Ameren CEO talks base ROE implications, $2.2bn investment in transmission

Reducing the base return on equity (ROE) for transmission projects would deflate the desire to pursue large transmission projects, Ameren (NYSE:AEE) CEO Thomas Voss said May 2.

Asked during the question-and-answer session of the company’s 1Q13 earnings call what the effect of lower authorized ROEs would be on Ameren’s spending program for transmission, Voss said, “To the extent that the ratemaking treatment or the ROEs were changed, it detracts from the incentive that exists today in investing in these large regional transmission projects.”

The base ROE issue has risen to prominence in the transmission industry, initiated in 2011 by a request that FERC lower ISO New England’s base ROE for transmission projects (FERC Docket No. EL11-66). The issue is set for hearing this month, with an initial FERC decision scheduled for September.

Ameren’s capital expenditure program for transmission is $2.2bn for the 2013-2017 period, an increase of $500m over the company’s $1.7bn investment in transmission for the five-year period ending in 2016.

Ameren’s Ameren Transmission Company of Illinois (ATXI) has proposed to build the $1.1bn Illinois Rivers project, a 331-mile, 345-kV interstate project that is estimated to cost $1.1bn.

The company in November 2012 filed for a certificate of public convenience and necessity (CPCN) with the Illinois Commerce Commission (ICC). ICC staff on March 29 recommended the commission grant the application, with conditions. Ameren on April 29 filed testimony to address the ICC staff’s concerns. Hearings are scheduled for May 13-17, with an ICC decision expected by Aug. 20, Voss said.

“Upon receipt of the certificate from the ICC, we will begin to acquire rights-of-way for the transmission line, with the full range of construction activities expected to begin in 2014,” he said.

The project is scheduled to enter service in 2019.

Five-year investment program

The $2.2bn will be invested in FERC-regulated transmission projects over the 2013-2017 period, with $1bn to be invested at Ameren Illinois and $1.2bn to be invested at ATXI.

Spending will ramp up in the 2016-2018 time frame and will represent spending on the Spoon River and Mark Twain transmission lines, an Ameren spokesperson told TransmissionHub on May 3.

“Right now, we’re not spending a lot but when those projects ramp up, that’s when we’ll be spending more money,” the spokesperson said.

Spoon River is part of Phase I of Ameren’s Grand Rivers project and comprises 70 miles of 345-kV line in Illinois. The project is estimated to cost $209m and enter service in 2018. The Grand Rivers project involves $3bn of investment over a 15-year period, according to TransmissionHub data.

The Mark Twain project was approved by the Midwest ISO as a multi-value project in the RTO’s 2011 expansion plan. The $155m project comprises

151 miles of 345-kV line from Iowa to Missouri and is expected to enter service in December 2018.

Ameren on May 2 reported 1Q13 net income from continuing operations of $54m, or 22 cents per share, compared to 1Q12 net income from continuing operations of $37m, or 15 cents per share.

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.