of credit | | | | | 2 | |
Missouri Credit Agreement – subtotal | | | | | 531 | |
| Ameren (parent) and Ameren Illinois: | | | | | |
Illinois Credit Agreement – borrowing capacity | | | | | 1,100 | |
| | | | | |
| Less: Ameren (parent) commercial paper outstanding | | | | | 213 | |
Less: Ameren Illinois commercial paper outstanding | | | | | 141 | |
| | | | | |
| | | | | |
Illinois Credit Agreement – subtotal | | | | | 746 | |
Subtotal | | | | | $ | 1,277 | |
Add: Cash and cash equivalents | | | | | 7 | |
Net Available Liquidity(a) | | | | | $ | 1,284 | |
(a)Does not include Ameren’s forward equity sale agreements. See Note 4 – Long-term Debt and Equity Financings under Part I, Item 1, of this report for additional information.
The Credit Agreements, among other things, provide $2.3 billion of credit until maturity in December 2025. See Note 3 – Short-term Debt and Liquidity under Part I, Item 1, of this report for additional information on the Credit Agreements. During the six months ended June 30, 2022, Ameren (parent), Ameren Missouri, and Ameren Illinois each issued commercial paper. Borrowings under the Credit Agreements and commercial paper issuances are based upon available interest rates at that time of the borrowing or issuance.
Ameren has a money pool agreement with and among its utility subsidiaries to coordinate and to provide for certain short-term cash and working capital requirements. As short-term capital needs arise, and based on availability of funding sources, Ameren Missouri and Ameren Illinois will access funds from the utility money pool, the Credit Agreements, or the commercial paper programs depending on which option has the lowest interest rates.
See Note 3 – Short-term Debt and Liquidity under Part I, Item 1, of this report for additional information on credit agreements, commercial paper issuances, Ameren’s money pool arrangements and related borrowings, and relevant interest rates.
The issuance of short-term debt securities by Ameren’s utility subsidiaries is subject to FERC approval under the Federal Power Act. In March 2022, the FERC issued an order authorizing Ameren Missouri to issue up to $1 billion of short-term debt securities through March 2024. In 2020, the FERC issued an order authorizing Ameren Illinois to issue up to $1 billion of short-term debt securities through September 2022. In 2021, the FERC issued an order authorizing ATXI to issue up to $300 million of short-term debt securities, which expires in July 2023.
The Ameren Companies continually evaluate the adequacy and appropriateness of their liquidity arrangements for changing business conditions. When business conditions warrant, changes may be made to existing credit agreements or to other borrowing arrangements, or other arrangements may be made.
Long-term Debt and Equity
The following table presents issuances (net of any issuance premiums or discounts) of long-term debt and equity and redemptions of preferred stock for the six months ended June 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | |
| Month Issued, Redeemed, or Matured | | 2022 | | 2021 | |
| Issuances of Long-term Debt | | | | | | |
| Ameren: | | | | | | |
| 1.75% Senior unsecured notes due 2028 | March | | $ | — | | | $ | 450 | | |
| | | | | | |
| Ameren Missouri: | | | | | | |
| 3.90% First mortgage bonds due 2052 (green bonds) | April | | 524 | | | — | | |
| 2.15% First mortgage bonds due 2032 (green bonds) | June | | — | | | 524 | | |
| Ameren Illinois: | | | | | | |
| 2.90% First mortgage bonds due 2051 (green bonds) | June | | — | | | 349 | | |
| 0.375% First mortgage bonds due 2023 | June | | — | | | 100 | | |
| Total Ameren long-term debt issuances | | | $ | 524 | | | $ | 1,423 | | |
| Issuances of Common Stock | | | | | | |
| Ameren: | | | | | | |
DRPlus and 401(k) (a) | Various | | $ | 17 | | (b) | $ | 24 | | |
August 2019 forward sale agreement (c) | February | | — | | | 113 | | |
ATM program (d) | Various | | — | | | 121 | | |
Total Ameren common stock issuances (e) | | | $ | 17 | | | $ | 258 | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Redemptions of Preferred Stock | | | | | | |
| Ameren Illinois: | | | | | | |
| 6.625% Series | March | | $ | — | | | $ | 12 | | |
| 7.75% Series | March | | — | | | 1 | | |
| Total Ameren Illinois preferred stock redemptions | | | $ | — | | | $ | 13 | | |
| | | | | | |
(a)Ameren issued a total of 0.3 million and 0.3 million shares of common stock under its DRPlus and 401(k) plan in the six months ended June 30, 2022 and 2021, respectively.
(b)Excludes an $8 million receivable at June 30, 2022.
(c)Ameren issued 1.6 million shares of common stock to settle the remainder of the August 2019 forward sale agreement.
(d)Ameren issued 1.4 million shares of common stock under the ATM program.
(e)Excludes 0.4 million and 0.5 million shares of common stock valued at $31 million and $33 million issued for no cash consideration in connection with stock-based compensation for the six months ended June 30, 2022 and 2021, respectively.
See Note 4 – Long-term Debt and Equity Financings under Part I, Item 1, of this report for additional information, including proceeds from issuances of long-term debt, including Ameren Missouri’s April 2022 issuance of first mortgage bonds, the use of those proceeds, Ameren’s forward equity sale agreements, and the ATM program.
Indebtedness Provisions and Other Covenants
At June 30, 2022, the Ameren Companies were in compliance with the provisions and covenants contained in their credit agreements, indentures, and articles of incorporation, as applicable, and ATXI was in compliance with the provisions and covenants contained in its note purchase agreements. See Note 3 – Short-term Debt and Liquidity under Part I, Item 1, of this report and Note 4 – Short-term Debt and Liquidity and Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, of the Form 10-K for a discussion of provisions, applicable cross-default provisions, and covenants contained in our credit agreements, in ATXI’s note purchase agreements, and in certain of the Ameren Companies’ indentures and articles of incorporation.
We consider access to short-term and long-term capital markets to be a significant source of funding for capital requirements not satisfied by cash provided by our operating activities. Inability to raise capital on reasonable terms, particularly during times of uncertainty in the capital markets, could negatively affect our ability to maintain and expand our businesses. After assessing its current operating performance, liquidity, and credit ratings (see Credit Ratings below), Ameren, Ameren Missouri, and Ameren Illinois each believes that it will continue to have access to the capital markets on reasonable terms. However, events beyond Ameren’s, Ameren Missouri’s, and Ameren Illinois’ control may create uncertainty in the capital markets or make access to the capital markets uncertain or limited. Such events could increase our cost of capital and adversely affect our ability to access the capital markets.
Dividends
The amount and timing of dividends payable on Ameren’s common stock are within the sole discretion of Ameren’s board of directors. Ameren’s board of directors has not set specific targets or payout parameters when declaring common stock dividends, but it considers various factors, including Ameren’s overall payout ratio, payout ratios of our peers, projected cash flow and potential future cash flow requirements, historical earnings and cash flow, projected earnings, impacts of regulatory orders or legislation, and other key business considerations. Ameren expects its dividend payout ratio to be between 55% and 70% of annual earnings over the next few years.
See Note 4 – Short-term Debt and Liquidity and Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, of the Form 10-K for additional discussion of covenants and provisions contained in certain of the Ameren Companies’ financial agreements and articles of incorporation that would restrict the Ameren Companies’ payment of dividends in certain circumstances. At June 30, 2022, none of these circumstances existed at Ameren, Ameren Missouri, or Ameren Illinois and, as a result, these companies were not restricted from paying dividends.
The following table presents common stock dividends declared and paid by Ameren Corporation to its common shareholders and by Ameren subsidiaries to their parent, Ameren Corporation, for the six months ended June 30, 2022 and 2021:
| | | | | | | | | | | |
| Six Months |
| 2022 | | 2021 |
| Ameren | $ | 305 | | | $ | 282 | |
| | | |
| | | |
| ATXI | — | | | 32 | |
Credit Ratings
Our credit ratings affect our liquidity, our access to the capital markets and credit markets, our cost of borrowing under our credit facilities and our commercial paper programs, and our collateral posting requirements under commodity contracts.
The following table presents the principal credit ratings by Moody’s and S&P, as applicable, effective on the date of this report:
| | | | | | | | | | | | | | |
| | Moody’s | | S&P |
| Ameren: | | | | |
| Issuer/corporate credit rating | | Baa1 | | BBB+ |
| Senior unsecured debt | | Baa1 | | BBB |
| Commercial paper | | P-2 | | A-2 |
| Ameren Missouri: | | | | |
| Issuer/corporate credit rating | | Baa1 | | BBB+ |
| Secured debt | | A2 | | A |
| Senior unsecured debt | | Baa1 | | Not Rated |
| Commercial paper | | P-2 | | A-2 |
| Ameren Illinois: | | | | |
| Issuer/corporate credit rating | | A3 | | BBB+ |
| Secured debt | | A1 | | A |
| Senior unsecured debt | | A3 | | BBB+ |
| Commercial paper | | P-2 | | A-2 |
| ATXI: | | | | |
| Issuer credit rating | | A2 | | Not Rated |
| Senior unsecured debt | | A2 | | Not Rated |
A credit rating is not a recommendation to buy, sell, or hold securities. It should be evaluated independently of any other rating. Ratings are subject to revision or withdrawal at any time by the rating organization.
Collateral Postings
Any weakening of our credit ratings may reduce access to capital and trigger additional collateral postings and prepayments. Such changes may also increase the cost of borrowing, resulting in an adverse effect on earnings. Cash collateral postings and prepayments made with external parties, including postings related to exchange-traded contracts, were $222 million, $199 million, and $23 million for Ameren, Ameren Missouri, and Ameren Illinois, respectively, and cash collateral posted by external parties were $75 million, $15 million, and $60 million for Ameren, Ameren Missouri, and Ameren Illinois, respectively, at June 30, 2022. A sub-investment-grade issuer or senior unsecured debt rating (below “Baa3” from Moody’s or below “BBB-” from S&P) at June 30, 2022, could have resulted in Ameren, Ameren Missouri, or Ameren Illinois being required to post additional collateral or other assurances for certain trade obligations amounting to $166 million, $89 million, and $77 million, respectively.
Changes in commodity prices could trigger additional collateral postings and prepayments. Based on credit ratings at June 30, 2022, if market prices were 15% higher or lower than June 30, 2022 levels in the next 12 months and 20% higher or lower thereafter through the end of the term of the commodity contracts, then Ameren, Ameren Missouri, and Ameren Illinois could be required to post an immaterial amount, compared to each company’s liquidity, of collateral or provide other assurances for certain trade obligations.
OUTLOOK
Below are some key trends, events, and uncertainties that may reasonably affect our results of operations, financial condition, or liquidity, as well as our ability to achieve strategic and financial objectives, for 2022 and beyond. For additional information regarding recent rate orders, lawsuits, and pending requests filed with state and federal regulatory commissions, including those discussed below, see Note 2 – Rate and Regulatory Matters under Part I, Item 1, of this report and Note 2 – Rate and Regulatory Matters under Part II, Item 8, of the Form 10-K.
Operations
•In the first half of 2022, our sales volumes, which have been, and continue to be, affected by the COVID-19 pandemic, among other things, increased compared to the same period in 2021, excluding the estimated effects of weather and customer energy-efficiency programs. While total sales volume levels at Ameren Missouri were comparable to pre-pandemic levels for the first six months of 2022, Ameren Illinois’ sales remain below pre-pandemic levels. However, revenues from Ameren Illinois’ electric distribution business, residential and small nonresidential customers of Ameren Illinois’ natural gas distribution business, and Ameren Illinois’ and ATXI’s electric transmission businesses are decoupled from changes in sales volumes. There has also been a shift in sales volumes by customer class at both Ameren Missouri and Ameren Illinois, which began in 2020, with an increase in residential sales, and a decrease in commercial and industrial sales. The continued effect of the COVID-19 pandemic on our results of operations, financial position, and liquidity in subsequent periods will depend on its severity and longevity, future regulatory or legislative actions with respect thereto, and the resulting impact on business, economic, and capital market conditions.
•The PISA permits Ameren Missouri to defer and recover 85% of the depreciation expense and earn a return at the applicable WACC on investments in certain property, plant, and equipment placed in service, and not included in base rates. The regulatory asset for accumulated PISA deferrals also earns a return at the applicable WACC, with all approved PISA deferrals added to rate base prospectively and recovered over a period of 20 years following a regulatory rate review. Additionally, under the RESRAM, Ameren Missouri is permitted to recover the 15% of depreciation expense not recovered under the PISA, and earn a return at the applicable WACC for investments in renewable generation plant placed in service to comply with Missouri’s renewable energy standard. Accumulated RESRAM deferrals earn carrying costs at short-term interest rates. The PISA and the RESRAM mitigate the effects of regulatory lag between regulatory rate reviews. Those investments not eligible for recovery under the PISA and the remaining 15% of certain property, plant, and equipment placed in service, unless eligible for recovery under the RESRAM, remain subject to regulatory lag. Ameren Missouri defers its cost of debt relating to PISA eligible investments as an offset to interest charges with the difference between the applicable WACC and its cost of debt recognized in revenues when recovery of such deferrals is reflected in customer rates. As a result of the PISA election, additional provisions of the law apply to Ameren Missouri, including limitations on electric customer rate increases. Ameren Missouri does not expect to exceed these rate increase limitations in 2022. In June 2022, Missouri Senate Bill 745 was enacted and will become effective on August 28, 2022. The law extended Ameren Missouri’s PISA election through December 2028 and allows for an additional five-year extension through December 2033 if requested by Ameren Missouri and approved by the MoPSC, among other things. The law established a 2.5% annual limit on increases to the electric service revenue requirement used to set customer rates due to the inclusion of incremental PISA deferrals in the revenue requirement. The limitation will be effective for revenue requirements approved by the MoPSC after January 1, 2024, and will be based on the revenue requirement established in the immediately preceding rate order. The current rate limitation, which is effective through 2023, is a 2.85% cap on the compound annual growth rate in the average overall customer rate per kilowatthour, based on the electric rates that became effective in April 2017, less half of the annual savings from the TCJA that was passed on to customers as approved in a July 2018 MoPSC order.
•In 2018, the MoPSC issued an order approving Ameren Missouri’s MEEIA 2019 plan. The plan includes a portfolio of customer energy-efficiency and demand response programs through December 2023 and low-income customer energy-efficiency programs through December 2024, along with a rider. Ameren Missouri intends to invest approximately $360 million over the life of the plan, including $80 million in 2022 and $75 million in 2023. The plan includes the continued use of the MEEIA rider, which allows Ameren Missouri to collect from, or refund to, customers any difference in actual MEEIA program costs and related lost electric margins and the amounts collected from customers. In addition, the plan includes a performance incentive that provides Ameren Missouri an opportunity to earn additional revenues by achieving certain customer energy-efficiency goals. If the target goals were achieved for 2021 and are achieved for 2022, additional revenues of $24 million would be recognized in 2022, and, if target goals are achieved for 2023, additional revenues of $13 million would be recognized in 2023.
•In August 2022, Ameren Missouri filed a request with the MoPSC seeking approval to increase its annual revenues for electric service by $316 million. The MoPSC proceeding relating to the proposed electric service rate changes will take place over a period of up to 11 months, with a decision by the MoPSC expected by June 2023 and new rates effective by July 2023. Ameren Missouri cannot predict the level of any electric service rate change the MoPSC may approve, whether the requested regulatory recovery mechanisms will be approved, or whether any rate change that may eventually be approved will be sufficient for Ameren Missouri to recover its costs and earn a reasonable return on its investments when the rate change goes into effect.
•In December 2021, the MoPSC issued an order in Ameren Missouri’s 2021 electric service regulatory rate review, resulting in an increase of $220 million to Ameren Missouri’s annual revenue requirement for electric retail service. As a result of this order, Ameren Missouri expects a year-over-year increase to 2022 earnings, compared to 2021, primarily in the third quarter of 2022 due to seasonal electric customer rates and higher demand during the summer. Ameren Missouri expects earnings to increase approximately $23 million in the third quarter of 2022, compared to the same period in 2021.
•Ameren Illinois and ATXI use a forward-looking rate calculation with an annual revenue requirement reconciliation for each company’s electric transmission business. Based on expected rate base and the currently allowed 10.52% ROE, which includes a 50 basis point incentive adder for participation in an RTO, the revenue requirements included in 2022 rates for Ameren Illinois’ and ATXI’s electric transmission businesses are $422 million and $195 million, respectively. These revenue requirements represent an increase in Ameren Illinois’ revenue requirement of $42 million and a decrease in ATXI’s revenue requirement of $5 million from the revenue requirements reflected in 2021 rates, primarily due to higher expected rate base at Ameren Illinois and a lower expected rate base at ATXI. These rates will affect Ameren Illinois’ and ATXI’s cash receipts during 2022, but will not determine their respective electric transmission service operating revenues, which will instead be based on 2022 actual recoverable costs, rate base, and a return on rate base at the applicable WACC as calculated under the FERC formula ratemaking framework.
•The allowed base ROE for FERC-regulated transmission rates previously charged under the MISO tariff is the subject of an appeal filed with the United States Court of Appeals for the District of Columbia Circuit. Depending on the outcome of the appeal, the transmission rates charged during previous periods and the currently effective rates may be subject to change. Additionally, in March 2019, the FERC issued a Notice of Inquiry regarding its transmission incentives policy. In March 2020, the FERC issued a Notice of Proposed Rulemaking on its transmission incentives policy, which addressed many of the issues in the Notice of Inquiry on transmission incentives. The Notice of Proposed Rulemaking included an increased incentive ROE for participation in an RTO to 100 basis points from the current 50 basis points and revised the parameters for awarding incentives, while limiting the overall incentives to a cap of 250 basis points, among other things. In April 2021, the FERC issued a Supplemental Notice of Proposed Rulemaking, which proposes to modify the Notice of Proposed Rulemaking’s incentive for participation in an RTO by limiting this incentive for utilities that join an RTO to 50 basis points and only allowing them to earn the incentive for three years, among other things. If this proposal is included in a final rule, Ameren Illinois and ATXI would no longer be eligible for the 50 basis point RTO incentive adder, prospectively. The FERC is under no deadline to issue a final rule on this matter. Ameren is unable to predict the ultimate impact of any changes to the FERC’s incentives policy, or any further order on base ROE. A 50 basis point change in the FERC-allowed ROE would affect Ameren’s and Ameren Illinois’ annual net income by an estimated $12 million and $8 million, respectively, based on each company’s 2022 projected rate base.
•Ameren Illinois’ electric distribution service performance-based formula ratemaking framework under the IEIMA allows Ameren Illinois to reconcile electric distribution service rates to its actual revenue requirement on an annual basis to reflect actual recoverable costs incurred and a return at the applicable WACC on year-end rate base. If a given year’s revenue requirement varies from the amount collected from customers, an adjustment is made to electric operating revenues with an offset to a regulatory asset or liability to reflect that year’s actual revenue requirement, independent of actual sales volumes. The regulatory balance is then collected from, or refunded to, customers within two years from the end of the year. Pursuant to an order issued by the ICC in March 2021, Ameren Illinois expects to use the current IEIMA formula framework to establish annual customer rates effective through 2023, and reconcile the related revenue requirement for customer rates established for 2022 and 2023. As such, Ameren Illinois’ 2022 and 2023 revenues would reflect each year’s actual recoverable costs, year-end rate base, and a return at the applicable WACC, with the ROE component based on the annual average of the monthly yields of the 30-year United States Treasury bonds plus 580 basis points. For more information on the March 2021 ICC order, see Note 2 – Rate and Regulatory Matters under Part II, Item 8, of the Form 10-K. By law, the decoupling
provisions extend beyond the end of existing performance-based formula ratemaking, which ensures that Ameren Illinois’ electric distribution revenues authorized in a regulatory rate review are not affected by changes in sales volumes.
•Pursuant to the IETL, which was enacted in September 2021, Ameren Illinois may file an MYRP with the ICC to establish base rates for electric distribution service to be charged to customers for each calendar year of a four-year period. An MYRP would allow Ameren Illinois to reconcile electric distribution service rates to its actual revenue requirement on an annual basis, subject to a reconciliation cap and adjustments to the ICC-determined ROE for performance incentives and penalties. Ameren Illinois’ existing riders will remain effective whether it elects to file an MYRP or a traditional regulatory rate review. Additionally, electric distribution service revenues would continue to be decoupled from sales volumes under either election. Subject to a constructive outcome regarding the ICC’s determination of performance metrics, Ameren Illinois anticipates filing an MYRP by mid-January 2023, with rates effective beginning in 2024. If Ameren Illinois does not file an MYRP for rates effective beginning in 2024, its next opportunity to file an MYRP would be for rates effective beginning in 2028. For additional information regarding ratemaking under an MYRP, including details of the reconciliation cap, see Note 2 – Rate and Regulatory Matters under Part II, Item 8, of the Form 10-K.
•In 2021, the ICC issued an order in Ameren Illinois’ annual update filing that approved a $58 million increase in Ameren Illinois’ electric distribution service rates beginning in January 2022. Ameren Illinois’ 2022 electric distribution service revenues will be based on its 2022 actual recoverable costs, 2022 year-end rate base, and a return at the applicable WACC, with the ROE component based on the annual average of the monthly yields of the 30-year United States Treasury bonds plus 580 basis points. As of June 30, 2022, Ameren Illinois expects its 2022 electric distribution year-end rate base to be $3.9 billion. The 2022 revenue requirement reconciliation adjustment will be collected from, or refunded to, customers in 2024. A 50 basis point change in the annual average of the monthly yields of the 30-year United States Treasury bonds would result in an estimated $11 million change in Ameren’s and Ameren Illinois’ annual net income, based on Ameren Illinois’ 2022 projected year-end rate base, including electric energy-efficiency investments. Ameren Illinois’ recognized ROE for the first six months of 2022 was based on an estimated annual average of the monthly yields of the 30-year United States Treasury bonds of 3.10%.
•In April 2022, Ameren Illinois filed its annual electric distribution service performance-based formula rate update with the ICC to be used for 2023 rates. In July 2022, Ameren Illinois filed a revised request seeking to increase its annual revenues for electric distribution service by $84 million. In June 2022, the ICC staff submitted its calculation of the revenue requirement included in Ameren Illinois’ update filing, recommending a $60 million increase in Ameren Illinois’ electric distribution service rates. An ICC decision in this proceeding is required by December 2022, with new rates effective in January 2023. These rates will affect Ameren Illinois’ cash receipts during 2023, but will not affect electric distribution service revenues, which will be based on 2023 actual recoverable costs, 2023 year-end rate base, and a return at the applicable WACC as calculated under the Illinois performance-based formula ratemaking framework.
•Pursuant to Illinois law, Ameren Illinois’ electric energy-efficiency investments are deferred as a regulatory asset and earn a return at the applicable WACC, with the ROE component based on the annual average of the monthly yields of the 30-year United States Treasury bonds plus 580 basis points. The allowed ROE on electric energy-efficiency investments can be increased or decreased by up to 200 basis points, depending on the achievement of annual energy savings goals. While the ICC has approved a plan for Ameren Illinois to invest approximately $120 million per year in electric energy-efficiency programs through 2025, the ICC has the ability to reduce the amount of electric energy-efficiency savings goals in future plan program years if there are insufficient cost-effective programs available, which could reduce the investments in electric energy-efficiency programs. The electric energy-efficiency program investments and the return on those investments are collected from customers through a rider and are not recovered through the electric distribution service performance-based formula ratemaking framework.
•Ameren Missouri’s next refueling and maintenance outage at its Callaway energy center is scheduled for the fall of 2023. During a scheduled refueling, which occurs every 18 months, maintenance expenses are deferred as a regulatory asset and amortized until the completion of the next refueling and maintenance outage. During an outage, depending on the availability of its other generation sources and the market prices for power, Ameren Missouri’s purchased power costs may increase and the amount of excess power available for sale may decrease versus non-outage years. Changes in purchased power costs and excess power available for sale are included in the FAC, which results in limited impacts to earnings. In addition, Ameren Missouri may incur increased non-nuclear energy center maintenance costs in non-outage years.
•Ameren Missouri continues to experience coal transportation disruptions in 2022, resulting in coal inventory levels below targeted levels at the Labadie, Rush Island, and Sioux energy centers as of the end of July 2022. Prolonged disruptions in the delivery of coal could have adverse effects on Ameren Missouri's electric generation operations and could result in increased purchased power expense. Under the FAC, 95% of the variance in net energy costs, which includes purchased power expense, from the amount set in base rates is expected to be recovered. Further, the timing of payments for purchased power costs compared to the recovery through customer rates under the FAC could have adverse effects on Ameren and Ameren Missouri's liquidity.
•In December 2021, Ameren Missouri filed a motion with the United States District Court for the Eastern District of Missouri to modify a September 2019 remedy order issued by the district court to allow the retirement of the Rush Island Energy Center in advance of its previously expected useful life in lieu of installing a flue gas desulfurization system. In June 2022, Ameren Missouri supplemented its filing with the district court by proposing reduced operations, mostly operating during peak demand times and emergencies until the energy center is retired. The March 31, 2024 compliance date contained in the district court’s September 2019 remedy order remains in effect unless extended by the district court. In July 2022, in response to an Ameren Missouri request for a final, binding reliability assessment, the MISO designated the Rush Island Energy Center as a system support resource and concluded that certain mitigation measures, including transmission upgrades, should occur before the energy center is retired. The transmission upgrade projects have been approved by the MISO, and Ameren Missouri has started design and procurement activities necessary to complete the upgrades and expects to complete the upgrades by late 2025. The FERC will need to approve a system support resource agreement detailing the manner of continued operation of the Rush Island Energy Center, as well as a request from Ameren Missouri for recovery of non-energy costs under the related MISO tariff. The agreement, if approved, would have a term of 12 months. The system support resource designation and the related agreement are subject to renewal and revision. Any difference between revenues and costs under the MISO tariff is expected to be included in the FAC. The district court has the authority to determine the retirement date and operating parameters for the Rush Island Energy Center and is not bound by the MISO determination of the Rush Island Energy Center as a system support resource or the FERC’s approval. While the district court is under no deadline to issue a ruling modifying the remedy order, a decision is expected in the near term. For additional information on the NSR and Clean Air Act litigation, see Note 9 – Commitments and Contingencies under Part I, Item 1, of this report. Ameren Missouri filed a 2022 Change to the 2020 IRP with the MoPSC in June 2022 to reflect, among other things, the planned acceleration of the retirement of the Rush Island Energy Center from 2039, the retirement year for the facility as reflected in the 2020 IRP. In February 2022, the MoPSC issued an order directing the MoPSC staff to review Ameren Missouri’s planned accelerated retirement of the Rush Island Energy Center, including potential impacts on the reliability and cost of Ameren Missouri’s service to its customers; Ameren Missouri’s plans to mitigate the customer impacts of the accelerated retirement; and the prudence of Ameren Missouri’s actions and decisions with regard to the Rush Island Energy Center, which is expected to be addressed in the current electric service regulatory rate review, among other things. In April 2022, the MoPSC staff filed an initial report with the MoPSC in which the staff concluded early retirement of the Rush Island Energy Center may cause reliability concerns. The MoPSC staff is under no deadline to complete this review. As of December 31, 2021, and June 30, 2022, Ameren and Ameren Missouri classified the remaining net book value of the Rush Island Energy Center as plant to be abandoned, net, within “Property, Plant, and Equipment, Net” on Ameren’s and Ameren Missouri’s balance sheets. As part of the assessment of any potential future abandonment loss, consideration will be given to rate and securitization orders issued by the MoPSC to Ameren Missouri and to orders issued to other Missouri utilities with similar facts.
•The IETL established emission standards that became effective in September 2021. Ameren Missouri’s natural gas-fired energy centers in Illinois are subject to limits on emissions, including CO2 and NOx, equal to their unit-specific average emissions from 2018 through 2020, for any rolling twelve-month period beginning October 1, 2021, through 2029. Further reductions to emissions limits will become effective between 2030 and 2040, resulting in the closure of the Venice Energy Center by 2029. The reductions could also limit the operations of Ameren Missouri’s other four natural gas-fired energy centers located in the state of Illinois, and will result in their closure by 2040. These energy centers are utilized to support peak loads. Subject to conditions in the IETL, these energy centers may be allowed to exceed the emissions limits in order to maintain reliability of electric utility service as necessary. Ameren Missouri filed a 2022 Change to the 2020 IRP with the MoPSC in June 2022 to reflect, among other things, the updated scheduled retirement dates of the natural gas-fired energy centers located in the state of Illinois.
•In April 2022, the MISO released the results of its 2022 capacity auction, which projected a capacity shortage in the central region of the MISO footprint, which includes Ameren Missouri’s and Ameren Illinois’ service territories. The projected shortage resulted in higher capacity prices for June 2022 through May 2023, and the MISO indicated that the shortage may lead to temporary, controlled interruptions of service during the summer of 2022 to maintain system reliability.
•We are observing inflationary pressures on the prices of commodities, labor, services, materials, and supplies, as well as increasing interest rates. Ameren Missouri and Ameren Illinois are generally allowed to pass on to customers prudently incurred costs for fuel, purchased power, and natural gas supply. Additionally, for certain non-commodity cost changes, the use of trackers, riders, and formula ratemaking, as applicable, mitigates our exposure. The inflationary pressures and increasing interest rates could impact our ability to control costs and/or make substantial investments in our businesses, including our ability to recover costs and investments, and to earn our allowed ROEs within frameworks established by our regulators, while maintaining rates that are affordable to our customers. Based on estimated power prices and customer demand, the capacity price set by the April 2022 MISO auction, and the amounts of energy and capacity hedged through IPA procurement events, Ameren Illinois estimates an increase to purchased power costs for calendar year 2022, compared to 2021, of approximately $400 million. The actual increase to purchased power costs will vary due to differences between estimated and realized power prices as well as customer demand satisfied by Ameren Illinois, which will be affected by changes in customers’ elections to use Ameren Illinois or an alternative retail electric supplier for their energy needs. An increase to purchased power costs for calendar year 2023, compared to 2021, is also likely but Ameren Illinois cannot reasonably estimate the amount of the increase as additional energy and capacity contracts for 2023 will be entered into as a part of IPA procurement events
later in 2022 and the first half of 2023, as well as pricing determined by the April 2023 MISO capacity auction. Because of the power procurement riders, the difference between actual purchased power costs and costs billed to customers in a given period is deferred as a regulatory asset or liability. These pass-through costs do not affect Ameren Illinois’ net income, as any change in costs are offset by a corresponding change in revenues. Also, based on the capacity price set by the April 2022 MISO auction, Ameren Missouri estimates increases to capacity revenues and purchased power costs for the calendar year 2022, compared to 2021, of approximately $375 million. Ameren Missouri sells nearly all of its capacity to the MISO and purchases the capacity it needs to supply its native load sales from the MISO. An increase to capacity revenues and purchased power costs for calendar year 2023, compared to 2021, is also likely but Ameren Missouri cannot reasonably estimate the amount of the increases as capacity pricing for June 2023 through December 2023 will be determined by the April 2023 MISO capacity auction. Capacity revenues and purchased power costs are a part of the net energy costs recoverable under the FAC, with 95% of the variance between net energy costs and the amount set in base rates recovered or refunded through the FAC.
•Ameren Missouri and Ameren Illinois continue to make infrastructure investments and expect to seek increases to electric and natural gas rates to recover the cost of investments and earn an adequate return. Ameren Missouri and Ameren Illinois will also seek new, or to maintain existing, legislative solutions to address regulatory lag and to support investment in their utility infrastructure for the benefit of their customers. Ameren Missouri and Ameren Illinois continue to face cost recovery pressures, including limited economic growth in their service territories, increasing inflation, higher cost of debt, economic impacts of the COVID-19 pandemic, customer conservation efforts, the impacts of additional customer energy-efficiency programs, and increased customer use of increasingly cost-effective advancements in innovative energy technologies, including private generation and energy storage. However, over the long-term, we expect the decreased demand to be partially offset by increased demand resulting from increased electrification of the economy and as a means to address economy-wide CO2 emission concerns. We expect that increased investments, including expected future investments for environmental compliance, system reliability improvements, and new generation sources, will result in rate base and revenue growth but also higher depreciation and financing costs.
Liquidity and Capital Resources
•In February 2022, Ameren Missouri filed an update to its Smart Energy Plan with the MoPSC, which includes a five-year capital investment overview with a detailed one-year plan for 2022. The plan is designed to upgrade Ameren Missouri’s electric infrastructure and includes investments that will upgrade the grid and accommodate more renewable energy. Investments under the plan are expected to total approximately $8.4 billion over the five-year period from 2022 through 2026, with expenditures largely recoverable under the PISA and the RESRAM.
•In June 2022, Ameren Missouri filed a notice of change in preferred resource plan with the MoPSC. The filing includes a 2022 Change to the 2020 IRP, which the MoPSC may review at its election. In connection with the change, Ameren revised its goals for reduction of carbon emissions. Ameren is targeting net-zero carbon emissions by 2045, as well as a 60% reduction by 2030 and an 85% reduction by 2040 based on 2005 levels. Ameren’s goals include both direct emissions from operations, as well as electricity usage at Ameren buildings, including other greenhouse gas emissions of methane, nitrous oxide, and sulfur hexafluoride. Achieving these goals will be dependent on a variety of factors, including cost-effective advancements in innovative clean energy technologies and constructive federal and state energy and economic policies. The 2022 Change to the 2020 IRP includes expanding renewable sources by adding 2,800 MWs of renewable generation by 2030, 400 MWs of battery storage by 2035, and a total of 4,700 MWs of renewable generation and 800 MWs of battery storage by 2040. These amounts include 350 MWs of solar generation projects discussed below. The change also includes adding 1,200 MWs of natural gas-fired combined cycle generation by 2031, with plans to switch to hydrogen fuel and/or blend hydrogen fuel with natural gas and install carbon capture technology if these technologies become commercially available at a reasonable cost, adding 1,200 MWs of additional clean dispatchable generation by 2043, the continued implementation of customer energy-efficiency programs, and the expectation that Ameren Missouri will seek and receive NRC approval for an extension of the operating license for the Callaway Energy Center beyond its current 2044 expiration date. Additionally, the change includes extending the retirement date of the coal-fired Sioux Energy Center from 2028 to 2030 in order to ensure reliability during the transition to clean energy generation, which is subject to the approval of a change in the asset’s depreciable life by the MoPSC in Ameren Missouri’s current electric service regulatory rate review, accelerating the retirement date of the Rush Island coal-fired energy center to 2025, retiring the Meramec coal-fired energy center at the end of its useful life in 2022, retiring the generating units at the Labadie coal-fired energy center at the end of their useful lives (two generating units by 2036 and the other two by 2042), accelerating the retirement date of the Venice natural gas-fired energy center to 2029, and retiring Ameren Missouri’s other natural gas-fired energy centers in Illinois by 2040. Ameren Missouri’s plan could be affected by, among other factors: Ameren Missouri’s ability to obtain certificates of convenience and necessity from the MoPSC, and any other required approvals for the addition of renewable resources, retirement of energy centers, and new or continued customer energy-efficiency programs; the ability to enter into build-transfer agreements for renewable generation and acquire that generation at a reasonable cost; the ability of developers to meet contractual commitments and timely complete projects, which is dependent upon the availability of necessary labor, materials, and equipment, including those that are affected by the disruptions in the global supply chain caused by the COVID-19 pandemic or government actions, among other things; changes in the scope and timing of projects; the availability of federal production and investment tax credits related to renewable energy and Ameren
Missouri’s ability to use such credits; the cost of wind, solar, and other renewable generation and storage technologies; the cost of natural gas or hydrogen CT technologies; changes in environmental regulations, including those related to CO2 and other greenhouse gas emissions; energy prices and demand; and Ameren Missouri’s ability to obtain necessary rights-of-way, easements, and transmission interconnection agreements at an acceptable cost and in a timely fashion. The next integrated resource plan is expected to be filed in September 2023.
•Missouri law allows Missouri electric utility companies to petition the MoPSC for a financing order to authorize the issuance of securitized utility tariff bonds to finance the cost of retiring electric generation facilities before the end of their useful lives, including the repayment of existing debt. In connection with the planned accelerated retirement of the Rush Island Energy Center due to the NSR and Clean Air Act Litigation discussed above, Ameren Missouri expects to seek approval from the MoPSC to finance the costs associated with the retirement, including the remaining unrecovered net plant balance associated with the facility, through the issuance of securitized utility tariff bonds. As such, Ameren Missouri did not request a change in the depreciation rates related to the Rush Island Energy Center in the electric regulatory rate review filed in August 2022.
•In February 2022, Ameren Missouri, through a subsidiary, entered into a build-transfer agreement to acquire, after construction, a 150-MW solar generation facility, which is expected to be located in southeastern Illinois and, if approved by the MoPSC, serve customers under Ameren Missouri’s Renewable Solutions Program. In June 2022, Ameren Missouri, through a subsidiary, entered into a build-transfer agreement to acquire, after construction, a 200-MW solar generation facility, which is expected to be located in central Missouri and support Ameren Missouri’s compliance with the state of Missouri’s requirement of achieving 15% of retail sales from renewable energy sources, of which 2% must be derived from solar energy sources. The acquisitions are subject to certain conditions, including the issuance of certificates of convenience and necessity by the MoPSC, obtaining MISO transmission interconnection agreements, and approval by the FERC. In July 2022, Ameren Missouri filed for certificates of convenience and necessity with the MoPSC for both facilities and expects decisions by March 2023 and April 2023 for the 200-MW facility and the 150-MW facility, respectively. Depending on the timing of regulatory approvals and the impact of potential sourcing issues discussed below, the projects could be completed as early as the fourth quarter of 2024. Capital expenditures related to these facilities are not included in Ameren’s and Ameren Missouri’s expected capital investments discussed below.
•Ameren Missouri's 2022 Change to the 2020 IRP targets cleaner and more diverse sources of energy generation, including solar generation. While rights to acquire the solar facilities discussed above were secured through build-transfer agreements, supply chain disruptions, including solar panel shortages and increasing material costs as a result of government tariffs and other factors, could affect the costs as well as the timing of these projects and other solar generation projects. The supply of solar panels to the United States was significantly disrupted as a result of an investigation initiated by the Department of Commerce in late March 2022, which could result in punitive tariffs on solar panels imported from four Southeast Asian countries. The investigation is in response to complaints of Chinese solar manufacturers shifting solar cells to these countries to avoid tariffs required on imports from China. The Department of Commerce is required to issue a preliminary determination within 150 days of its initiation of an investigation, with final determination taking 300 days or more. Additionally, certain solar panels from China have been subject to detention by the United States Customs and Border Protection Agency as a result of the Uyghur Forced Labor Prevention Act that was passed in December 2021. In June 2022, President Biden authorized the Department of Energy to use the Defense Production Act to rapidly expand American manufacturing of five critical clean energy technologies, including solar panel components. President Biden also took executive action to temporarily lift certain tariffs on solar panels imported from the four Southeast Asian countries under investigation by the Department of Commerce for 24 months in order to allow the United States access to a sufficient supply of solar panels to meet electricity generation needs while domestic manufacturing scales up. Any future tariffs or other outcomes resulting from the investigation by the Department of Commerce or actions by the United States Customs and Border Protection Agency could affect the cost and the availability of solar panels and the timing and amount of Ameren Missouri's estimated capital expenditures associated with solar generation investments.
•Through 2026, we expect to make significant capital expenditures to improve our electric and natural gas utility infrastructure, with a major portion directed to our transmission and distribution systems. We estimate that we will invest up to $18.0 billion (Ameren Missouri – up to $9.2 billion; Ameren Illinois – up to $8.6 billion; ATXI – up to $0.2 billion) of capital expenditures during the period from 2022 through 2026. These planned investments are based on the assumption of continued constructive regulatory frameworks. Ameren’s and Ameren Missouri’s estimates exclude renewable generation investment opportunities of 800 MWs by 2026, which are included in Ameren Missouri’s 2022 Change to the 2020 IRP, and investment opportunities that may be approved by the MISO to address reliability concerns in connection with the planned accelerated retirement of the Rush Island Energy Center. These investment opportunities may be incremental to or partially replace other expenditures included in the 2022 through 2026 estimates above.
•In 2021, the MISO issued a report outlining a preliminary long-range transmission planning roadmap of projects through 2039, which considers the rapidly changing generation mix within MISO resulting from significant additions of renewable generation, actual and expected generation plant closures, and state mandates or goals for clean energy or carbon emissions reductions. In July 2022, the MISO approved the first tranche of projects under the first phase of the roadmap. A portion of these projects were assigned to various utilities, of which Ameren was awarded projects that are estimated to cost approximately $1.8 billion, based on MISO’s cost estimate.
The MISO is expected to initiate requests for proposals for the remaining projects included in the first tranche, which are expected to be awarded between mid-2023 and mid-2024. These investment opportunities may be incremental to or partially replace other expenditures included in the 2022 through 2026 estimates discussed above. In July 2022, a group of industrial customers filed a complaint with the FERC, challenging provisions of a MISO tariff that exclude regional transmission projects from the MISO’s competitive bid process based on state laws related to the right of first refusal, which provide an incumbent utility the right to build, maintain, and own transmission lines located within its service territory. The complaint seeks to require MISO to revise its tariff to prohibit the application of state laws related to the right of first refusal in the MISO’s long-range transmission planning and require projects to be bid on a competitive basis, to the maximum extent possible. It also is asking for refunds related to any costs under the tariff that would not comply with the sought-after revisions. The FERC is under no deadline to issue an order.
•In July 2022, an Illinois law prohibiting the state’s oversight of certain electric utilities’ choice of RTO membership ceased to be effective. Given the change in law and the high prices resulting from MISO’s 2022 capacity auction, the ICC issued an order requiring Ameren Illinois to perform a cost benefit study of continued participation in the MISO compared to participation in PJM Interconnection LLC, another RTO. The cost benefit study will examine the impacts of participation in each RTO, including reliability, resiliency, affordability, and environmental impacts, among other things, for a period of five to 10 years beginning June 2024. The ICC order requires Ameren Illinois to file the study by July 2023. A 30-day comment period will follow. The ICC is under no obligation to issue an order in this matter.
•Environmental regulations, including those related to CO2 emissions, or other actions taken by the EPA or state regulators, or requirements that may result from the NSR and Clean Air Act Litigation discussed in Note 9 – Commitments and Contingencies under Part I, Item 1, of this report, could result in significant increases in capital expenditures and operating costs. Regulations enacted by a prior federal administration can be reviewed and repealed, and replacement or alternative regulations can be proposed or adopted by the current federal administration including the EPA. The ultimate implementation of any of these regulations, as well as the timing of any such implementation, is uncertain. However, the individual or combined effects of existing and new environmental regulations could result in significant capital expenditures, increased operating costs, or the closure or alteration of some of Ameren Missouri’s coal and natural gas-fired energy centers. Ameren Missouri’s capital expenditures are subject to MoPSC prudence reviews, which could result in cost disallowances as well as regulatory lag. The cost of Ameren Illinois’ purchased power and natural gas purchased for resale could increase. However, Ameren Illinois expects that these costs would be recovered from customers with no material adverse effect on its results of operations, financial position, or liquidity. Ameren’s and Ameren Missouri’s earnings could benefit from increased investment to comply with environmental regulations if those investments are reflected and recovered on a timely basis in customer rates.
•The Ameren Companies have multiyear credit agreements that cumulatively provide $2.3 billion of credit through December 2025, subject to a 364-day repayment term for Ameren Missouri and Ameren Illinois, with the option to seek incremental commitments to increase the cumulative credit provided to $2.7 billion. See Note 3 – Short-term Debt and Liquidity under Part I, Item 1, of this report and Note 4 – Short-term Debt and Liquidity under Part II, Item 8, in the Form 10-K for additional information regarding the Credit Agreements. By the end of 2022, $55 million, $400 million, and $50 million of long-term debt obligations are due to mature at Ameren Missouri, Ameren Illinois, and ATXI, respectively. Ameren, Ameren Missouri, and Ameren Illinois believe that their liquidity is adequate given their expected operating cash flows, capital expenditures, and financing plans. To date, the Ameren Companies have been able to access the capital markets on reasonable terms when needed. However, there can be no assurance that significant changes in economic conditions, disruptions in the capital and credit markets, or other unforeseen events will not materially affect their ability to execute their expected operating, capital, or financing plans.
•Ameren expects its cash used for currently planned capital expenditures and dividends to exceed cash provided by operating activities over the next several years. As part of its funding plan for capital expenditures, Ameren is using newly issued shares of common stock, rather than market-purchased shares, to satisfy requirements under the DRPlus and employee benefit plans and expects to continue to do so through at least 2026. Ameren expects these issuances to provide equity of about $100 million annually. In addition, in 2021, Ameren established an ATM program under which Ameren may offer and sell from time to time up to $750 million of its common stock, which includes the ability to enter into forward sales agreements, subject to market conditions and other factors. Ameren has entered into multiple forward sale agreements under the ATM program with various counterparties relating to 5.8 million shares of common stock. As of June 30, 2022, Ameren could have settled the forward sale agreements with physical delivery of 5.6 million shares of common stock to the respective counterparties in exchange for cash of $500 million. As of June 30, 2022, Ameren had approximately $90 million of common stock available under the ATM program, which takes into account the forward sale agreements in effect as of June 30, 2022. For additional information regarding outstanding forward sale agreements, including settlement dates, see Note 4 – Long-Term Debt and Liquidity under Part I, Item 1, of this report. Ameren expects to settle approximately $300 million of the forward sale agreements by December 31, 2022. Ameren plans to issue approximately $300 million of equity each year from 2022 to 2026 in addition to issuances under the DRPlus and employee benefit plans. Ameren expects its equity to total capitalization ratio to be approximately 45% through December 31, 2026, with the long-term intent to support solid investment-grade credit ratings. Ameren Missouri and Ameren Illinois expect to fund cash flow needs through debt issuances, adjustments of dividends to Ameren (parent), and/or capital contributions from Ameren (parent).
•As of June 30, 2022, Ameren had $146 million in tax benefits from federal and state income tax credit carryforwards and $38 million in tax benefits from federal and state net operating loss carryforwards, which will be utilized in future periods. Ameren expects federal income tax payments at the required minimum levels from 2022 to 2026 resulting from the anticipated use of existing production tax credits generated by Ameren Missouri’s High Prairie Renewable and Atchison Renewable energy centers, existing tax net operating losses, tax credit carryforwards, tax overpayments, and outstanding refunds.
The above items could have a material impact on our results of operations, financial position, and liquidity. Additionally, in the ordinary course of business, we evaluate strategies to enhance our results of operations, financial position, and liquidity. These strategies may include acquisitions, divestitures, opportunities to reduce costs or increase revenues, and other strategic initiatives to increase Ameren’s shareholder value. We are unable to predict which, if any, of these initiatives will be executed. The execution of these initiatives may have a material impact on our future results of operations, financial position, or liquidity.
REGULATORY MATTERS
See Note 2 – Rate and Regulatory Matters under Part I, Item 1, of this report.
