Ameren Missouri, a utility company of
Ameren Corporation
(
AEE
), announced that the Missouri Public Service Commission ("MPSC")
will hold public meetings starting July 26 through August 23 on its
proposed rate hike. Earlier, in February 2012, the company had
filed for an electric rate increase of $376 million with the MPSC
to recover the costs incurred in infrastructure investment, to
recover increase in net fuel costs due to fuel price increase and
get reimbursement for the costs incurred for the energy efficiency
programs. The company expects to hear a final decision from the
MPSC by December 2012.
Ameren's request for a rate increase of $376 million mainly
comprises approximately $85 million for the investments made
primarily to improve the reliability of its aging infrastructure
and to abide by environmental and renewable energy regulations, and
about $103 million for higher net fuel costs incurred for running
power plants. Higher costs for the company's recently proposed
energy efficiency programs account for approximately $81 million of
the request. The rest is for the additional cost increases incurred
by the company, including those to meet renewable energy
requirements, material costs and employee benefits.
The rate increase request is based on a 10.75% return on equity, a
capital structure composed of 52% common equity, an aggregate
electric rate base of $6.8 billion, and a test year that ended
September 30, 2011. The company believes that if the rate increase
is approved, assuming 1,100 kilowatt-hours of usage per month, the
average residential electric bill would increase by about 46 cents
a day.
Currently, Ameren Missouri has the lowest electric rate in
comparison to any investor-owned utility in Missouri, which is
approximately 25% below the national average rate. Ameren Missouri
aims to provide safe, affordable and environmentally responsible
energy to its customers. Therefore, in order to accomplish its aim,
the company has made significant investments in its energy
infrastructure and has focused on energy efficiency programs. In
fact, the rate increase request is due to these heavy spending made
by the company.
The company has been making significant infrastructure investments.
These investments include costs associated with the Ameren Missouri
Maryland Heights Renewable Energy Center which will be the largest
landfill gas-electric facility in Missouri. To generate clean,
renewable electricity, the Center will utilize methane gas from
decaying trash and meet the energy needs of about 10,000 homes.
Also, under the Missouri Energy Efficiency Investment Act, the
utility has focused on energy efficiency programs which will
provide approximately $500 million in total customer benefits over
the next 20 years. The company's proposal includes investments of
approximately $145 million over three years, beginning January 1,
2013. Overall, the company expects these programs to provide annual
energy savings of approximately 800 million kilowatt-hours. This is
equal to the annual energy consumption of more than 60,000 average
Missouri homes.
In order to continue to meet customers' expectations, the company
is looking for reimbursement for more than $700 million of
investments which are not currently included in rates. The utility
is optimistic that under the regulatory framework, these
investments will be recovered in rates over the service life of the
investments.
Meanwhile, to compensate the customers, the company is taking
several steps to manage its costs in a disciplined fashion. It has
reduced its combined non-fuel related operating and capital
expenditures. In late 2011, the company made job cuts and reduced
approximately 340 employees through a voluntary separation program.
Moreover, the company has budget billing and supports energy
assistance programs for those customers who are least able to pay
their bills. Nearly all these costs are excluded from customers'
rates.
Ameren Corporation has a solid base of stable utility operations in
the Midwestern market. We believe its key growth drivers include
cost minimization and its strong balance sheet. However, we are
concerned about its predominantly coal-based generation assets and
pending regulatory cases. The company presently retains a
short-term Zacks #3 Rank (Hold) that corresponds with our long-term
Neutral recommendation on the stock. The company mainly competes
with
CenterPoint Energy, Inc.
(
CNP
) and
Exelon Corporation
(
EXC
).
AMEREN CORP (AEE): Free Stock Analysis Report
CENTERPOINT EGY (CNP): Free Stock Analysis
Report
EXELON CORP (EXC): Free Stock Analysis Report
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