Ameren (NYSE:AEE) Chairman, President and CEO Warner Baxter, during the company’s 1Q17 earnings call on May 4, said that the company has invested more than $300m, or 61% of first quarter capital expenditures, in jurisdictions with supportive regulatory frameworks, including about $135m of capital for FERC-regulated transmission projects.
A significant portion of that capital was invested in the company’s $1.4bn Midcontinent ISO (MISO)-approved Illinois Rivers Project, which is a new, high voltage transmission line that will span 385 miles across Illinois, he said.
“This project is about 78% complete, with four of its nine line segments energized, including two river crossings, and with eight of 10 substations now in service,” he said, adding that the remaining two substations are expected to be in service by the end of this month.
The project remains on schedule for completion in 2019, he said.
Another MISO-approved project, the $150m Spoon River transmission line in northwestern Illinois, will span 44 miles and include one new substation, he said, adding that foundation work on the line began in January, and that a new substation was completed and placed in service in March.
The project remains on schedule for completion in 2018, Baxter said.
He noted that there have been several recent developments in another MISO-approved project, the Mark Twain Transmission Line in northeastern Missouri.
In March, the Missouri Court of Appeals, Western District vacated the certificate of convenience and necessity (CCN) that the Missouri Public Service Commission (PSC) granted for the project in April 2016, he said.
As noted in the March 28 court opinion, the PSC granted Ameren Transmission Company of Illinois’ (ATXI) application for a CCN to build the project, subject to certain conditions, including that the CCN was contingent upon ATXI providing certified copies of county assents for the project from the Missouri counties that the project would run through – Marion, Shelby, Knox, Adair, and Schuyler.
The court said in its opinion, “Because the PSC has no statutory authority to grant a preliminary or conditional CCN contingent on the required county commission consents being subsequently obtained, the report and order was entered in excess of the PSC’s authority and is vacated.”
Baxter said during the call: “We are currently evaluating whether to appeal this ruling to the Missouri Supreme Court. Meanwhile, ATXI continues to pursue its suits filed last October, seeking to obtain assents for the original project route. A decision in these lawsuits is expected in late 2017.”
While the company continues to pursue the construction of the project under its original plan, Ameren has listened to the feedback from key stakeholders and evaluated other approaches to address their concerns, he said.
As TransmissionHub reported, Ameren on May 2 said that ATXI, in collaboration with Northeast Missouri Electric Power Cooperative (Northeast Power) and Ameren Missouri, have proposed a new route for the project that would use the existing right of way (ROW) of Northeast Power and Ameren Missouri. The proposed new route would minimize impact to landowners, communities, and existing farmland, the company said, noting that the new route would result in fewer utility structures along the existing ROW.
Baxter said during the call that the proposed alternative route would use existing transmission line corridors for nearly 90% of the project, and is not expected to change the estimated $250m project cost.
“ATXI will finalize the alternative route after obtaining public input, and then request assents for road crossings from the commissioners in the five affected counties,” he said. “Upon receiving the county assents, ATXI will then seek Missouri PSC approval.”
The project’s planned in-service date is late 2019, he said.
Baxter also said that investment continues in Ameren Illinois’ local electric transmission projects to maintain and enhance reliability, including projects to meet reliability requirements, replace aging infrastructure, and modernize the grid.
“[W]e also invested about $170m in Illinois electric and natural gas distribution infrastructure projects in the first quarter of this year,” he said. “These include investments made under the company’s Modernization Action Plan, which was enabled by Illinois’ Energy Infrastructure Modernization Act of 2011. The Act was extended through 2022 by the Future Energy Jobs Act. To date, Ameren Illinois’ electric grid modernization initiatives have resulted in an overall 17% improvement in reliability and are saving customers an estimated $45m each year.”
Ameren Illinois has installed 460,000 electric smart meters, and 250,000 gas meter modules at customer premises, Baxter said. This year, the company plans to install 300,000 advanced electric meters, and to upgrade 140,000 gas meter modules, as it works to deploy those to all of its 1.2 million electric and 800,000 gas customers in Illinois by the end of 2019, he said.
He also discussed efforts “to modernize the Missouri regulatory framework for electric utility service,” noting that Senate Bill (SB) 190, the Missouri Economic Development and Infrastructure Investment Act, remains on the Missouri Senate’s informal calendar.
The legislation, if approved, would implement regulatory reforms to modernize existing energy policies that would drive significant investment and enable Ameren Missouri to execute its $1bn incremental infrastructure investment plan over the next five years, he said.
As posted on the Senate’s website, the bill, among other things, allows the PSC to utilize rate adjustment mechanisms otherwise not specifically authorized by statute to promote modernization and replacement of an electrical corporation’s infrastructure. The bill would also allow the PSC to use partially forecast test-years, true-ups of revenue requirement components, tracking mechanisms, grid modernization incentive mechanisms, interim rates, performance-based rates, revenue decoupling with regular adjustments, or decisional pre-approval with post construction review for construction projects. The bill further notes that if the PSC authorizes any such rate adjustment mechanism for a specified term, the PSC is to lack authority to modify or eliminate an electrical corporation’s use of such mechanism during the specified term.
“While much progress has been made in designing constructive, forward-thinking legislation, this legislation was filibustered by a small group of state senators during debates several weeks ago,” Baxter said during the call.
He added that since other legislative matters have stalled debate on a number of bills, including SB 190, and the current General Assembly session ends on May 12, “we believe it is unlikely that SB 190 will advance during this legislative session.”
Also speaking on the call was Martin Lyons, Ameren executive vice president and CFO, who noted that the PSC in March approved a stipulation and agreement that resolved Ameren Missouri’s electric rate review.
As noted in Ameren’s earnings presentation, the agreement increases the annual base electric revenue requirement by $92m.
Lyons said that while the agreement did not specify an allowed return on equity (ROE), a rate base level, or a common equity ratio, the PSC determined that an implicit ROE in the range of 9.2% to 9.7% is reasonable.
“We will use a 9.53% ROE, the level authorized in our April 2015 order to calculate allowance for funds used during construction, as supported by the Missouri PSC staff in a commission open meeting,” Lyons said.
He also noted that Ameren Illinois last month made its required annual electric distribution rate update filing, which seeks a $16m decrease in the annual electric distribution revenue requirement.
“This net amount includes revenue increases reflecting 2016 recoverable costs, expected 2017 infrastructure investments, and recovery in 2018 of the 2016 revenue requirement reconciliation,” he said. “These increases are more than offset by a revenue decrease due to recovery by year end 2017 of previously unrecovered costs associated with the 2015 revenue requirement reconciliation.”
The Illinois Commerce Commission will review the matter, and a decision is expected in December, with new rates effective early next year, he said.
Lyons also noted that a second complaint case seeking to reduce the base allowed ROE for MISO transmission owners is pending at FERC. An administrative law judge issued an initial decision last June, recommending a 9.7% base ROE, he said, noting that FERC has authorized Ameren’s transmission business to add up to 50 basis points to MISO’s base allowed ROE, reflecting voluntary participation in MISO.
A final FERC order is expected this year, he said, adding: “Of course, the timing of this decision will depend in part on when new commissioners are confirmed and a quorum exists at the FERC. In addition, we expect the FERC commissioners may take time to consider the recent ruling of the U.S. Court of Appeals for the D.C. Circuit vacating the FERC’s order in a New England transmission ROE case, as such ruling may influence its order in the pending MISO case.”
As TransmissionHub reported, FERC Commissioner Colette Honorable on April 28 said that she has decided not to pursue another term at FERC. Former FERC Chairman Norman Bay resigned, effective as of Feb. 3, and prior to his resignation, there were already two vacancies at FERC, following the departures of former Commissioners Philip Moeller and Tony Clark. A FERC spokesperson on May 1 confirmed to TransmissionHub that if someone is not appointed to serve on the commission before Honorable leaves, it will be the first time in FERC’s history that the commission has only one commissioner – in this case, FERC Acting Chairman Cheryl LaFleur.
Also, as reported, the United States Court of Appeals for the District of Columbia Circuit, in an April 14 opinion, granted petitions for review – filed by the New England Transmission Owners, as well as “Petitioners Massachusetts and various consumer-side stakeholders” (referred to as customers) – regarding the base ROE for the Transmission Owners, which are a group of privately owned utilities that provide transmission services in New England.
Ameren on May 4 announced 1Q17 net income attributable to common shareholders of $102m, or 42 cents per share, compared to 1Q16 net income attributable to common shareholders of $105m, or 43 cents per share.
The year-over-year first quarter earnings decrease reflected lower 2017 electric retail sales at Ameren Missouri primarily driven by very mild winter temperatures, as well as lower tax benefits associated with share-based compensation, the company said. Those factors were partially offset by the favorable impact of a 2017 change in the timing of interim period revenue recognition at the Ameren Illinois Electric Distribution segment, Ameren added.