ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Ameren, headquartered in St. Louis, Missouri, is a public utility holding company whose primary assets are its equity interests in its subsidiaries.Ameren’s subsidiaries are separate, independent legal entities with separate businesses, assets, and liabilities. Dividends on Ameren’s common stock and the payment of expenses by Ameren depend on distributions made to it by its subsidiaries.
Below is a summary description of Ameren’s principal subsidiaries – Ameren Missouri, Ameren Illinois, and ATXI. Ameren also has other subsidiaries that conduct other activities, such as providing shared services. A more detailed description can be found in Note 1 – Summary of Significant Accounting Policies under Part II, Item 8, of this report.
•Ameren Missouri operates a rate-regulated electric generation, transmission, and distribution business and a rate-regulated natural gas distribution business in Missouri.
•Ameren Illinois operates rate-regulated electric transmission, electric distribution, and natural gas distribution businesses in Illinois.
•ATXI operates a FERC rate-regulated electric transmission business in the MISO.
Ameren has four segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Transmission. The Ameren Missouri segment includes all of the operations of Ameren Missouri. Ameren Illinois Electric Distribution consists of the electric distribution business of Ameren Illinois. Ameren Illinois Natural Gas consists of the natural gas business of Ameren Illinois. Ameren Transmission primarily consists of the aggregated electric transmission businesses of Ameren Illinois and ATXI. See Note 16 – Segment Information under Part II, Item 8, of this report for further discussion of Ameren’s and Ameren Illinois’ segments.
Ameren’s and Ameren Missouri’s financial statements are prepared on a consolidated basis and therefore include the accounts of their majority-owned subsidiaries. All intercompany transactions have been eliminated. Ameren Missouri’s subsidiaries were created for the ownership of renewable generation projects. Ameren Illinois has no subsidiaries. All tabular dollar amounts are in millions, unless otherwise indicated.
The following discussion should be read in conjunction with the financial statements contained in this Form 10-K. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. The discussion also provides information about the financial results of our business segments to provide a better understanding of how those segments and their results affect the financial condition and results of operations of Ameren as a whole. Discussion regarding our financial condition and results of operations for the year ended December 31, 2020, including comparisons with the year ended December 31, 2021, is included in Item 7 of our Form 10-K for the year ended December 31, 2021, filed with the SEC on February 23, 2022.
In addition to presenting results of operations and earnings amounts in total, we present certain information in cents per diluted share. These amounts reflect factors that directly affect Ameren’s earnings. We believe this per diluted share information helps readers to understand the impact of these factors on Ameren’s earnings per diluted share.
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OVERVIEW
Our core strategy is driven by the following three pillars, which allow us to capitalize on opportunities to benefit our customers, our shareholders, and the environment:
Segment Regulatory Framework
AmerenTransmission Formula ratemakingAllowed ROE of 10.52%
Key announcements, updates, and regulatory outcomes
In February 2023, 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 2023. 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 $9.9 billion over the five-year period from 2023 through 2027, with expenditures largely recoverable under the PISA and the RESRAM. Ameren Missouri’s Smart Energy Plan excludes investments in its natural gas distribution business, as well as removal costs, net of salvage.
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 electric rate increase request is based on a 10.2% ROE, a capital structure composed of 51.9% common equity, a rate base of $11.6 billion, and a test year ended March 31, 2022, with certain pro-forma adjustments expected through an anticipated true-up date of December 31, 2022. In January 2023, the MoPSC staff recommended an increase to Ameren Missouri's annual electric service revenues of $199 million based on a 9.59% ROE, a capital structure composed of 51.84% common equity, and a rate base as of June 30, 2022, of $10.5 billion. Ameren Missouri expects the MoPSC staff will update its rate base estimate through the anticipated true-up date of December 31, 2022. The MoPSC staff’s recommendation includes an adjustment to annual electric service revenues for estimated true-up items from June 30, 2022, to December 31, 2022, including the impacts of any investments made during that period. The MoPSC proceeding
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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. See Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report for additional information.
Missouri Senate Bill 745 became effective on August 28, 2022. The law extended Ameren Missouri’s PISA election through December 2028 and allows for an additional 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. The law also established electric and natural gas property tax trackers that allow Ameren Missouri to defer the difference between actual property taxes incurred and related taxes included in customer rates as a regulatory asset or regulatory liability, with the difference expected to be reflected in rate base in a subsequent rate order. Upon the effective date of the law, Ameren Missouri began deferring amounts under these trackers. In the 2022 electric service regulatory rate review discussed above, Ameren Missouri requested recovery of the amounts deferred under the electric property tax tracker.
In February 2022, Ameren Missouri, through a subsidiary, entered into a build-transfer agreement to acquire, after construction, the Boomtown Solar Project, a 150-MW solar generation facility, which is expected to be located in southeastern Illinois, support Ameren Missouri’s transition to renewable energy generation, and serve customers under the Renewable Solutions Program, if approved by the MoPSC. In December 2022, the MoPSC staff filed a recommendation that the MoPSC should not approve Ameren Missouri’s July 2022 request for a certificate of convenience and necessity for the facility, arguing Ameren Missouri did not adequately demonstrate the facility is needed to continue providing service to customers. Ameren Missouri expects a decision by the MoPSC by April 2023. In June 2022, Ameren Missouri, through a subsidiary, entered into a build-transfer agreement to acquire, after construction, the Huck Finn Solar Project, 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. In February 2023, the MoPSC issued an order approving a nonunanimous stipulation and agreement regarding a requested certificate of convenience and necessity for the Huck Finn Solar Project. Both acquisitions are aligned with the 2022 Change to the 2020 IRP, and are subject to certain conditions, including the issuance of certificates of convenience and necessity by the MoPSC for the Boomtown Solar Project and approval by the FERC for both acquisitions. Depending on the timing of regulatory approvals and the impact of potential sourcing issues, the facilities could be completed as early as the fourth quarter of 2024.
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.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. Transmission upgrade projects to mitigate reliability concerns have been approved by the MISO and are expected to be completed by spring of 2025. In September 2022, the Rush Island Energy Center began operating consistent with a system support resource agreement approved by the FERC in October 2022. The district court has the authority to determine the retirement date and operating parameters for the Rush Island Energy Center. The district court is under no deadline to issue a ruling modifying the remedy order. Related to this matter, 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, 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. 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 pursuant to Missouri’s securitization statute.See Note 14 – Commitments and Contingencies under Part II, Item 8, of this report for additional information.
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In January 2023, Ameren Illinois filed an MYRP with the ICC to be used in setting electric distribution service rates for 2024 through 2027. Under the MYRP, the ICC would approve base rates for electric distribution service to be charged to customers for each calendar year of the four-year period. The following table includes the forecasted revenue requirement, the requested ROE, the requested capital structure common equity percentage, and the forecasted average annual rate base for 2024 through 2027, as reflected in Ameren Illinois’ MYRP:
(a)A capital structure of up to and including 50% common equity is deemed prudent and reasonable by law. A higher equity ratio requires specific ICC approval.
Under an MYRP, the IETL permits any initial rate increase to be phased in, with at least 50% of the first annual period’s approved rate increase reflected in rates in the first annual period, with the remaining portion deferred as a regulatory asset that earns a return at the applicable WACC and is collected from customers over a period not to exceed two years beginning within one year after the second annual period’s rates are effective. Ameren Illinois’ MYRP filing utilizes this phase-in provision and proposes to defer 50% of the requested 2024 rate increase of $175 million as a regulatory asset to be collected from customers in 2026. An ICC decision in this proceeding is required by December 2023, with new rates effective starting in January 2024. See Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report for additional information.
In September 2022, the ICC issued an order approving total ROE incentives and penalties under an MYRP of 24 basis points, allocated among seven performance metrics. These performance metrics include improvements in service reliability in both the frequency and duration of outages, a reduction in peak loads, an increased percentage of spend with diverse suppliers, a reduction in disconnections for certain customers, and improved timeliness in response to customer requests for interconnection of distributed energy resources. These performance metrics and the ROE incentives and penalties will apply annually from 2024 through 2027 under the MYRP filed by Ameren Illinois.
In December 2022, the ICC issued an order in Ameren Illinois’ annual update filing that approved a $61 million increase in Ameren Illinois’ electric distribution service rates beginning in January 2023. This order reflected an increase to the annual performance-based formula rate based on 2021 actual recoverable costs and expected net plant additions for 2022, an increase to include the 2021 revenue requirement reconciliation adjustment including a capital structure composed of 50% common equity, and a decrease for the conclusion of the 2020 revenue requirement reconciliation adjustment, which was fully collected from customers in 2022, consistent with the ICC’s December 2021 annual update filing order.
In December 2022, the ICC issued an order in Ameren Illinois’ annual update filing that approved electric customer energy-efficiency rates of $76 million beginning in January 2023, which represents an increase of $15 million from 2022 rates.
In June 2022, the ICC issued an order approving Ameren Illinois’ revised energy-efficiency plan that includes annual investments in electric energy-efficiency programs of approximately $120 million per year through 2025, which reflects the increased level of annual investments allowed under the IETL. The ICC has the ability to reduce the amount of electric energy-efficiency savings goals in future 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.
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 the MISO’s cost estimate. Construction on the Ameren projects is expected to begin in 2025, with completion dates expected near the end of this decade. The MISO initiated requests for proposals in December 2022, and is expected to initiate additional requests for proposals in March and July 2023, for additional first tranche projects crossing Missouri, with total cost estimated by the MISO of approximately $0.7 billion, which are expected to be awarded between late-2023 and mid-2024. In November 2022, the MISO released plans for a second tranche of projects and began the process of identifying a list of projects for consideration under this tranche. Ameren expects the second tranche of projects to be approved in the first half of 2024. 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
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costs under the tariff that would not comply with the sought-after revisions. The FERC is under no deadline to issue an order in this proceeding.
The IRA was enacted in August 2022. The law extends federal production and investment tax credits for projects beginning construction through 2024 and creates new federal production and investment tax credits for projects placed in service after 2024, among other things. The federal production and investment tax credits will support Ameren’s net-zero carbon emission goals and Ameren Missouri’s 2022 Change to the 2020 IRP, incentivize electrification, and enhance customer affordability during Ameren’s transition to clean energy. In addition, the new law imposes a 15% minimum tax on adjusted financial statement income, as defined in the law, assessed against corporations whose average annual adjusted financial statement income exceeds $1 billion for three consecutive preceding tax years, effective for tax years beginning after December 31, 2022. Once a corporation exceeds this three-year average annual adjusted financial statement income threshold, it will be subject to the minimum tax for all future tax years. See Note 12 – Income Taxes under Part II, Item 8, of this report for additional information.
In February 2022, Ameren’s board of directors increased the quarterly common stock dividend to 59 cents per share, resulting in an annualized equivalent dividend rate of $2.36 per share. In February 2023, Ameren’s board of directors increased the quarterly common stock dividend to 63 cents per share, resulting in an annualized equivalent dividend rate of $2.52 per share.
Earnings
Net income attributable to Ameren common shareholders was $1,074 million, or $4.14 per diluted share, for 2022, and $990 million, or $3.84 per diluted share, for 2021. Net income was favorably affected in 2022, compared with 2021, by increased infrastructure investments across all business segments and a higher recognized ROE at Ameren Illinois Electric Distribution, increased retail electric sales volumes at Ameren Missouri, primarily resulting from colder winter and warmer summer temperatures experienced in 2022, and increased base rate revenues at Ameren Missouri pursuant to the December 2021 MoPSC electric rate order. Net income was unfavorably affected in 2022, compared with 2021, by increased other operations and maintenance expenses not subject to formula rates, riders, or trackers, primarily due to an increase due to the expiration of contracts relating to refined coal tax credits at Ameren Missouri in 2021, a reduction in the cash surrender value of COLI, and increased Callaway Energy Center costs. Earnings in 2022, compared with 2021, were also unfavorably affected by increased financing costs from debt issuances and higher interest on short-term borrowings.
Liquidity
At December 31, 2022, Ameren, on a consolidated basis, had available liquidity in the form of cash on hand and amounts available under the Credit Agreements of $1.5 billion.
Ameren has an ATM program under which Ameren may offer and sell from time to time common stock, which includes the ability to enter into forward sales agreements, subject to market conditions and other factors. As of December 31, 2022, Ameren had approximately $1 billion of common stock available for sale under the ATM program, which takes into account the forward sale agreements in effect as of December 31, 2022. For information regarding long-term debt issuances and maturities, common stock issuances, and outstanding forward sale agreements entered into under the ATM program through the date of this report, see Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, of this report.
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Ameren remains focused on strategic capital allocation. The following chart presents 2022 capital expenditures by segment and the midpoint of projected cumulative capital expenditures for 2023 through 2027 by segment:
Ameren Missouri(a) Ameren Illinois Natural Gas
Ameren Illinois Electric Distribution Ameren Transmission
(a)Ameren Missouri’s projected capital expenditures for 2023 through 2027 includes approximately $0.7 billion of capital expenditures related to coal-fired generation.
For 2023 through 2027, Ameren’s cumulative capital expenditures are projected to range from $18.9 billion to $20.5 billion. The following table presents the range of projected spending by segment:
Range (in billions)
Ameren Missouri(a) $ 10.0 – $ 10.8
Ameren Illinois Electric Distribution 3.5 – 3.8
Ameren Illinois Natural Gas 1.8 – 2.0
Ameren Transmission(b) 3.6 – 3.9
(a)Amount includes $2.5 billion of renewable generation investments through 2027 consistent with investments outlined in Ameren Missouri’s 2022 Change to the 2020 IRP.
(b)Amount includes $0.8 billion of capital expenditures through 2027 related to projects assigned to Ameren pursuant to the first tranche of projects under the MISO’s long-range transmission planning roadmap.
RESULTS OF OPERATIONS
Our results of operations and financial position are affected by many factors. Economic conditions, energy-efficiency investments by our customers and by us, technological advances, distributed generation, and the actions of key customers can significantly affect the demand for our services. Ameren and Ameren Missouri results are also affected by seasonal fluctuations in winter heating and summer cooling demands, as well as by energy center maintenance outages. Additionally, fluctuations in interest rates and conditions in the capital and credit markets affect our cost of borrowing, our pension and postretirement benefits costs, the cash surrender value of COLI, and the asset value of Ameren Missouri’s nuclear decommissioning trust fund. Almost all of Ameren’s revenues are subject to state or federal regulation. This regulation has a material impact on the rates we charge customers for our services. Our results of operations, financial position, and liquidity are affected by our ability to align our overall spending, both operating and capital, with the frameworks established by our regulators. See Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report for additional information regarding Ameren Missouri’s, Ameren Illinois’, and ATXI’s regulatory frameworks.
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Due to a change in customer behavior and certain business practices resulting from the COVID-19 pandemic, there has been a shift in sales volumes by customer class from pre-pandemic levels 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. While our electric sales volumes in 2022, excluding the estimated effects of weather and customer energy-efficiency programs, were comparable to 2021 and, at Ameren Missouri, were comparable to pre-pandemic levels, Ameren Illinois’ sales volumes 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. While our customers are also observing inflationary pressures, those pressures have not significantly affected customer payments. As of December 31, 2022, accounts receivable balances that were 30 days or greater past due or that were a part of a deferred payment arrangement represented 17%, 14%, and 20%, or $107 million, $35 million, and $71 million, of Ameren’s, Ameren Missouri’s, and Ameren Illinois’ customer trade receivables before allowance for doubtful accounts, respectively. In comparison, as of December 31, 2021, these percentages were 20%, 17%, and 24%, or $94 million, $34 million, and $60 million, for Ameren, Ameren Missouri, and Ameren Illinois, respectively. Ameren Illinois’ electric distribution and natural gas distribution businesses have bad debt riders, which provide for recovery of bad debt write-offs, net of any subsequent recoveries. Ameren Missouri does not have a bad debt rider or tracker, and thus its earnings are exposed to increases in bad debt expense, absent regulatory relief.
Ameren Missouri principally uses coal and enriched uranium for fuel in its electric operations and purchases natural gas for its customers. Ameren Illinois purchases power and natural gas for its customers. The prices for these commodities can fluctuate significantly because of the global economic and political environment, weather, supply, demand, inflation, and many other factors. We have natural gas cost recovery mechanisms for our Illinois and Missouri natural gas distribution businesses, a purchased power cost recovery mechanism for Ameren Illinois’ electric distribution business, and a FAC for Ameren Missouri’s electric business.
We employ various risk management strategies to reduce our exposure to commodity risk and other risks inherent in our business. The reliability of Ameren Missouri’s energy centers and our transmission and distribution systems and the level and timing of operations and maintenance costs and capital investment are key factors that we seek to manage in order to optimize our results of operations, financial position, and liquidity.
Earnings Summary
The following table presents a summary of Ameren’s earnings for the years ended December 31, 2022 and 2021:
Net income attributable to Ameren common shareholders $ 1,074 $ 990
Earnings per common share – diluted 4.14 3.84
Net income attributable to Ameren common shareholders in 2022 increased $84 million, or $0.30 per diluted share, from 2021. The increase was due to net income increases of $44 million, $37 million, $33 million, and $15 million at Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Transmission, and Ameren Illinois Natural Gas, respectively. The increases in net income were partially offset by an increase in the net loss for activity not reported as part of a segment, primarily at Ameren (parent), of $45 million.
Earnings per share in 2022, compared with 2021, were favorably affected by:
•increased rate base investments at Ameren Transmission and Ameren Illinois Electric Distribution and a higher recognized ROE due to a higher annual average of the monthly yields of the 30-year United States Treasury bonds at Ameren Illinois Electric Distribution, which increased revenues at these segments (23 cents per share);
•increased electric retail sales at Ameren Missouri, primarily resulting from colder winter temperatures and warmer summer temperatures experienced in 2022 (estimated at 13 cents per share);
•higher base rate revenues at Ameren Missouri pursuant to the December 2021 MoPSC electric rate order, partially offset by the amortization of previously deferred depreciation expense under the PISA and RESRAM, financing costs otherwise recoverable under the PISA and RESRAM, a higher base level of expenses, and the net recovery for amounts associated with the reduction in sales volumes resulting from MEEIA programs (10 cents per share);
•increased Ameren Illinois Natural Gas earnings from investments in qualifying infrastructure recovered under the QIP and higher base rates, pursuant to the ICC’s January 2021 natural gas rate order (7 cents per share);
•increased base rate revenues at Ameren Missouri for the inclusion of previously deferred interest charges pursuant to the December 2021 MoPSC electric rate order, partially offset by lower deferral of interest charges related to infrastructure investments associated with the PISA and RESRAM (6 cents per share);
•increased electric retail sales at Ameren Missouri, excluding the estimated effects of weather, primarily due to increased sales volumes for commercial and residential customers (5 cents per share);
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•a change in the method of earning MEEIA performance incentives from metrics-based to spend-based, which resulted in an increased level of MEEIA performance incentives due to the recognition of incentives from two program years in 2022, compared with one program year in 2021 (4 cents per share);
•increased Ameren Missouri margins resulting from increased electric demand and customer charges, higher base rates pursuant to the December 2021 MoPSC natural gas rate order, and increased electric transmission service revenues (3 cents per share);
•increased other income, net, primarily due to increased non-service cost components of net periodic benefit income not subject to formula rates or trackers largely due to a decrease in net actuarial losses (3 cents per share); and
•the absence in 2022 of the FERC’s March 2021 order, primarily related to the historical recovery of materials and supplies inventories, which decreased Ameren Transmission revenues in 2021 (3 cents per share).
Earnings per share in 2022, compared with 2021, were unfavorably affected by:
•increased other operations and maintenance expenses not subject to formula rates, riders, or trackers, primarily due to the expiration of contracts relating to refined coal tax credits at Ameren Missouri in 2021, a reduction in the cash surrender value of COLI, and increased Callaway Energy Center costs (26 cents per share);
•increased financing costs, primarily at Ameren Missouri and Ameren (parent), primarily due to higher long-term debt balances and higher interest rates on short-term borrowings (13 cents per share);
•decreased other income, net, from lower earnings on equity method investments to advance clean and resilient energy technologies and increased charitable donations, primarily at Ameren (parent) (8 cents per share); and
•increased weighted-average basic common shares outstanding resulting from issuances of common shares as detailed in Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, of this report (3 cents per share).
The cents per share information presented is based on the weighted-average basic shares outstanding in 2021 and does not reflect any change in earnings per share resulting from dilution, unless otherwise noted. Amounts other than variances related to income taxes have been presented net of income taxes using Ameren’s 2022 statutory tax rate of 26%. For additional details regarding the Ameren Companies’ results of operations, including explanations of Electric and Natural Gas Margins, Other Operations and Maintenance Expenses, Depreciation and Amortization, Taxes Other Than Income Taxes, Other Income, Net, Interest Charges, and Income Taxes, see the major headings below.
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Below is Ameren’s table of income statement components by segment for the years ended December 31, 2022 and 2021:
Natural gas purchased for resale (104) — (553) — — (657)
Noncontrolling interests – preferred stock dividends (3) (1) — (1) — (5)
Natural gas purchased for resale (60) — (382) — — (442)
Noncontrolling interests – preferred stock dividends (3) (1) — (1) — (5)
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Below is Ameren Illinois’ table of income statement components by segment for the years ended December 31, 2022 and 2021:
Natural gas purchased for resale — (553) — — (553)
Natural gas margins — 627 — — 627
Other operations and maintenance expenses (580) (253) (49) — (882)
Depreciation and amortization (332) (98) (84) — (514)
Taxes other than income taxes (75) (82) (4) — (161)
Preferred stock dividends (1) — (1) — (2)
Net income attributable to common shareholder $ 202 $ 123 $ 188 $ — $ 513
Natural gas revenues — 957 — — 957
Natural gas purchased for resale — (382) — — (382)
Natural gas margins — 575 — — 575
Other operations and maintenance expenses (534) (236) (50) — (820)
Depreciation and amortization (309) (90) (73) — (472)
Taxes other than income taxes (76) (73) (4) — (153)
Preferred stock dividends (1) — (1) — (2)
Net income attributable to common shareholder $ 165 $ 108 $ 152 $ — $ 425
Margins
Electric margins are defined as electric revenues less fuel and purchased power costs. Natural gas margins are defined as natural gas revenues less natural gas purchased for resale. We consider electric and natural gas margins useful measures to analyze the change in profitability of our electric and natural gas operations between periods. We have included the analysis below as a complement to the financial information we provide in accordance with GAAP. However, these margins may not be a presentation defined under GAAP, and they may not be comparable to other companies’ presentations or more useful than the GAAP information we provide elsewhere in this report.
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Electric Margins
Total by Segment(a) Increase by Segment
Overall Ameren Increase of $451 Million
(a)Includes other/intersegment eliminations of $(25) million and $(29) million in 2022and 2021, respectively.
Natural Gas Margins
Total by Segment(a) Increase by Segment
Overall Ameren Increase of $64 Million
(a)Includes other/intersegment eliminations of $(1) million and $(1) million in 2022and 2021, respectively.
Ameren Missouri Ameren Illinois Natural Gas Other/Intersegment Eliminations
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The following table presents the favorable (unfavorable) variations by segment for electric and natural gas margins in 2022, compared with 2021:
Electric and Natural Gas Margins
Electric revenue change:
Base rates (estimate)(b) $ 202 $ 87 $ — $ 53 $ — $ 342
Effect of weather (estimate)(c) 53 — — — — 53
MEEIA 2019 performance incentives 13 — — — — 13
Off-system sales, capacity, and FAC revenues, net 315 — — — — 315
Transmission service 3 — — — — 3
Demand and customer charges 4 — — — — 4
Other cost recovery mechanisms(e) 34 (3) — — — 31
Fuel and purchased power change:
Effect of weather (estimate)(c) (10) — — — — (10)
Effect of higher net energy costs included in base rates (10) — — — — (10)
Other (4) — — — — (4)
Cost recovery mechanisms – offset in electric revenue(d) 2 (518) — — 27 (489)
Total fuel and purchased power change $ (342) $ (518) $ — $ — $ 27 $ (833)
Net change in electric margins $ 295 $ 99 $ — $ 53 $ 4 $ 451
Natural gas revenue change:
Base rates (estimate) $ 3 $ — $ 4 $ — $ — $ 7
Effect of weather (estimate)(c) 12 — — — — 12
Change in rate design — — 1 — — 1
QIP rider — — 26 — — 26
Other 2 — 3 — — 5
Other cost recovery mechanisms(e) 3 — 18 — — 21
Total natural gas revenue change $ 56 $ — $ 223 $ — $ — $ 279
Natural gas purchased for resale change:
Effect of weather (estimate)(c) $ (8) $ — $ — $ — $ — $ (8)
Total natural gas purchased for resale change $ (44) $ — $ (171) $ — $ — $ (215)
Net change in natural gas margins $ 12 $ — $ 52 $ — $ — $ 64
(a)Includes an increase in transmission electric margins of $59 million in 2022, compared with 2021, at Ameren Illinois.
(b)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 a decrease 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.
(c)Represents the estimated variation resulting primarily from changes in cooling and heating degree days on electric and natural gas demand compared with the prior year; this variation is based on temperature readings from the National Oceanic and Atmospheric Administration weather stations at local airports in our service territories.
(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 13 – Related-party Transactions and Note 16 – Segment Information under Part II, Item 8, 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 of the statement of income. These items have no overall impact on earnings.
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Ameren
Ameren’s electric margins increased $451 million, or 11%, in 2022, compared with 2021, because of increased margins at Ameren Missouri, Ameren Illinois Electric Distribution, and Ameren Transmission, as discussed below. Ameren’s natural gas margins increased $64 million, or 10%, between years primarily because of increased margins at Ameren Illinois Natural Gas and Ameren Missouri, as discussed below.
Ameren Transmission
Ameren Transmission’s margins increased $53 million, or 9%, in 2022, compared with 2021. Base rate revenues were favorably affected by increased capital investment (+$23 million), as evidenced by a 10% increase in rate base used to calculate the revenue requirement, higher recoverable expenses (+$19 million), the absence in 2022 of the FERC’s March 2021 order (+$7 million), and a higher equity percentage in the capital structure at Ameren Illinois (+$4 million). See Transmission Formula Rate Revisions in Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report for additional information regarding the March 2021 FERC order.
Ameren Missouri
Ameren Missouri’s electric margins increased $295 million, or 12%, in 2022, compared with 2021. Revenues associated with “Cost recovery mechanisms – offset in fuel and purchased power” were comparable to 2021, with a decrease of $2 million in 2022, due to changes in 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 in 2022, compared with 2021:
•The December 2021 MoPSC electric rate order effective February 28, 2022, 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 $192 million. The change in electric base rates is the sum of the change in “Base rates (estimate)” (+$202 million) and the “Effect of higher net energy costs included in base rates” (-$10 million) in the table above.
•Summer temperatures were warmer as cooling degree days increased 3% through September, and winter temperatures were colder as heating degree days increased 11%. The aggregate effect of weather increased margins by an estimated $43 million. The change in margins due to weather is the sum of the “Effect of weather (estimate)” on electric revenues (+$53 million) and the “Effect of weather (estimate)” on fuel and purchased power (-$10 million) in the table above.
•Other cost recovery mechanisms increased margins $34 million due to increased RESRAM revenues (+$38 million), primarily resulting from a lower deferral of revenues due to inclusion of production tax credits in base rates pursuant to the December 2021 electric rate order and increased excise taxes (+$9 million), partially offset by a decrease in recoverable MEEIA program costs (-$13 million).
•Excluding the estimated effects of weather and the MEEIA customer energy-efficiency programs, electric revenues increased an estimated $17 million. The increase was primarily due to an increase in commercial and residential sales volumes and an increase in the average retail price per kilowatthour due to changes in customer usage patterns.
•The MEEIA 2019 performance incentives increased revenues $13 million due to a change in the method of earning MEEIA performance incentives from metrics-based to spend-based, resulting in the recognition in 2022 of performance incentives for program years 2021 and 2022, compared with recognition in 2021 of the performance incentive for program year 2020.
•Demand and customer charges increased revenues $4 million due to higher revenues from commercial customer demand charges and increased residential and commercial customer counts.
•Transmission service revenues increased $3 million, primarily due to increased volumes.
Ameren Missouri’s electric margins decreased $5 million due to its 5% exposure to net energy cost variances under the FAC. The change in net energy costs is the sum of “Off-system sales, capacity and FAC revenues, net” (+$315 million) and “Energy costs (excluding the estimated effect of weather)” (-$320 million) in the table above. Net energy costs were higher than those reflected in base rates, primarily because of higher purchased power costs due to higher energy prices in 2022, compared with 2021. Higher purchased power costs were partially offset by a favorable net impact of capacity revenues and costs.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. Capacity revenues and costs increased as the capacity price set by the annual MISO auction in 2022 increased from $5 per MW-day to $237 per MW-day. The April 2021 MISO auction pricing was effective from June 2021 through May 2022, while the April 2022 MISO auction pricing established the annual rate beginning in June 2022. In 2022, compared with 2021, increased capacity revenues of $367 million are reflected in “Off-system sales, capacity and FAC revenues, net” and increased capacity costs of $355 million are reflected in “Energy costs (excluding the estimated effect of weather)” in the table above. See Outlook for additional information related to the April 2022 MISO auction.
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Ameren Missouri’s natural gas margins increased $12 million, or 15%, in 2022, compared with 2021.Purchased gas costs increased $36 million in 2022, compared with 2021, 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.The increased purchased gas costs are fully offset by an increase in natural gas revenues under the PGA, resulting in no impact to margin. The increase in purchased gas cost is reflected in “Cost recovery mechanisms – offset in natural gas revenue” and the associated recoveries 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 Missouri’s natural gas margins in 2022, compared with 2021:
•Revenues increased $4 million due to colder winter temperatures as heating degree days increased 11%. The change in margins due to weather is the sum of the “Effect of weather (estimate)” on natural gas revenues (+$12 million) and the “Effect of weather (estimate)” on natural gas purchased for resale (-$8 million) in the table above.
•Revenues increased $3 million due to higher base rates as a result of the December 2021 MoPSC natural gas rate order effective February 28, 2022.
•Other cost recovery mechanisms increased revenues $3 million due to increased revenues for excise taxes.
Ameren Illinois
Ameren Illinois’ electric margins increased $158 million, or 10%, in 2022, compared with 2021, driven by increased margins at Ameren Illinois Electric Distribution and Ameren Illinois Transmission. Ameren Illinois Natural Gas’ margins increased $52 million, or 9%, between years.
Ameren Illinois Electric Distribution
Ameren Illinois Electric Distribution’s margins increased $99 million, or 8%, in 2022, compared with 2021. Purchased power costs increased $518 million in 2022, compared with 2021, primarily due to increased energy prices (+$260 million), which largely reflect the results of IPA procurement events, and higher volumes (+$131 million), primarily due to residential and small commercial customer switching from alternative retail electric suppliers to Ameren Illinois’ supplied power. In addition to higher energy prices and volumes, purchased power costs increased due to higher capacity prices (+$91 million). In 2022, capacity revenues and costs increased as the capacity price set by the annual MISO auction in April 2022 increased from $5 per MW-day to $237 per MW-day. The April 2021 MISO auction pricing was effective from June 2021 through May 2022, while the April 2022 MISO auction pricing established the annual rate beginning in June 2022. See Outlook for additional information related to the April 2022 MISO auction. 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 recoveries 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 in 2022, compared with 2021:
•Base rates increased due to higher recoverable non-purchased power expenses (+$67 million), a higher recognized ROE (+$21 million), as evidenced by an increase of 106 basis points in the annual average of the monthly yields of the 30-year United States Treasury bonds, and increased capital investment (+$8 million), as evidenced by a 6% increase in year-end rate base, partially offset by the results from 2020 and 2021 revenue requirement reconciliation adjustment true-ups recognized in the following respective year (-$9 million). The sum of these changes collectively increased margins $87 million.
•Revenues increased $12 million due to the recovery of and return on increased customer energy-efficiency program investments under performance-based formula ratemaking.
Ameren Illinois Natural Gas
Ameren Illinois Natural Gas’ margins increased $52 million, or 9%, in 2022, compared with 2021. Purchased gas costs increased $171 million in 2022, compared with 2021, 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. The increased purchased gas costs are fully offset by an increase in natural gas revenues under the PGA, resulting in no impact to margin. The increase in purchased gas cost is reflected in “Cost recovery mechanisms – offset in natural gas revenue” and the associated recoveries 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 in 2022, compared with 2021:
•Revenues increased $26 million due to additional investment in natural gas infrastructure under the QIP.
•Other cost recovery mechanisms increased revenues $18 million, primarily due to increased revenues for excise taxes and various other riders.
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•Revenues increased $4 million due to higher base rates, primarily as a result of the January 2021 natural gas rate order.
Ameren Illinois Transmission
Ameren Illinois Transmission’s electric margins increased $59 million, or 16%, in 2022, compared with 2021. Base rate revenues were favorably affected by increased capital investment (+$25 million), as evidenced by a 16% increase in rate base used to calculate the revenue requirement, higher recoverable expenses (+$23 million), the absence in 2022 of the FERC’s March 2021 order (+$7 million), and a higher equity percentage in the capital structure (+$4 million). See Transmission Formula Rate Revisions in Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report for additional information regarding the March 2021 FERC order.
Other Operations and Maintenance Expenses
Total by Segment(a) Increase (Decrease) by Segment
Overall Ameren Increase of $163 Million
(a)Includes $60 million and $62 million at Ameren Transmission in 2022 and 2021, respectively, and other/intersegment eliminations of $16 million and $(6) million in 2022and 2021, respectively.
Ameren Missouri Ameren Illinois Natural Gas Other/Intersegment Eliminations
Ameren Illinois Electric Distribution Ameren Transmission
Ameren
Other operations and maintenance expenses at Ameren increased $163 million in 2022, compared with 2021. In addition to changes by segment as discussed below, other operations and maintenance expenses increased $22 million in 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. The non-service cost component of net periodic benefit cost or income at Ameren Services 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.
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Ameren Missouri
The $80 million increase in Ameren Missouri’s other operations and maintenance expenses in 2022, compared with 2021, was primarily due to the following items:
•The absence in 2022 of $21 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, which was reflected in electric service rates pursuant to the December 2021 MoPSC rate order.
•Labor and benefit costs increased $20 million, largely because of a higher base level of pension service costs reflected in electric service rates pursuant to the December 2021 MoPSC rate order.
•The cash surrender value of COLI decreased $20 million, primarily because of unfavorable market returns in 2022. In 2022, the effect of changes in the cash surrender value of COLI was a loss of $14 million, compared with a gain of $6 million in 2021.
•Callaway Energy Center costs increased $10 million, primarily because of the amortization of increased costs related to the spring 2022 refueling and maintenance outage and other non-outage related costs.
•The absence of a $5 million deferral to a regulatory asset of certain costs previously incurred to the COVID-19 pandemic, pursuant to MoPSC orders from March 2021, which decreased other operations and maintenance expenses in 2021.
•Technology-related expenditures increased $5 million, primarily because of costs associated with digital enablement projects and software licensing costs.
•Costs related to the wind energy centers increased $5 million, which are recovered under the RESRAM.
•Customer billing costs increased $4 million, 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 such fees in electric service rates.
The following items partially offset the above increases in other operations and maintenance expenses between years:
•MEEIA customer energy-efficiency program spend decreased $13 million, as approved by the MoPSC.
•Non-nuclear and non-wind energy center maintenance costs decreased $6 million, primarily because of reduced energy center maintenance outages and lower maintenance expenditures related to reduced operations at the Meramec and Rush Island energy centers.
Ameren Illinois
Other operations and maintenance expenses increased $62 million at Ameren Illinois in 2022, compared with 2021, as discussed below. Other operations and maintenance expenses were comparable at Ameren Illinois Transmission between 2022 and 2021.
Ameren Illinois Electric Distribution
The $46 million increase in Ameren Illinois Electric Distribution’s other operations and maintenance expenses in 2022, compared with 2021, was primarily due to the following items:
•Distribution system expenditures increased $15 million, primarily because of projects deferred to 2022 as a result of 2021 storm restoration efforts for which the associated costs were deferred as a regulatory asset in 2021.
•The cash surrender value of COLI decreased $10 million, primarily because of unfavorable market returns in 2022, compared with favorable market returns in 2021.
•Amortization of regulatory assets associated with customer energy-efficiency program investments under formula ratemaking increased $8 million.
•Increased bad debt expense of $7 million because of increased recovery of bad debt costs allowed by the ICC.
•Injuries and damages increased $6 million, primarily because of an increase in claims compared with 2021.
•Technology-related expenditures increased $4 million, primarily because of costs associated with digital enablement projects and software licensing costs.
The above increases were partially offset by a $4 million reduction in environmental remediation rider costs, primarily resulting from fewer remediation projects.
Ameren Illinois Natural Gas
Other operations and maintenance expenses at Ameren Illinois Natural Gas increased $17 million in 2022, compared with 2021, primarily because of the following items:
•The cash surrender value of COLI decreased $5 million, primarily because of unfavorable market returns in 2022, compared with favorable market returns in 2021. The effect of COLI was a loss of $4 million, compared with a gain of $1 million in 2021.
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•Increase of $5 million in costs recovered under various riders.
•Distribution system expenditures increased $4 million, primarily related to higher contractor service costs.
Depreciation and Amortization
Total by Segment(a) Increase by Segment
Overall Ameren Increase of $143 Million
(a)Includes other/intersegment eliminations of $4 million and $4 million in 2022 and 2021, respectively.
Ameren Missouri Ameren Illinois Natural Gas Other/Intersegment Eliminations
Ameren Illinois Electric Distribution Ameren Transmission
The $143 million, $100 million, and $42 million increases in depreciation and amortization expenses in 2022, compared with 2021, at Ameren, Ameren Missouri, and Ameren Illinois, respectively, were primarily due to additional property, plant, and equipment across their respective segments. Ameren’s and Ameren Missouri’s depreciation and amortization expenses were affected by the following, which include the effect of the additional investments in property, plant, and equipment:
•Depreciation and amortization rate changes pursuant to the December 2021 MoPSC electric rate order, which increased depreciation and amortization expenses by $57 million.
•Increased depreciation and amortization expenses of $57 million 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 of expenses of $50 million 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 by $51 million, pursuant to the December 2021 MoPSC electric rate order, which established a five-year recovery period for certain Meramec Energy Center costs.
•The deferral of RESRAM eligible expenses decreased depreciation and amortization expenses by $10 million.
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Taxes Other Than Income Taxes
Total by Segment(a) Increase (Decrease) by Segment
Overall Ameren Increase of $27 Million
(a)Includes $9 million and $8 million at Ameren Transmission in 2022 and 2021, respectively, and other/intersegment eliminations of $10 million and $12 million in 2022and2021, respectively.
Ameren Missouri Ameren Illinois Natural Gas Other/Intersegment Eliminations
Ameren Illinois Electric Distribution Ameren Transmission
Taxes other than income taxes increased $27 million at Ameren in 2022, compared with 2021, primarily because of $12 million and $8 million increases in excise taxes at Ameren Missouri and Ameren Illinois Natural Gas, respectively, mostly due to higher base rates at Ameren Missouri, pursuant to the December 2021 MoPSC electric rate order, and increased sales at both segments. Taxes other than income taxes also increased $8 million at Ameren Missouri because of increased property taxes, primarily resulting from higher assessed values, that were incurred prior to the implementation of the electric and natural gas property tax trackers beginning in August 2022.
See Excise Taxes in Note 15 – Supplemental Information under Part II, Item 8, of this report for additional information.
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Other Income, Net
Total by Segment Increase (Decrease) by Segment
Overall Ameren Increase of $24 Million
Ameren Missouri Ameren Illinois Natural Gas Other/Intersegment Eliminations
Ameren Illinois Electric Distribution Ameren Transmission
Other income, net, increased $24 million at Ameren in 2022, compared with 2021, primarily because of increases in the non-service cost component net periodic benefit income of $19 million, $19 million, and $8 million for Ameren Illinois Electric Distribution, activity not reported as part of a segment, and Ameren Illinois Natural Gas, respectively, largely due to a decrease in net actuarial losses. These increases in other income, net, were partially offset by a $15 million increase in charitable contributions and a $10 million decrease in income from equity method investments, primarily associated with investments to advance clean and resilient energy technologies, both for activity not reported as part of a segment.
See Note 6 – Other Income, Net under Part II, Item 8, of this report for additional information. See Note 10 – Retirement Benefits under Part II, Item 8, of this report for more information on the non-service cost components of net periodic benefit income.
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Interest Charges
Total by Segment Increase by Segment
Overall Ameren Increase of $103 Million
Ameren Missouri Ameren Illinois Natural Gas Other/Intersegment Eliminations
Ameren Illinois Electric Distribution Ameren Transmission
Interest charges increased $103 million in 2022, compared with 2021, primarily because of the following items:
•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 was updated when new customer rates became effective on February 28, 2022, pursuant to the December 2021 MoPSC electric rate order. 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 $49 million.
•Issuances of long-term debt at Ameren Missouri in June 2021 and April 2022 increased interest charges by $21 million.
•Interest charges at Ameren (parent) and Ameren Missouri increased $11 million and $4 million, respectively, because of higher interest rates on short-term borrowings.
•Issuances of long-term debt at Ameren (parent) in March 2021 and November 2021 increased interest charges by $10 million.
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Income Taxes
The following table presents effective income tax rates for the years ended December 31, 2022and 2021:
Ameren Missouri (2)% 1%
Ameren Illinois 26% 25%
Ameren Illinois Electric Distribution 25% 24%
Ameren Illinois Natural Gas 27% 27%
Ameren Illinois Transmission 26% 25%
Ameren Transmission 26% 26%
See Note 12 – Income Taxes under Part II, Item 8, of this report for information regarding reconciliations of effective income tax rates for Ameren, Ameren Missouri, and Ameren Illinois.
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). In addition, to support a portion of its fuel requirements for generation, Ameren Missouri has entered into various long-term commitments to meet these requirements. Ameren Missouri and Ameren Illinois also have entered into various long-term commitments for purchased power and natural gas for distribution. Ameren’s, Ameren Missouri’s, and Ameren Illinois’ estimated minimum purchase obligations associated with these commitments totaled $2.3 billion, $1.0 billion, and, $1.3 billion, respectively, which include $1.1 billion, $0.4 billion, and, $0.7 billion, respectively, in 2023.
We expect to make significant capital expenditures over the next five years, as discussed in the Capital Expenditures sections below, 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 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 2027. Ameren expects these equity issuances to total about $100 million annually. In addition, Ameren has an ATM program under which Ameren may offer and sell from time to time common stock, which includes the ability to enter into forward sales agreements, subject to market conditions and other factors. During 2022, Ameren issued a total of 3.4 million shares of common stock and received aggregate proceeds of $292 million under the ATM program. As of January 31, 2023, Ameren had multiple forward sale agreements that could be settled under the ATM program with various counterparties relating to 3.4 million shares of common stock. As of December 31, 2022, Ameren could have settled the forward sale agreements with physical delivery of 3.2 million shares of common stock to the respective counterparties in exchange for cash of $295 million. Ameren expects to settle approximately $300 million of the forward sale agreements and issue 3.2 million shares of common stock by December 31, 2023. Also, Ameren plans to issue approximately $500 million of equity each year from 2024 to 2027 in addition to issuances under the DRPlus and employee benefit plans. As of December 31, 2022, Ameren had approximately $1 billion of common stock available for sale under the ATM program, which takes into account the forward sale agreements in effect as of December 31, 2022. Ameren expects its equity to total capitalization to be about 45% through December 31, 2027, with the long-term intent to support solid investment-grade credit ratings. See Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, 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 December 31, 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 $1.5 billion at December 31, 2022. See Credit Facility Borrowings and Liquidity and Long-term Debt and Equity below for additional information.
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The following table presents net cash provided by (used in) operating, investing, and financing activities for the years ended December 31, 2022 and 2021:
(a) Both Ameren and Ameren Illinois’ cash provided by operating activities included cash outflows of $104 million and $99 million for the FEJA electric energy-efficiency rider and $5 million and $30 million for the customer generation rebate program in 2022 and 2021, respectively.
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 regulatory rate review, subject to prudence reviews. 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, significantly affects the amount and timing of our cash provided by operating activities. See Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report for more information about our regulatory frameworks.
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 collected the PGA under-recovery over 18 months beginning April 2021.
Ameren
Ameren’s cash provided by operating activities increased $602 million in 2022, compared with 2021. The following items contributed to the increase:
•A $615 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 2021 due to extremely cold weather, an increase in collections under the renewable energy credit compliance rider pursuant to the IETL, and higher customer collections resulting from base rate increases pursuant to Ameren Missouri’s December 2021 electric rate order, partially offset by a decrease attributable to other regulatory mechanisms.
•A $55 million decrease in pension benefit plan contributions.
•A $29 million decrease in coal inventory levels at Ameren Missouri as less coal was purchased in 2022 due to transportation delays.
•A $29 million decrease in payments to settle ARO liabilities, primarily related to the closure of Ameren Missouri’s CCR storage facilities.
•A $12 million decrease in major storm restoration costs at Ameren Illinois, primarily due to a January 2021 storm.
The following items partially offset the increase in Ameren’s cash from operating activities between periods:
•A $70 million increase in purchases of materials and supplies inventories to support operations in 2022 as levels were primarily increased to mitigate against potential supply disruptions.
•A $50 million increase in interest payments, primarily due to an increase in the average outstanding debt and an increase in interest rates.
•A $47 million increase in payments for the 2022 nuclear refueling and maintenance outage at Ameren Missouri’s Callaway Energy Center. There was no scheduled refueling and maintenance outage in 2021.
•The absence in 2022 of $20 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 $16 million increase in property tax payments at Ameren Missouri, primarily due to higher assessed property tax values and an increase in assets placed in-service.
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•A $10 million increase in net collateral posted with counterparties, primarily due to changes in the market prices of power, natural gas, and other fuels.
Ameren Missouri
Ameren Missouri’s cash provided by operating activities increased $201 million in 2022, compared with 2021. The following items contributed to the increase:
•A $182 million increase resulting from increased customer collections and decreased expenditures under the PGA due to the significant increase from customer demand and prices for natural gas 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, partially offset by a decrease attributable to other regulatory mechanisms.
•A $39 million increase resulting from income tax refunds of $20 million in 2022, compared with income tax payments of $19 million in 2021, from Ameren (parent) pursuant to the tax allocation agreement, primarily due to lower taxable income in 2022.
•A $29 million decrease in coal inventory levels as less coal was purchased in 2022 due to transportation delays.
•A $29 million decrease in payments to settle ARO liabilities, primarily related to the closure of CCR storage facilities.
•A $21 million decrease in pension benefit plan contributions.
•A $20 million decrease in net collateral posted with counterparties, primarily due to changes in the market prices of power, natural gas, and other fuels.
The following items partially offset the increase in Ameren Missouri’s cash from operating activities between periods:
•A $47 million increase in payments for the 2022 nuclear refueling and maintenance outage at the Callaway Energy Center. There was no scheduled refueling and maintenance outage in 2021.
•A $34 million increase in purchases of materials and supplies inventories to support operations in 2022 as levels were primarily increased to mitigate against potential supply disruptions.
•A $25 million increase in interest payments, primarily due to an increase in the average outstanding debt and an increase in interest rates.
•The absence in 2022 of $20 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 $16 million increase in property tax payments, primarily due to higher assessed property tax values and an increase in assets placed in-service.
Ameren Illinois
Ameren Illinois’ cash provided by operating activities increased $386 million in 2022, compared with 2021. The following items contributed to the increase:
•A $432 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 2021 due to extremely cold weather, an increase in collections under the renewable energy credit compliance rider pursuant to the IETL, and a net increase attributable to other regulatory recovery mechanisms.
•A $25 million decrease in pension benefit plan contributions.
•A $12 million decrease in major storm restoration costs, primarily due to a January 2021 storm.
The following items partially offset the increase in Ameren Illinois’ cash from operating activities between periods:
•A $64 million decrease resulting from income tax payments of $23 million in 2022, compared with income tax refunds of $41 million in 2021, to Ameren (parent) pursuant to the tax allocation agreement, primarily due to higher taxable income in 2022.
•A $36 million increase in purchases of materials and supplies inventories to support operations in 2022 as levels were primarily increased to mitigate against potential supply disruptions.
•A $30 million increase in net collateral posted with counterparties, primarily due to changes in the market prices of power and natural gas.
Cash Flows from Investing Activities
Ameren’s cash used in investing activities decreased $158 million during 2022, compared with 2021, primarily as a result of a $128 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.
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Ameren Missouri’s cash used in investing activities decreased $219 million during 2022, compared with 2021, primarily as a result of a $325 million decrease in capital expenditures, largely resulting from a reduction in expenditures related to wind generation assets, partially offset by increased expenditures for electric delivery infrastructure upgrades. The decrease was partially offset by a $139 million return of net money pool advances in 2021.
Ameren Illinois’ cash used in investing activities increased $165 million during 2022, compared with 2021, due to an increase in capital expenditures, largely related to transmission projects.
Capital Expenditures
The following charts present our capital expenditures for the years ended December 31, 2022 and 2021:
Ameren Illinois Electric Distribution Ameren Illinois Transmission
(a)Includes Other capital expenditures of $(9) million and $(9) million for the years ended December 31, 2022 and 2021, respectively, which includes amounts for the elimination of intercompany transfers.
(b)Ameren Missouri’s capital expenditures include $525 million for wind generation expenditures for the year ended December 31, 2021.
Ameren’s 2022 capital expenditures consisted of expenditures made by its subsidiaries, including $69 million by ATXI and other electric transmission subsidiaries. Of the $308 million in capital expenditures spent by Ameren Illinois Natural Gas during 2022, $183 million related to natural gas projects eligible for QIP recovery. Ameren’s 2021 capital expenditures consisted of expenditures made by its subsidiaries, including $41 million by ATXI and other electric transmission subsidiaries. Of the $278 million in capital expenditures spent by Ameren Illinois Natural Gas during 2021, $170 million related to natural gas projects eligible for QIP recovery. In addition, Ameren Missouri expenditures included $525 million for wind generation, primarily for the acquisition of the Atchison Renewable Energy Center. In both years, other capital expenditures were made principally to maintain, upgrade, and improve the reliability of the transmission and distribution systems of Ameren Missouri and Ameren Illinois by investing in substation upgrades, energy center projects, and smart-grid technology. Additionally, the Ameren Companies invested in various software projects.
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The following table presents Ameren’s estimate of capital expenditures that will be incurred from 2023 through 2027, including construction expenditures, allowance for funds used during construction, and expenditures for compliance with existing environmental regulations:
ATXI and other electric transmission subsidiaries 120 50 – 55 170 – 175
Ameren Missouri’s estimated capital expenditures include transmission, distribution, grid modernization, and generation-related investments, as well as expenditures for compliance with environmental regulations. Capital expenditures related to coal-fired generation of approximately $0.7 billion are included in Ameren Missouri’s estimated capital expenditures through 2027. Ameren Illinois’ estimated capital expenditures are primarily for electric and natural gas transmission and distribution-related investments, including capital expenditures to modernize its electric and gas distribution systems. These planned investments are based on the assumption of continued constructive regulatory frameworks. Ameren’s and Ameren Missouri’s estimated capital expenditures include $2.5 billion ofrenewable generation investments through 2027 consistent with investments outlined in Ameren Missouri’s 2022 Change to the 2020 IRP.Ameren’s estimate also includes $0.8 billion of capital expenditures through 2027 related to projects assigned to Ameren pursuant to the first tranche of projects under the MISO’s long-range transmission planning roadmap. The capital expenditures associated with the MISO’s long-range transmission planning roadmap are predominantly reflected in the Ameren Illinois Transmission amounts until the planning process is completed.
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 the MISO’s cost estimate. Construction on the Ameren projects is expected to begin in 2025, with completion dates expected near the end of this decade. The MISO initiated requests for proposals in December 2022, and is expected to initiate additional requests for proposals in March and July 2023, for additional first tranche projects crossing Missouri, with total cost estimated by the MISO of approximately $0.7 billion, which are expected to be awarded between late-2023 and mid-2024.
In February 2023, 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 2023. 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 $9.9 billion over the five-year period from 2023 through 2027, with expenditures largely recoverable under the PISA and the RESRAM. Ameren Missouri’s Smart Energy Plan excludes investments in its natural gas distribution business, as well as removal costs, net of salvage.
Ameren Missouri continually reviews its generation portfolio and expected power needs. As a result, Ameren Missouri could modify its plan for generation capacity, the type of generation asset technology that will be employed, and whether capacity or power may be purchased, among other changes. Additionally, we continually review the reliability of our transmission and distribution systems, expected capacity needs, and opportunities for transmission investments within and outside our service territories. The timing and amount of investments could vary because of changes in expected capacity, the condition of transmission and distribution systems, and our ability and willingness to pursue transmission investments, as well as our ability to obtain necessary regulatory approvals, among other factors. Any changes in future generation, transmission, or distribution needs could result in significant changes in capital expenditures or losses, which could be material. Compliance with environmental regulations could also have significant impacts on the level of capital expenditures.
Environmental Capital Expenditures
Ameren Missouri will continue to incur costs to comply with federal and state regulations, including those requiring the reduction of SO2, NOx, and mercury emissions from its coal-fired energy centers, compliance with the CCR Rule, and potential modifications to cooling water intake structures at existing power plants under Clean Water Act rules. See Note 14 – Commitments and Contingencies under Part II, Item 8, of this report for a discussion of existing and proposed environmental laws that affect, or may affect, our facilities and capital expenditures to comply with such laws.
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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.
Ameren’s cash provided by consolidated financing activities decreased $553 million during 2022, compared with 2021. During 2022, Ameren utilized net proceeds of $1.5 billion of long-term debt to repay then-outstanding short-term debt, for capital expenditures, and to repay $505 million of maturities of long-term debt. In addition, Ameren utilized proceeds from net commercial paper issuances of $522 million, aggregate cash proceeds of $333 million from the issuance of common stock under the ATM program, the DRPlus, and the 401(k) plan, and cash provided by operating activities to fund, in part, capital expenditures. In comparison, in 2021, Ameren utilized proceeds from the issuance of $2.0 billion of long-term debt for general corporate purposes, including 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 discussed in the Cash Flows from Operating Activities section above, and to fund, in part, capital expenditures. Ameren also received aggregate cash proceeds of $308 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, and $55 million from net commercial paper issuances. These proceeds were used to fund a portion of Ameren Missouri’s wind generation investments and to fund, in part, other capital expenditures. During 2022, Ameren paid common stock dividends of $610 million, compared with $565 million in dividend payments in 2021.
Ameren Missouri’s cash provided by financing activities decreased $278 million during 2022, compared with 2021. During 2022, Ameren Missouri utilized net proceeds of $524 million from the issuance of long-term debt to repay then-outstanding short-term debt and for capital expenditures. In addition, Ameren Missouri utilized proceeds from net commercial paper issuances of $164 million along with cash provided by operating activities to fund, in part, capital expenditures. In comparison, in 2021, Ameren Missouri utilized net proceeds of $524 million from the issuance of long-term debt 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 discussed in Cash Flows from Operating Activities. Additionally, proceeds from the issuance of long-term debt and capital contributions of $207 million from Ameren (parent) were used to fund a portion of wind generation investments and to fund, in part, capital expenditures. In 2021, Ameren Missouri also received $165 million from commercial paper issuances. During 2022, Ameren Missouri paid common stock dividends of $46 million, compared with $24 million in dividend payments in 2021.
Ameren Illinois’ cash provided by financing activities decreased $149 million during 2022, compared with 2021. During 2022, Ameren Illinois utilized net proceeds of $848 million from the issuance of long-term debt to repay $400 million of maturities of long-term debt and to repay a portion of the then-outstanding short-term debt. Additionally, the proceeds from the issuance of long-term debt, proceeds from net commercial paper issuances of $161 million, capital contributions from Ameren (parent) of $15 million, and cash provided by operating activities were used to fund, in part, capital expenditures. In comparison, in 2021, Ameren Illinois utilized net proceeds of $449 million from the issuance of long-term debt 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 discussed in Cash Flows from Operating Activities. Additionally, the proceeds from the issuance of long-term debt and $262 million of capital contributions from Ameren (parent) were used to fund, in part, capital expenditures. In 2021 Ameren Illinois also received $103 million from commercial paper issuances. In addition, Ameren Illinois repaid $19 million of money pool borrowings and redeemed $13 million of preferred stock in 2021.
Credit Facility Borrowings and Liquidity
The liquidity needs of the Ameren Companies are typically supported through the use of 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. See Note 4 – Short-term Debt and Liquidity under Part II, Item 8, of this report for additional information on credit agreements, commercial paper issuances, Ameren’s money pool arrangements and related borrowings, and relevant interest rates.
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The following table presents Ameren’s consolidated net available liquidity as of December 31, 2022:
Ameren (parent) and Ameren Missouri(a):
Missouri Credit Agreement – borrowing capacity $ 1,400
Less: Ameren (parent) commercial paper outstanding 281
Less: Ameren Missouri commercial paper outstanding 329
Less: Letters of credit 2
Missouri Credit Agreement – subtotal 788
Ameren (parent) and Ameren Illinois(b):
Illinois Credit Agreement – borrowing capacity 1,200
Less: Ameren (parent) commercial paper outstanding 196
Less: Ameren Illinois commercial paper outstanding 264
Illinois Credit Agreement – subtotal 740
Cash and cash equivalents 10
Net available liquidity $ 1,538
(a) The maximum aggregate amount available to both Ameren (parent) and Ameren Missouri under the Missouri Credit Agreement is $1 billion. See Note 4 – Short-term Debt and Liquidity under Part II, Item 8, of this report for further discussion of the Credit Agreements.
(b) The maximum aggregate amount available to Ameren (parent) and Ameren Illinois under the Illinois Credit Agreement is $700 million and $1 billion, respectively. See Note 4 – Short-term Debt and Liquidity under Part II, Item 8, of this report for further discussion of the Credit Agreements.
In December 2022, the Credit Agreements, which were scheduled to mature in December 2025, were extended and now mature in December 2027. The Credit Agreements provide $2.6 billion of credit through December 2027. See Note 4 – Short-term Debt and Liquidity under Part II, Item 8, of this report for additional information on the Credit Agreements. During the year ended December 31, 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.
The issuance of short-term debt securities by Ameren’s utility subsidiaries is subject to FERC approval under the Federal Power Act. In January 2023, the FERC issued orders authorizing Ameren Missouri, Ameren Illinois, and ATXI to issue up to $1 billion, $1 billion, and $300 million, respectively, of short-term debt securities through January 2025.
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 short-term borrowing arrangements, or other arrangements may be made.
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Long-term Debt and Equity
The following table presents Ameren’s issuances (net of any issuance premiums or discounts) of long-term debt and equity, as well as redemptions and maturities of long-term debt and preferred stock for the years ended December 31, 2022 and 2021. For additional information related to the terms and uses of these issuances and effective registration statements, and Ameren’s forward sale agreements relating to common stock, see Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, of this report. For information on capital contributions received by Ameren Missouri and Ameren Illinois from Ameren (parent), see Note 13 – Related-party Transactions under Part II, Item 8, of this report.
Month Issued, Redeemed, Repurchased, or Matured 2022 2021
Issuances of Long-term Debt
Ameren:
1.75% Senior unsecured notes due 2028 March $ — $ 450
1.95% Senior unsecured notes due 2027 November — 499
Ameren Missouri:
3.90% First mortgage bonds due 2052 (green bonds)(a) April 524 —
2.15% First mortgage bonds due 2032 (green bonds)(a) June — 524
Ameren Illinois:
5.90% First mortgage bonds due 2052 (green bonds)(a) November 349
2.90% First mortgage bonds due 2051 (green bonds)(a) June — 349
ATXI:
2.96% Senior unsecured notes due 2052 August 95 —
2.45% Senior unsecured notes due 2036 November — 75
Total Ameren long-term debt issuances $ 1,467 $ 1,997
Issuances of Common Stock
Ameren:
DRPlus and 401(k)(b) Various $ 41 (c) $ 47
August 2019 forward sale agreement(d) February — 113
Total Ameren common stock issuances(f) $ 333 $ 308
Maturities of Long-term Debt
Ameren Missouri:
City of Bowling Green financing obligation (Peno Creek CT) December 8 8
Ameren Illinois:
2.70% Senior secured notes due 2022 September 400 —
ATXI:
3.43% Senior unsecured notes due 2050 August 50 —
Total long-term debt redemptions, repurchases, and maturities $ 505 $ 8
Redemptions of Preferred Stock
Ameren Illinois:
7.75% Series March — 1
Total Ameren Illinois preferred stock redemptions $ — $ 13
(a) Ameren Missouri and Ameren Illinois intend to allocate an amount equal to the net proceeds to sustainability projects meeting certain eligibility criteria.
(b) Ameren issued a total of 0.5 million and 0.5 million shares of common stock under its DRPlus and 401(k) plan in 2022 and 2021, respectively.
(c) Excludes an $8 million receivable at December 31, 2022.
(d) Ameren issued 1.6 million shares of common stock to settle the remainder of the August 2019 forward sale agreement.
(e) Ameren issued 3.4 million and 1.8 million shares of common stock under the ATM program in 2022 and 2021, respectively.
(f) 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 in 2022 and 2021, respectively
The Ameren Companies may sell securities registered under their effective registration statements if market conditions and capital requirements warrant such sales. Any offer and sale will be made only by means of a prospectus that meets the requirements of the Securities Act of 1933 and the rules and regulations thereunder.
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Indebtedness Provisions and Other Covenants
At December 31, 2022, the Ameren Companies were in compliance with the provisions and covenants contained within 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 4 – Short-term Debt and Liquidity and Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, of this report for a discussion of covenants and provisions (and applicable cross-default provisions) contained in our credit agreements, certain of the Ameren Companies’ indentures and articles of incorporation, and ATXI’s note purchase agreements.
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
Ameren paid to its shareholders common stock dividends totaling $610 million, or $2.36 per share, in 2022 and $565 million, or $2.20 per share, in 2021. 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 earnings over the next few years. On February 10, 2023, the board of directors of Ameren declared a quarterly dividend on Ameren’s common stock of 63 cents per share, payable on March 31, 2023, to shareholders of record on March 15, 2023.
Certain of our financial agreements and corporate organizational documents contain covenants and conditions that, among other things, restrict the Ameren Companies’ payment of dividends in certain circumstances.
Ameren Illinois’ articles of incorporation require its dividend payments on common stock to be based on ratios of common stock to total capitalization and other provisions with respect to certain operating expenses and accumulations of earned surplus. Additionally, Ameren has committed to the FERC to maintain a minimum of 30% equity in the capital structure at Ameren Illinois.
Ameren Missouri and Ameren Illinois, as well as certain other nonregistrant Ameren subsidiaries, are subject to Section 305(a) of the Federal Power Act, which makes it unlawful for any officer or director of a public utility, as defined in the Federal Power Act, to participate in the making or paying of any dividend from any funds “properly included in capital account.” The FERC has consistently interpreted the provision to allow dividends to be paid as long as (1) the source of the dividends is clearly disclosed, (2) the dividends are not excessive, and (3) there is no self-dealing on the part of corporate officials. At a minimum, Ameren believes that dividends can be paid by its subsidiaries that are public utilities from net income and from retained earnings. In addition, under Illinois law, Ameren Illinois and ATXI may not pay any dividend on their respective stock unless, among other things, their respective earnings and earned surplus are sufficient to declare and pay a dividend after provisions are made for reasonable and proper reserves, or unless Ameren Illinois or ATXI has specific authorization from the ICC.
At December 31, 2022, the amount of restricted net assets of Ameren’s subsidiaries that may not be distributed to Ameren in the form of a loan or dividend was $4.0 billion.
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:
Ameren Missouri 46 24
Ameren Missouri and Ameren Illinois each have issued preferred stock, which provide for cumulative dividends. Each company’s board of directors considers the declaration of preferred stock dividends to shareholders of record on a certain date, stating the date on which the dividend is payable and the amount to be paid. See Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, of this report for further detail concerning the preferred stock issuances.
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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 of the Ameren Companies by Moody’s and S&P 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 $142 million, $101 million, and $41 million for Ameren, Ameren Missouri, and Ameren Illinois, respectively, and cash collateral posted by external parties were $33 million for Ameren and Ameren Illinois at December 31, 2022. A sub-investment-grade issuer or senior unsecured debt rating (below “Baa3” from Moody’s or below “BBB-” from S&P) at December 31, 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 $124 million, $58 million, and $66 million, respectively.
Changes in commodity prices could trigger additional collateral postings and prepayments. Based on credit ratings at December 31, 2022, if market prices were 15% higher or lower than December 31, 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, or 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.
Environmental Matters
Our electric generation, transmission, and distribution and natural gas distribution and storage operations must comply with a variety of statutes and regulations relating to the protection of the environment and human health and safety including permitting programs implemented by federal, state, and local authorities. Such environmental laws address air emissions; discharges to water bodies; the storage, handling and disposal of hazardous substances and waste materials; siting and land use requirements; and potential ecological impacts. See Note 14 – Commitments and Contingencies under Part II, Item 8, of this report for a discussion of existing and proposed environmental laws, including those that may address climate change, that affect, or may affect, our facilities, operations, and capital expenditures to comply with such laws. The individual or combined effects of compliance with existing and new environmental regulations could result in significant capital expenditures, increased operating costs, or the closure or alteration of operations at some of Ameren Missouri’s energy centers.
Additionally, international agreements could lead to future federal or state legislation or regulations. In 2015, the United Nations Framework Convention on Climate Change reached consensus among approximately 190 nations on an agreement, known as the Paris Agreement, that establishes a framework for greenhouse gas mitigation actions by all countries, with a goal of holding the increase in global
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average temperature to below 2 degrees Celsius above pre-industrial levels and an aspiration to limit the increase to 1.5 degrees Celsius. The Biden administration has a policy commitment regarding a reduction in greenhouse gas emissions for the United States, but rulemaking to achieve such reductions has not yet been implemented. Actions taken to implement the Paris Agreement could result in future additional greenhouse gas reduction requirements in the United States. In addition, the EPA has announced plans to implement new climate change programs, including potential regulation of greenhouse gas emissions targeting the utility industry.
We provide information regarding our sustainability initiatives through our website, including in our annual sustainability report, our responses to the annual climate change and water surveys conducted by CDP, and an ESG investor presentation. In addition, we issue an annual report in accordance with the Edison Electric Institute’s (EEI) and American Gas Association’s (AGA) ESG and sustainability-related reporting program. We also issue a periodic climate risk report and a report on our management of CCR. Additionally, we have posted a Task Force on Climate-related Financial Disclosures (TCFD) and Sustainability Accounting Standards Board (SASB) mapping of sustainability data. The reports may be updated at any time. The information on Ameren’s website, including the reports and documents mentioned in this paragraph, is not incorporated by reference into this report.
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 2023 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 II, Item 8, of this report.
Operations
•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. In addition, these inflationary pressures and increasing interest rates could also adversely affect our customers’ usage of, or payment for, our services. 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 annual auction resulted in a capacity price increase from $5 per MW-day for June 2021 through May 2022 to $237 per MW-day for June 2022 through May 2023. Ameren Illinois’ purchased power costs increased by nearly $500 million for calendar year 2022, compared to 2021, largely due to higher energy and capacity prices. Higher purchased power costs for calendar year 2023, compared to 2021, are 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 an IPA procurement event in 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, largely due to the capacity price set by the April 2022 MISO auction, Ameren Missouri’s capacity revenues and purchased power costs increased by approximately $370 million and $360 million, respectively, for the calendar year 2022, compared to 2021. 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. Higher capacity revenues and purchased power costs for calendar year 2023, compared to 2021, are 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.
•The PISA permits Ameren Missouri to defer and recover 85% of the depreciation expense for investments in qualifying property, plant, and equipment placed in service and not included in base rates. Investments not eligible for recovery under the PISA include amounts related to new nuclear and natural gas generating units and service to new customer premises. Additionally, the PISA permits Ameren Missouri to earn a return at the applicable WACC on rate base that incorporates those qualifying investments, as well as changes in total accumulated depreciation excluding retirements and plant-related deferred income taxes since the previous regulatory rate review. The regulatory asset for accumulated PISA deferrals also earns a return at the applicable WACC until added to rate base prospectively. Ameren Missouri recognizes an offset to interest charges for its cost of debt relating to each return allowed under the PISA, with the difference between the applicable WACC and its cost of debt recognized in revenues when recovery of PISA deferrals is reflected in customer rates. Approved PISA deferrals are 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
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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. As a result of the PISA election, additional provisions of the law apply to Ameren Missouri, including limitations on electric customer rate increases. 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. Ameren Missouri does not expect to exceed this rate increase limitation in 2023. Missouri Senate Bill 745 became effective on August 28, 2022. The law extended Ameren Missouri’s PISA election through December 2028 and allows for an additional 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.
•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. Ameren Missouri intends to invest approximately $350 million over the life of the plan, including $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 spending 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.
•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 that will be included in 2023 rates for Ameren Illinois’ and ATXI’s electric transmission businesses are $476 million and $194 million, respectively. These revenue requirements represent an increase in Ameren Illinois’ revenue requirement of $54 million and a decrease in ATXI’s revenue requirement of $1 million from the revenue requirements reflected in 2022 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 2023, but will not determine their respective electric transmission service operating revenues, which will instead be based on 2023 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 pending proceedings. Depending on the outcome of the proceedings, the transmission rates charged during previous periods and the currently effective rates may be subject to change and refund. In March 2020, the FERC issued a Notice of Proposed Rulemaking on its transmission incentives policy, which increased the 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 $14 million and $10 million, respectively, based on each company’s 2023 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 December 2022 and March 2021 ICC orders, Ameren Illinois used the current IEIMA formula framework to establish annual customer rates effective through 2023, and expects to reconcile the related
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revenue requirement for customer rates established for 2022 and 2023. As such, Ameren Illinois’ 2022 revenues reflected, and its 2023 revenues will 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. 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. The base rates for a particular calendar year are based on forecasted recoverable costs and an ICC-determined ROE applied to Ameren Illinois’ forecasted average annual rate base using a forecasted capital structure, with a common equity ratio of up to 50% being deemed prudent and reasonable by law and a higher equity ratio requiring specific ICC approval. The ROE determined by the ICC for each calendar year of the four-year period is subject to annual adjustments based on certain performance incentives and penalties. An MYRP allows 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 ROE. If a given year’s revenue amount collected from customers varies from the approved revenue requirement, an adjustment would be 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 would then be collected from, or refunded to, customers within two years from the end of the applicable annual period. Ameren Illinois’ existing riders will remain effective under the January 2023 MYRP discussed below, and will continue to remain effective beyond 2027 whether it elects to file an MYRP or a traditional regulatory rate review. Additionally, electric distribution service revenues continue to be decoupled from sales volumes under either election.
•In January 2023, Ameren Illinois filed an MYRP with the ICC requesting approval of forecasted revenue requirements for electric distribution service for 2024, 2025, 2026, and 2027 of $1,282 million, $1,373 million, $1,477 million, and $1,556 million, respectively. Pursuant to a provision under the IETL that permits initial rate increases under an MYRP to be phased in, Ameren Illinois’ filing proposes to defer 50% of the requested 2024 rate increase of $175 million as a regulatory asset to be collected from customers in 2026. That regulatory asset would earn a return at the applicable WACC. An ICC decision in this proceeding is required by December 2023, with new rates effective starting in January 2024. Ameren Illinois cannot predict the level of any electric distribution service rate change the ICC may approve, or whether any rate change that may eventually be approved will be sufficient for Ameren Illinois to recover its costs to the extent those costs are subject to and exceed the MYRP reconciliation cap and earn a reasonable return on its investments when the rate change goes into effect.
•In December 2022, the ICC issued an order in Ameren Illinois’ annual update filing that approved a $61 million increase in Ameren Illinois’ electric distribution service rates beginning in January 2023. Ameren Illinois’ 2023 electric distribution service revenues will be based on its 2023 actual recoverable costs, 2023 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 December 31, 2022, Ameren Illinois expects its 2023 electric distribution year-end rate base to be $4.2 billion. The 2023 revenue requirement reconciliation adjustment will be collected from, or refunded to, customers in 2025. 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 $12 million change in Ameren’s and Ameren Illinois’ annual net income, based on Ameren Illinois’ 2023 projected year-end rate base, including electric energy-efficiency investments. Ameren Illinois’ recognized ROE for 2022 was based on an annual average of the monthly yields of the 30-year United States Treasury bonds of 3.11%.
•In January 2023, Ameren Illinois filed a request with the ICC seeking approval to increase its annual revenues for natural gas delivery service by $160 million, which included an estimated $77 million of annual revenues that would otherwise be recovered under the QIP and other riders. A decision by the ICC in this proceeding is required by late November 2023, with new rates expected to be effective in early December 2023. Ameren Illinois cannot predict the level of any delivery service rate change the ICC may approve, nor whether any rate change that may eventually be approved will be sufficient to enable Ameren Illinois to recover its costs and to earn a reasonable return on investments when the rate changes go into effect. Without legislative action, the QIP will expire after December 2023.
•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 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.
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•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 continued to experience coal transportation delays in 2022 and early 2023, resulting in coal inventory levels below targeted levels at the Labadie and Sioux energy centers as of the end of January 2023. Prolonged delays or 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. 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 design and procurement activities necessary to complete the upgrades are underway. Ameren Missouri expects to complete the upgrades by mid-2025. In October 2022, the FERC approved a system support resource agreement, which became effective retroactively as of September 1, 2022. The agreement details the manner of continued operation for a system support resource that results in operating during peak demand times and emergencies. The system support resource designation and the related agreement are subject to annual renewal and revision. In September 2022, the Rush Island Energy Center began operating consistent with the system support resource agreement. In addition, in October 2022, the FERC established hearing and settlement procedures in response to an August 2022 request from Ameren Missouri for recovery of non-energy costs under the related MISO tariff. The FERC is under no deadline to issue an order related to this proceeding. Revenues and costs under the MISO tariff are 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. The district court is under no deadline to issue a ruling modifying the remedy order. For additional information on the NSR and Clean Air Act litigation, see Note 14 – Commitments and Contingencies under Part II, Item 8, 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, 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, 2022 and 2021, 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 will be subject to limits on emissions, including CO2 and NOx, equal to their unit-specific average annual 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 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. 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.
•Due to a change in customer behavior and certain business practices resulting from the COVID-19 pandemic, there has been a shift in sales volumes by customer class from pre-pandemic levels 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. While our electric sales volumes in 2022, excluding the
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estimated effects of weather and customer energy-efficiency programs, were comparable to 2021 and, at Ameren Missouri, were comparable to pre-pandemic levels, Ameren Illinois’ sales volumes 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. Further effects of the COVID-19 pandemic, or a similar health crisis, 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.
•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, 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 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, among other things, the following:
•the continued implementation of customer energy-efficiency programs;
•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;
•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 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;
•extending the retirement date of the coal-fired Sioux Energy Center from 2028 to 2030 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 2022 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, which was completed in December 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 or natural gas-fired combined cycle generation, retirement of energy centers, and new or continued customer energy-efficiency programs; the ability to enter into agreements for renewable or natural gas-fired combined cycle generation and acquire or construct that generation at a reasonable cost; the ability of suppliers, contractors, and 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, geopolitical conflict, or government actions, among other things; changes in the scope and timing of projects; the ability to qualify for, and use or transfer, federal production or investment tax credits; the cost of wind, solar, and other renewable generation and battery storage technologies; the cost of natural gas or hydrogen CT technologies; the ability to maintain system reliability during and after the transition to clean energy generation; changes in environmental regulations, including
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those related to CO2 and other greenhouse gas emissions; energy prices and demand; 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 inability to earn an adequate return on invested capital; and the ability to raise capital on reasonable terms. 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. 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, the Boomtown Solar Project, a 150-MW solar generation facility, which is expected to be located in southeastern Illinois, support Ameren Missouri’s transition to renewable energy generation, and serve customers under the Renewable Solutions Program, if approved by the MoPSC. In December 2022, the MoPSC staff filed a recommendation that the MoPSC should not approve Ameren Missouri’s July 2022 request for a certificate of convenience and necessity for the facility, arguing Ameren Missouri did not adequately demonstrate the facility is needed to continue providing service to customers. Ameren Missouri expects a decision by the MoPSC by April 2023. In June 2022, Ameren Missouri, through a subsidiary, entered into a build-transfer agreement to acquire, after construction, the Huck Finn Solar Project, 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. In February 2023, the MoPSC issued an order approving a nonunanimous stipulation and agreement regarding a requested certificate of convenience and necessity for the Huck Finn Solar Project. Both acquisitions are aligned with the 2022 Change to the 2020 IRP discussed above, and are subject to certain conditions, including the issuance of certificates of convenience and necessity by the MoPSC for the Boomtown Solar Project and approval by the FERC for both acquisitions. Depending on the timing of regulatory approvals and the impact of potential sourcing issues discussed below, the facilities could be completed as early as the fourth quarter of 2024. Capital expenditures related to these facilities are 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 panel components to the United States was significantly disrupted as a result of an investigation initiated by the United States Department of Commerce in late March 2022, which could result in significant tariffs on solar panel components imported from four Southeast Asian countries. The investigation is in response to a petition, which alleged that Chinese solar manufacturers shifted solar panel component manufacturing to these countries to avoid tariffs imposed on imports from China. In December 2022, the United States Department of Commerce issued a preliminary determination, finding that all exporters and producers of solar panel components from the four Southeast Asian countries, with a few exceptions, have been circumventing tariffs imposed on imports from China. As a result of the preliminary determination, processes were created by which importers and exporters may submit certifications to avoid the imposition of tariffs. Failure to submit the applicable certifications, or denial of the submitted certifications by the United States Department of Commerce, could result in increased tariffs on solar panel components that are subject to the investigation and entered the United States on or after April 1, 2022. The United States Department of Commerce will continue its investigation and is expected to issue a final determination by mid-2023. Additionally, certain solar panel components 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 became effective in June 2022. Also, in June 2022, President Biden authorized the United States 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 panel components imported from the four Southeast Asian countries under investigation by the United States Department of Commerce for 24 months in order to allow the United States access to a sufficient supply of solar panel components to meet electricity generation needs while domestic manufacturing scales up. Any future tariffs or other outcomes resulting from the investigation by the United States Department of Commerce or actions by the United States Customs and Border Protection Agency could affect the cost and the availability of solar panel components and the timing and amount of Ameren Missouri's estimated capital expenditures associated with solar generation investments.
•Through 2027, 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 $20.5 billion (Ameren Missouri – up to $10.8 billion; Ameren Illinois – up to $9.5 billion; ATXI – up to $0.2 billion) of capital expenditures during the period from 2023 through 2027. These planned investments are based on the assumption of continued constructive regulatory frameworks.
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Ameren’s and Ameren Missouri’s estimates include $2.5 billion of renewable generation investments through 2027 consistent with investments outlined in Ameren Missouri’s 2022 Change to the 2020 IRP. Ameren’s estimate also includes $0.8 billion of capital expenditures through 2027 related to projects assigned to Ameren pursuant to the first tranche of projects under the MISO’s long-range transmission planning roadmap discussed below.
•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 the MISO’s cost estimate. Construction on the Ameren projects is expected to begin in 2025, with completion dates expected near the end of this decade. The MISO initiated requests for proposals in December 2022, and is expected to initiate additional requests for proposals in March and July 2023, for additional first tranche projects crossing Missouri, with total cost estimated by the MISO of approximately $0.7 billion, which are expected to be awarded between late-2023 and mid-2024. In November 2022, the MISO released plans for a second tranche of projects and began the process of identifying a list of projects for consideration under this tranche. Ameren expects the second tranche of projects to be approved in the first half of 2024. 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 this proceeding.
•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 the MISO’s April 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 related to the cost-benefit study.
•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 14 – Commitments and Contingencies under Part II, Item 8, of this report, could result in significant increases in capital expenditures and operating costs. Regulations 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 new 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.