AMEREN ILLINOIS COMPANY The following discussion should be read in conjunction with the financial statements contained in this Form 10-Q, as well as Management's Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors contained in the 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 ofAmeren as a whole. Also see the Glossary of Terms and Abbreviations at the front of this report and in the Form 10-K.Ameren , headquartered inSt. 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 onAmeren's common stock and the payment of expenses byAmeren depend on distributions made to it by its subsidiaries.Ameren's principal subsidiaries are listed below.Ameren has other subsidiaries that conduct other activities, such as providing shared services. •Union Electric Company, doing business as Ameren Missouri, operates a rate-regulated electric generation, transmission, and distribution business and a rate-regulated natural gas distribution business inMissouri . •Ameren Illinois Company, doing business asAmeren Illinois , operates rate-regulated electric transmission, electric distribution, and natural gas distribution businesses inIllinois . •ATXI operates aFERC rate-regulated electric transmission business in the MISO.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. In addition to presenting results of operations and earnings amounts in total, we present certain information in cents per share. These amounts reflect factors that directly affectAmeren's earnings. We believe this per share information helps readers to understand the impact of these factors onAmeren's earnings per share. 38
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OVERVIEW
Net income attributable toAmeren common shareholders in the three months endedMarch 31, 2022 , was$252 million , or$0.97 per diluted share, compared with$233 million , or$0.91 per diluted share, in the year-ago period. Net income for the three months endedMarch 31, 2022 , compared to the year-ago period, was favorably affected by increased rate base investments across all segments and a higher recognized ROE at Ameren Illinois Electric Distribution. Earnings for the three months endedMarch 31, 2022 , compared to the year-ago period, was also favorably affected by the absence in 2022 of theFERC's March 2021 order, primarily related to the historical recovery of materials and supplies inventories, and increased retail electric sales volumes at Ameren Missouri, primarily resulting from colder temperatures experienced in 2022. Earnings for the three months endedMarch 31, 2022 , compared to the year-ago period, was unfavorably affected by increased other operations and maintenance expenses, primarily due to a reduction in the cash surrender value of company-owned life insurance and an increase due to the expiration of contracts relating to refined coal tax credits at Ameren Missouri in 2021, increased financing costs from debt issuances, and the effects of dilution.Ameren's strategic plan includes investing and operating its utilities in a manner consistent with existing regulatory frameworks, enhancing those frameworks, and advocating for responsible energy and economic policies, as well as creating and capitalizing on opportunities for investment for the benefit of its customers, shareholders, and the environment.Ameren remains focused on disciplined cost management and strategic capital allocation.Ameren invested$0.8 billion in its rate-regulated businesses in the three months endedMarch 31, 2022 . The COVID-19 pandemic continues to affect our results of operations, financial position, and liquidity. While our electric sales volumes, excluding the estimated effects of weather and customer energy-efficiency programs, were comparable to the same period in 2021, and total sales volume levels were comparable to pre-pandemic levels, there has been a shift in sales volumes by customer class, which began in 2020, with an increase in residential sales, and a decrease in commercial and industrial sales. The continued effect of the COVID-19 pandemic on our results of operations, financial position, and liquidity in subsequent periods will depend on its severity and longevity, future regulatory or legislative actions with respect thereto, and the resulting impact on business, economic, and capital market conditions. We continue to assess the impacts the COVID-19 pandemic is having on our businesses, including impacts on electric and natural gas sales volumes, liquidity, bad debt expense, and supply chain operations. For further discussion of these and other matters discussed below, see Note 1 - Summary of Significant Accounting Policies and Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report, and Results of Operations, Liquidity and Capital Resources, and Outlook sections below. InDecember 2021 , Ameren Missouri filed a motion with theUnited States District Court for the Eastern District of Missouri to modify aSeptember 2019 remedy order issued by the district court to allow the retirement of theRush Island Energy Center in advance of its previously expected useful life in lieu of installing a flue gas desulfurization system. The district court is under no deadline to issue a ruling revising the remedy order. InJanuary 2022 , the MISO completed a preliminary informational assessment regarding potential impacts of the retirement to the regional electric power system, which indicated transmission upgrades and voltage support would be needed in advance of the retirement of the Rush Island Energy Center to address reliability concerns. InFebruary 2022 , Ameren Missouri formally notified the MISO of its intent to retire the Rush Island Energy Center and requested the MISO to perform a final reliability assessment, which is expected to be completed inMay 2022 . The MISO must also separately approve the specific upgrades and transmission support required to address reliability concerns noted in the final assessment. Additionally, the MISO will determine whether reliability concerns require the Rush Island Energy Center to be classified as a system support resource, which should continue operating until the completion of to-be-specified transmission upgrades. If the Rush Island Energy Center were identified as a system support resource, an agreement detailing the manner of and time for continued operation would be filed with theFERC for approval. The district court has the authority to determine the retirement date and operating parameters for theRush Island Energy Center and is not bound by the MISO determination orFERC's approval. Related to this matter, inFebruary 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. InApril 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 theMissouri securitization statute that became effective inAugust 2021 . See Note 9 - Commitments and Contingencies under Part I, Item 1, of this report for additional information. InFebruary 2022 , Ameren Missouri filed an update to its Smart Energy Plan with the MoPSC, which includes a five-year capital investment overview with a detailed one-year plan for 2022. The plan is designed to upgradeAmeren Missouri's electric infrastructure and includes investments that will upgrade the grid and accommodate more renewable energy. Investments under the plan are expected to total approximately$8.4 billion over the five-year period from 2022 through 2026, with expenditures largely recoverable under thePISA and the RESRAM. The planned investments in 2024 through 2026 are based on the assumption that Ameren Missouri requests and receives MoPSC approval of an extension of thePISA fromDecember 2023 toDecember 2028 . 39
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InMay 2022 , Senate Bill 745 passed theMissouri General Assembly and was sent to the governor for approval. If enacted, among other things, the bill would extend thePISA election throughDecember 2028 and allow for an additional five-year extension throughDecember 2033 if requested by Ameren Missouri and approved by the MoPSC. In addition, a 2.5% limit on customer rate increases resulting fromPISA deferrals would become effective beginning in 2024. For information on the rate increase limitation effective through 2023, see Note 2 - Rate and Regulatory Matters under Part II, Item 8, of the Form 10-K.
In
InApril 2022 ,Ameren Illinois filed its annual electric distribution service performance-based formula rate update with the ICC to be used for 2023 rates, requesting an increase of$83 million . This update reflects 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 54% common equity, and a decrease for the conclusion of the 2020 revenue requirement reconciliation adjustment, which will be fully collected from customers in 2022, consistent with the ICC'sDecember 2021 annual update filing order. An ICC decision in this proceeding is required byDecember 2022 , with new rates effective inJanuary 2023 . InApril 2022 ,Ameren Illinois filed a revised energy-efficiency plan with the ICC to invest approximately$120 million per year in electric energy-efficiency programs 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 plan program years if there are insufficient cost-effective programs available, which could reduce the investments in electric energy-efficiency programs. The electric energy-efficiency program investments and the return on those investments are collected from customers through a rider and are not recovered through the electric distribution service performance-based formula ratemaking framework. The ICC is under no deadline to issue an order in this proceeding.
RESULTS OF OPERATIONS
Our results of operations and financial position are affected by many factors. Economic conditions, including those resulting from the COVID-19 pandemic discussed below, 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, and our pension and postretirement benefits costs. Almost all ofAmeren'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 I, Item 1, of this report and Note 2 - Rate and Regulatory Matters under Part II, Item 8, of the Form 10-K for additional information regarding Ameren Missouri's,Ameren Illinois' , and ATXI's regulatory mechanisms. We continue to monitor the impacts of the COVID-19 pandemic on our businesses, including impacts on electric and natural gas sales volumes, liquidity, supply chain operations, and bad debt expense. Regarding uncollectible accounts receivable,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. However, Ameren Missouri has not experienced and does not expect a material impact to earnings from increases in bad debt expense. 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, and many other factors. We have natural gas cost recovery mechanisms for ourIllinois andMissouri natural gas distribution businesses, a purchased power cost recovery mechanism forAmeren 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 ofAmeren 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. 40
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Earnings Summary
The following table presents a summary of
Three Months
2022 2021
Net income attributable to Ameren common shareholders $ 252 $ 233
Earnings per common share - diluted 0.97 0.91
Net income attributable toAmeren common shareholders increased$19 million , or6 cents per diluted share, in the three months endedMarch 31, 2022 , compared with the year-ago period. The increase was due to net income increases of$11 million ,$5 million ,$3 million ,$3 million , atAmeren Transmission ,Ameren Illinois Natural Gas , Ameren Missouri, andAmeren Illinois Electric Distribution, respectively. These increases were partially offset by a$3 million decrease in the net income for activity not reported as part of a segment, primarily atAmeren (parent).
Earnings per diluted share were favorably affected in the three months ended
•increased rate base investments atAmeren Transmission andAmeren Illinois Electric Distribution and a higher recognized ROE due to a higher estimated 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 (4 cents per share); •increasedAmeren Illinois Natural Gas earnings from investments in qualifying infrastructure recovered under the QIP and higher base rates pursuant to the ICC'sJanuary 2021 natural gas rate order (3 cents per share); •the absence in 2022 of theFERC's March 2021 order, primarily related to the historical recovery of materials and supplies inventories, which decreasedAmeren Transmission revenues in 2021 (3 cents per share); •increased base rate revenues for the inclusion of previously deferred interest charges pursuant to theDecember 2021 MoPSC electric rate order and increased deferral of interest charges related to infrastructure investments associated with thePISA and RESRAM (3 cents per share); and •increased electric retail sales at Ameren Missouri, primarily resulting from colder temperatures experienced in 2022 (estimated at3 cents per share).
Earnings per diluted share were unfavorably affected in the three months ended
•increased other operations and maintenance expenses not subject to riders and trackers, primarily due to a reduction in the cash surrender value of company-owned life insurance and an increase due to the expiration of contracts relating to refined coal tax credits at Ameren Missouri in 2021 (8 cents per share); •increased financing costs, primarily atAmeren (parent) and Ameren Missouri, largely due to higher long-term debt balances (2 cents per share); and •increased weighted-average basic common shares outstanding resulting from issuances of common shares as detailed in Note 4 - Long-term Debt and Equity Financings under Part I, Item 1, of this report, and Note 5 - Long Term Debt and Equity Financings under Part II, Item 8, of the Form 10-K (1 cent per share). The cents per share variances above are presented based on the weighted-average basic common shares outstanding in the three months endedMarch 31, 2021 , and do not reflect the impact of dilution on earnings per share, unless otherwise noted. Amounts other than variances related to income taxes have been presented net of income taxes usingAmeren's 2022 blended federal and state 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 Expenses, Taxes Other Than Income Taxes, Other Income, Net, Interest Charges, and Income Taxes, see the major headings below. 41
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Below is
Ameren
Illinois Ameren Other /
Ameren Electric Illinois Ameren Intersegment
Missouri Distribution Natural Gas Transmission Eliminations Ameren
Three Months 2022:
Electric revenues $ 738 $ 465 $ - $ 146 $ (31) $ 1,318
Fuel (176) - - - - (176)
Purchased power (50) (151) - - 24 (177)
Electric margins 512 314 - 146 (7) 965
Natural gas revenues 80 - 481 - - 561
Natural gas purchased for resale (46) - (247) - - (293)
Natural gas margins 34 - 234 - - 268
Other operations and maintenance
expenses (232) (147) (63) (16) (3) (461)
Depreciation and amortization expenses (164) (81) (23) (30) (1)
(299)
Taxes other than income taxes (85) (20) (31) (2) (4) (142) Operating income (loss) 65 66 117 98 (15) 331 Other income, net 23 16 4 3 14 60 Interest charges (39) (18) (11) (22) (14) (104) Income (taxes) benefit 2 (15) (30) (21) 30 (34) Net income 51 49 80 58 15 253 Noncontrolling interests - preferred stock dividends (1) - - - -
(1)
Net income attributable toAmeren common shareholders$ 50 $ 49 $ 80 $ 58 $ 15$ 252 Three Months 2021: Electric revenues$ 641 $ 411 $ - $ 130 $ (26)$ 1,156 Fuel (65) - - - - (65) Purchased power (88) (122) - - 19 (191) Electric margins 488 289 - 130 (7) 900 Natural gas revenues 63 - 347 - - 410 Natural gas purchased for resale (31) - (134) - - (165) Natural gas margins 32 - 213 - - 245 Other operations and maintenance expenses (225) (125) (56) (16) 2
(420)
Depreciation and amortization expenses (156) (75) (22) (28) -
(281)
Taxes other than income taxes (77) (20) (25) (2) (4) (128) Operating income (loss) 62 69 110 84 (9) 316 Other income, net 23 8 3 3 9 46 Interest charges (39) (18) (10) (23) (10) (100) Income (taxes) benefit 2 (12) (28) (17) 28 (27) Net income 48 47 75 47 18 235 Noncontrolling interests - preferred stock dividends (1) (1) - - -
(2)
Net income attributable toAmeren common shareholders$ 47 $ 46 $ 75 $ 47 $ 18$ 233 42
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Below is
Ameren
Illinois Ameren Ameren Other /
Electric Illinois Illinois Intersegment
Distribution Natural Gas Transmission Eliminations Ameren Illinois
Three Months 2022:
Electric revenues $ 465 $ - $ 98 $ (20) $ 543
Purchased power (151) - - 20 (131)
Electric margins 314 - 98 - 412
Natural gas revenues - 481 - - 481
Natural gas purchased for resale - (247) - - (247)
Natural gas margins - 234 - - 234 Other operations and maintenance expenses (147) (63) (13) -
(223)
Depreciation and amortization expenses (81) (23) (20) -
(124)
Taxes other than income taxes (20) (31) (2) - (53) Operating income (loss) 66 117 63 - 246 Other income, net 16 4 4 - 24 Interest charges (18) (11) (13) - (42) Income taxes (15) (30) (14) - (59) Net income attributable to common shareholder $ 49 $ 80 $ 40 $ - $ 169 Three Months 2021: Electric revenues $ 411 $ - $ 81 $ (16) $ 476 Purchased power (122) - - 16 (106) Electric margins 289 - 81 - 370 Natural gas revenues - 347 - - 347 Natural gas purchased for resale - (134) - -
(134)
Natural gas margins - 213 - - 213 Other operations and maintenance expenses (125) (56) (13) -
(194)
Depreciation and amortization expenses (75) (22) (18) -
(115)
Taxes other than income taxes (20) (25) (1) - (46) Operating income (loss) 69 110 49 - 228 Other income, net 8 3 3 - 14 Interest charges (18) (10) (14) - (42) Income taxes (12) (28) (10) - (50) Net income 47 75 28 - 150 Preferred stock dividends (1) - - - (1) Net income attributable to common shareholder $ 46 $ 75 $ 28 $ - $ 149
Electric and Natural Gas 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 to complement
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
Increase by Segment
Total by Segment(a) Overall Ameren Increase of $65 Million
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(a)Includes other/intersegment eliminations of $(7) million and $(7) million in
the three months ended March 31, 2022 and 2021, respectively.
Ameren Missouri Ameren Illinois Electric Distribution Ameren Transmission Other/Intersegment Eliminations
Natural Gas Margins
Increase by Segment
Total by Segment Overall Ameren Increase of $23 Million
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Ameren Missouri Ameren Illinois Natural Gas
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The following tables present the favorable (unfavorable) variations by
Electric and Natural Gas Margins
Ameren Illinois Ameren ElectricIllinois
Other /Intersegment
Three Months Ameren Missouri Distribution Natural Gas Ameren Transmission(a) Eliminations Ameren
Electric revenue change:
Effect of weather (estimate)(b) $ 7 $ - $ - $ - $ - $ 7
Base rates (estimate)(c) 18 19 - 16 - 53
Sales volumes and changes in customer usage
patterns (excluding the estimated effects
of weather and MEEIA) 4 - - - - 4
Off-system sales, capacity, and FAC
revenues, net 52 - - - - 52
Ameren Illinois energy-efficiency program
investment revenues - 3 - - - 3
Other (1) - - - - (1)
Cost recovery mechanisms - offset in fuel
and purchased power(d) 24 29 - - (5) 48
Other cost recovery mechanisms(e) (7) 3 - - - (4)
Total electric revenue change $ 97 $ 54 $ - $ 16 $ (5) $ 162
Fuel and purchased power change:
Energy costs (excluding the estimated
effect of weather) $ (47) $ - $ - $ - $ - $ (47)
Effect of weather (estimate)(b) (1) - - - - (1)
Effect of higher net energy costs included
in base rates (1) - - - - (1)
Cost recovery mechanisms - offset in
electric revenue(d) (24) (29) - - 5 (48)
Total fuel and purchased power change $ (73) $ (29) $ - $ - $ 5 $ (97)
Net change in electric margins $ 24 $ 25 $ - $ 16 $ - $ 65 Natural gas revenue change:
Base rates (estimate) $ 1 $ -$ 3 $ - $ -$ 4 Change in rate design - - 1 - - 1 QIP rider - - 9 - - 9 Other - - 2 - - 2 Cost recovery mechanisms - offset in natural gas purchased for resale(d) 15 - 113 - - 128 Other cost recovery mechanisms(e) 1 - 6 - - 7 Total natural gas revenue change $ 17 $ -$ 134 $ - $ -$ 151
Natural gas purchased for resale change:
Cost recovery mechanisms - offset in natural gas revenue(d) $ (15) $ -$ (113) $ - $ -$ (128) Total natural gas purchased for resale change $ (15) $ -$ (113) $ - $ -$ (128) Net change in natural gas margins $ 2 $ -$ 21 $ - $ -$ 23 (a)Includes an increase in transmission margins of$17 million atAmeren Illinois for the three months endedMarch 31, 2022 , compared with the year-ago period. (b)Represents the estimated variation resulting primarily from changes in cooling and heating degree-days on electric and natural gas demand compared with the year-ago period; this variation is based on temperature readings from theNational Oceanic and Atmospheric Administration weather stations at local airports in our service territories. (c)For Ameren Illinois Electric Distribution andAmeren Transmission , base rates include increases or decreases to operating revenues related to the revenue requirement reconciliation adjustment under formula rates. For Ameren Missouri, base rates exclude an increase for the recovery of lost electric margins resulting from the MEEIA customer energy-efficiency programs and an increase in base rates for RESRAM. These changes in 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" line items, respectively. (d)Electric and natural gas revenue changes are offset by corresponding changes in "Fuel," "Purchased power," and "Natural gas purchased for resale" on the statement of income, resulting in no change to electric and natural gas margins. Activity in Other/Intersegment Eliminations represents the elimination of related-party transactions between Ameren Missouri,Ameren Illinois , and ATXI, as well asAmeren Transmission revenue from transmission services provided to Ameren Illinois Electric Distribution. See Note 8 - Related-party Transactions and Note 14 - Segment Information under Part I, Item 1, of this report for additional information on intersegment eliminations. (e)Offsetting expense increases or decreases are reflected in "Other operations and maintenance," "Depreciation and amortization," or in "Taxes other than income taxes," within the "Operating Expenses" section and "Income Taxes" in the statement of income. These items have no overall impact on earnings. 45
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Ameren's electric margins increased$65 million , or 7%, for the three months endedMarch 31, 2022 , compared with the year-ago period, due to increased margins at Ameren Missouri, Ameren Illinois Electric Distribution, andAmeren Transmission , as discussed below.Ameren's natural gas margins increased$23 million , or 9%, for the three months endedMarch 31, 2022 , compared with the year-ago period, primarily because of increased margins atAmeren Illinois Natural Gas , as discussed below.
Ameren Transmission's margins increased$16 million , or 12%, for the three months endedMarch 31, 2022 , compared with the year-ago period. Base rate revenues were favorably affected by the absence in 2022 of theFERC's March 2021 order (+$7 million ), increased capital investment, as evidenced by a 10% increase in rate base used to calculate the revenue requirement (+$5 million ), and higher recoverable expenses (+$4 million ). See Transmission Formula Rate Revisions in Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report for additional information regarding theMarch 2021 FERC order.
Ameren Missouri
Ameren Missouri's electric margins increased$24 million , or 5%, for the three months endedMarch 31, 2022 , compared with the year-ago period. Revenues associated with "Cost recovery mechanisms - offset in fuel and purchased power" increased$24 million for the three months endedMarch 31, 2022 . The increased revenues are fully offset by an increase in fuel and purchased power costs, which increased primarily due to 2022 amortization of costs previously deferred under the FAC. 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 between periods:
•TheDecember 2021 MoPSC electric rate order effectiveFebruary 28, 2022 , that resulted in higher electric base rates, excluding the change in base rates for the MEEIA customer energy efficiency programs and the RESRAM, partially offset by higher net energy costs included in base rates, increased margins$17 million . The change in electric base rates is the sum of the change in "Base rates (estimate)" (+$18 million ) and the "Effect of higher net energy costs included in base rates" (-$1 million ) in the table above. •Winter temperatures were colder as heating degree days increased 1% for the three months endedMarch 31, 2022 . The aggregate effect of weather increased margins an estimated$6 million . The change in margins due to weather is the sum of the "Effect of weather (estimate)" on electric revenues (+$7 million ) and the "Effect of weather (estimate)" on fuel and purchased power (-$1 million ) in the table above. •Lower net energy costs increased margins$5 million . In 2021, the absence of the Callaway Energy Center generation and the significant increase in cost and customer demand caused by the extremely cold weather inFebruary 2021 drove higher net energy costs resulting from Ameren Missouri's 5% exposure to net energy cost variances from base rates under the FAC. The change in net energy costs is the sum of "Off-system sales, capacity and FAC revenues, net" (+$52 million ) and "Energy costs (excluding the estimated effect of weather)" (-$47 million ) in the table above. •Excluding the estimated effects of weather and the MEEIA customer energy-efficiency programs, electric revenues increased an estimated$4 million . The increase was primarily due to an increase in the average retail price per kilowatthour due to changes in customer usage patterns and shifts in commercial and industrial usage within rate classes.
Ameren Missouri's other cost recovery mechanisms decreased margins
Ameren Missouri's natural gas margins were comparable between periods. Purchased gas costs increased$15 million 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 inFebruary 2021 , partially offset by lower natural gas prices in 2022. The increased purchased natural gas costs are fully offset by an increase in natural gas revenues under the PGA rider, resulting in no impact to margin. The increase in purchased natural gas cost is reflected in "Cost recovery mechanisms - offset in natural gas revenue" and the associated recoverability from customers is reflected in "Cost recovery mechanisms - offset in natural gas purchased for resale" in the table above.Ameren Illinois Ameren Illinois' electric margins increased$42 million , or 11%, for the three months endedMarch 31, 2022 , compared with the year-ago period, driven by increased margins at Ameren Illinois Electric Distribution andAmeren Illinois Transmission.Ameren Illinois Natural Gas' margins increased$21 million , or 10%, for the three months endedMarch 31, 2022 , compared with the year-ago period. 46
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Ameren Illinois Electric Distribution
Ameren Illinois Electric Distribution's margins increased$25 million , or 9%, for the three months endedMarch 31, 2022 , compared with the year-ago period. Purchased power costs increased$29 million for the three months endedMarch 31, 2022 , primarily resulting from higher electric prices. The increased purchased power costs are fully offset by an increase in electric revenues under the cost recovery mechanisms for purchased power, resulting in no impact to margin. The increase in purchased power cost is reflected in "Cost recovery mechanisms - offset in electric revenue" and the associated recoverability from customers is reflected in "Cost recovery mechanisms - offset in fuel and purchased power" in the table above.
The following items had a favorable effect on
•Base rates increased due to a higher recognized ROE (+$2 million ), as evidenced by an increase of 29 basis points in the estimated annual average of the monthly yields of the 30-year United States Treasury bonds, increased capital investment (+$2 million ), as evidenced by a 6% increase in rate base used to calculate the revenue requirement, and higher recoverable non-purchased power expenses (+$19 million ), partially offset by the absence in 2022 of revenue requirement reconciliation adjustment true-ups (-$4 million ). The sum of these changes collectively increased margins$19 million . •Revenues increased$3 million due to the recovery of and return on increased energy-efficiency program investments under performance-based formula ratemaking.
Ameren Illinois Natural Gas' margins increased$21 million , or 10%, for the three months endedMarch 31, 2022 , compared with the year-ago period. Purchased gas costs increased$113 million for the three months endedMarch 31, 2022 , 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 inFebruary 2021 , partially offset by lower natural gas costs in 2022. The increased purchased natural gas costs are fully offset by an increase in natural gas revenues under the PGA rider, resulting in no impact to margin. The increase in purchased natural gas cost is reflected in "Cost recovery mechanisms - offset in natural gas revenue" and the associated recoverability from customers is reflected in "Cost recovery mechanisms - offset in natural gas purchased for resale" in the table above.
The following items had a favorable effect on
•Revenues increased$9 million due to additional investment in qualified natural gas infrastructure under the QIP. •Other cost recovery mechanisms increased revenues$6 million , primarily due to increased revenues for excise taxes. •Revenues increased$3 million duringJanuary 2022 due to higher natural gas base rates as a result of theJanuary 2021 natural gas rate order.
Ameren Illinois Transmission
Ameren Illinois Transmission's margins increased$17 million , or 21%, for the three months endedMarch 31, 2022 , compared with the year-ago period. Base rate revenues were favorably affected by the absence in 2022 of theFERC's March 2021 order (+$7 million ), increased capital investment (+$5 million ), as evidenced by a 16% increase in rate base used to calculate the revenue requirement, and higher recoverable expenses (+$5 million ). See Transmission Formula Rate Revisions in Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report for additional information regarding theMarch 2021 FERC order. 47
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Other Operations and Maintenance Expenses
Increase by Segment
Total by Segment(a) Overall Ameren Increase of $41 Million
[[Image Removed: aee-20220331_g8.jpg]][[Image Removed: aee-20220331_g9.jpg]]
(a)Includes other/intersegment eliminations of $3 million and $(2) million in
the three months ended March 31, 2022 and 2021, respectively.
Ameren Missouri
Ameren Illinois ElectricAmeren Transmission DistributionAmeren Other operations and maintenance expenses increased$41 million in the three months endedMarch 31, 2022 , compared with the year-ago period. In addition to changes by segments discussed below, other operations and maintenance expenses increased$5 million for activity not reported as part of a segment, as reflected in "Other/Intersegment Eliminations" above, primarily because of increased costs for support services.
Other operations and maintenance expenses were comparable between periods.
Ameren Missouri
The$7 million increase in other operations and maintenance in the three months endedMarch 31, 2022 , compared with the year-ago period, was primarily due to the following items: •The absence in 2022 of$6 million service fees received from third parties under refined coal production agreements, as the result of the expiration of refined coal tax credits at the end of 2021. •The cash surrender value of company-owned life insurance decreased$6 million , primarily because of unfavorable market returns in 2022. •The absence of a$5 million deferral to a regulatory asset of certain costs previously incurred related to the COVID-19 pandemic, pursuant to theMarch 2021 MoPSC orders. •Energy center operating costs, increased$3 million , primarily because of costs related to new wind generation facilities, which are recovered under the RESRAM. 48
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The above increases were partially offset by a$13 million decrease in MEEIA customer energy-efficiency program spend as approved by the MoPSC, compared with the year-ago period.Ameren Illinois Other operations and maintenance expenses increased$29 million in the three months endedMarch 31, 2022 , compared with the year-ago period, as discussed below. Other operations and maintenance expenses were comparable between periods at Ameren Illinois Transmission.
Ameren Illinois Electric Distribution
The
•Distribution system expenditures increased$10 million , primarily because of projects deferred in 2021 as a result of storm restoration efforts that were deferred as a regulatory asset in 2021. •Increased bad debt expense of$5 million , primarily because of increased recovery of bad debt costs allowed by the ICC. •The cash surrender value of company-owned life insurance decreased$3 million , primarily because of unfavorable market returns in 2022. •Amortization of regulatory assets associated with customer energy-efficiency program investments under formula ratemaking increased$2 million .
Other operations and maintenance expenses increased$7 million in the three months endedMarch 31, 2022 , compared with the year-ago period, primarily because of a$4 million increase in distribution system expenditures, related to higher labor and contract service costs. Other operations and maintenance expenses also increased$2 million , primarily because of a decrease in the cash surrender value of company-owned life insurance because of unfavorable market returns in 2022. These increases were partially offset by a$2 million reduction in costs recovered through riders. 49
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Depreciation and Amortization Expenses
Increase by Segment
Total by Segment(a) Overall Ameren Increase of $18 Million
[[Image Removed: aee-20220331_g10.jpg]][[Image Removed: aee-20220331_g11.jpg]]
(a)Includes other/intersegment eliminations of $1 million and $- million in the
three months ended March 31, 2022 and 2021, respectively.
Ameren Missouri
Ameren Illinois ElectricAmeren Transmission Distribution Depreciation and amortization expenses increased$18 million ,$9 million , and$8 million in the three months endedMarch 31, 2022 , compared with the year-ago period, atAmeren ,Ameren Illinois , and Ameren Missouri, respectively, primarily because of additional property, plant, and equipment investments across their respective segments.Ameren's and Ameren Missouri's depreciation and amortization expenses reflected a deferral to a regulatory asset of depreciation and amortization expenses pursuant to thePISA and the RESRAM. ThePISA and RESRAM deferrals of depreciation and amortization were$24 million and$19 million for the three months endedMarch 31, 2022 and 2021, respectively. The amount of depreciation and amortization expenses included in base rates forPISA and RESRAM deferrals was updated when new customer rates became effective onFebruary 28, 2022 , pursuant to theDecember 2021 MoPSC electric rate order, which incorporated deferrals throughSeptember 30, 2021 . 50
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Taxes Other Than Income Taxes
Increase by Segment
Total by Segment(a) Overall Ameren Increase of $14 Million
[[Image Removed: aee-20220331_g12.jpg]] [[Image Removed: aee-20220331_g13.jpg]]
(a)Includes $2 million and $2 million at Ameren Transmission in the three months
ended March 31, 2022 and 2021, respectively, and other/intersegment eliminations
of $4 million and $4 million in the three months ended March 31, 2022 and 2021,
respectively.
Ameren Missouri
Ameren Illinois ElectricAmeren Transmission Distribution Taxes other than income taxes increased$14 million in the three months endedMarch 31, 2022 , compared with the year-ago period, primarily because of$6 million and$3 million increases in excise taxes atAmeren Illinois Natural Gas and Ameren Missouri, respectively, primarily because of increased sales. Taxes other than income taxes also increased$4 million at Ameren Missouri because of increased property taxes, primarily resulting from property tax refunds received in 2021. 51
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Other Income, Net
Increase by Segment
Total by Segment(a) Overall Ameren Increase of $14 Million [[Image Removed: aee-20220331_g14.jpg]][[Image Removed: aee-20220331_g15.jpg]]
Ameren Missouri
Ameren Illinois ElectricAmeren Transmission Distribution Other income, net, increased$14 million in the three months endedMarch 31, 2022 , compared with the year-ago period, primarily because of increases in the non-service cost component of net periodic benefit income of$5 million ,$4 million , and$2 million for Ameren Illinois Electric Distribution, activity not reported as part of a segment, andAmeren Illinois Natural Gas , respectively. See Note 5 - Other Income, Net, under Part I, Item 1, of this report for additional information. See Note 11 - Retirement Benefits under Part I, Item 1, of this report for more information on the non-service cost components of net periodic benefit income. 52
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Interest Charges
Increase (Decrease) by Segment
Total by Segment Overall Ameren Increase of $4 Million [[Image Removed: aee-20220331_g16.jpg]][[Image Removed: aee-20220331_g17.jpg]]
Ameren Missouri
Ameren Illinois ElectricAmeren Transmission Distribution Interest charges increased$4 million in the three months endedMarch 31, 2022 , compared with the year-ago period, primarily because of issuances of long-term debt atAmeren (parent) in March and November of 2021. Interest charges atAmeren and Ameren Missouri reflected a deferral to a regulatory asset of interest charges pursuant toPISA and RESRAM. ThePISA and RESRAM deferrals of interest charges were$18 million and$15 million for the three months endedMarch 31, 2022 and 2021, respectively. A reduction in interest charges related to the increase inPISA and RESRAM deferrals at Ameren Missouri was offset by the issuance of long-term debt at Ameren Missouri inJune 2021 , which increased interest charges by$3 million . The amount of interest charges included in base rates forPISA and RESRAM deferrals was updated when new customer rates became effective onFebruary 28, 2022 , pursuant to theDecember 2021 MoPSC electric rate order, which incorporated deferrals throughSeptember 30, 2021 .
Income Taxes
The following table presents effective income tax rates for the three months
ended
Three Months(a)
2022 2021
Ameren 12 % 10 %
Ameren Missouri (4) % (4) %
Ameren Illinois 26 % 25 %
Ameren Illinois Electric Distribution 24 % 22 %
Ameren Illinois Natural Gas 27 % 27 %
Ameren Illinois Transmission 26 % 25 %
Ameren Transmission 27 % 27 %
(a)Estimate of the annual effective income tax rate adjusted to reflect the tax
effect of items discrete to the three months ended
See Note 12 - Income Taxes under Part I, Item 1, of this report for a reconciliation of the federal statutory corporate income tax rate to the effective income tax rate for the Ameren Companies.
The effective income tax rate was higher at Ameren Illinois Electric
Distribution in the three months ended
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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 andAmeren 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 andAmeren Illinois , with capital contributions fromAmeren (parent). As ofMarch 31, 2022 , there have been no material changes other than in the ordinary course of business related to cash requirements arising from these long-term commitments provided in Item 7 of the Form 10-K for the year endedDecember 31, 2021 . We expect to make significant capital expenditures over the next five years, supported by a combination of long-term debt and equity, as we invest in our electric and natural gas utility infrastructure to support overall system reliability, grid modernization, renewable energy target requirements, environmental compliance, and other improvements. For additional information about our long-term debt outstanding, including maturities due within one year, and the applicable interest rates, see Note 5 - Long-term Debt and Equity Financings under Part II, Item 8 of the Form 10-K and Note 4 - Long-term Debt and Equity Financings under Part I, Item 1, of this report. As part of its funding plan for capital expenditures,Ameren is using newly issued shares of common stock, rather than market-purchased shares, to satisfy requirements under the DRPlus and employee benefit plans and expects to continue to do so through at least 2026.Ameren expects these issuances to provide equity of about$100 million annually. In addition, in 2021,Ameren established an ATM program under whichAmeren may offer and sell from time to time up to$750 million of its common stock, which includes the ability to enter into forward sales agreements, subject to market conditions and other factors. There were no shares issued under the ATM program for the three months endedMarch 31, 2022 .Ameren has entered into multiple forward sale agreements under the ATM program with various counterparties relating to 3.4 million shares of common stock.Ameren expects to settle the forward sale agreements byDecember 31, 2022 .Ameren plans to issue approximately$300 million of equity each year from 2022 to 2026 in addition to issuances under the DRPlus and employee benefit plans.Ameren expects its equity to total capitalization ratio to be approximately 45% throughDecember 31, 2026 , with the long-term intent to support solid investment-grade credit ratings. See Long-term Debt and Equity below and Note 4 - Long-term Debt and Equity Financings under Part I, Item 1, of this report for additional information on the ATM program, including the forward sale agreements under the ATM program relating to common stock. The use of cash provided by operating activities and short-term borrowings to fund capital expenditures and other long-term investments at theAmeren Companies frequently results in a working capital deficit, defined as current liabilities exceeding current assets, as was the case atMarch 31, 2022 , forAmeren , Ameren Missouri, andAmeren Illinois . With the credit capacity available under the Credit Agreements, and cash and cash equivalents,Ameren (parent), Ameren Missouri, andAmeren Illinois , collectively, had net available liquidity of$1.2 billion atMarch 31, 2022 . See Credit Facility Borrowings and Liquidity for additional information. The following table presents net cash provided by (used in) operating, investing, and financing activities for the three months endedMarch 31, 2022 and 2021: Net Cash Provided By (Used In) Net Cash Used In Net Cash Provided By Operating Activities Investing Activities
Financing Activities
2022 2021 Variance 2022 2021 Variance 2022 2021 Variance
Ameren $ 388 $ (35) $ 423 $ (780) $ (889) $ 109 $ 391 $ 795 $ (404)
Ameren Missouri 56 (51) 107 (417) (398) (19) 362 316 46
Ameren Illinois 342 13 329 (342) (337) (5) 4 326 (322)
Cash Flows from Operating Activities
Our cash provided by operating activities is affected by fluctuations of trade accounts receivable, inventories, and accounts and wages payable, among other things, as well as the unique regulatory environment for each of our businesses. Substantially all expenditures related to fuel, purchased power, and natural gas purchased for resale are recovered from customers through rate adjustment mechanisms, which may be adjusted without a traditional rate proceeding. Similar regulatory mechanisms exist for certain other operating expenses that can also affect the timing of cash provided by operating activities. The timing of cash payments for costs recoverable under our regulatory mechanisms differs from the recovery period of those costs. Additionally, the seasonality of our electric and natural gas businesses, primarily caused by seasonal customer rates and changes in customer demand due to weather, such as increased demand resulting from the extremely cold weather inmid-February 2021 , significantly affects the amount and timing of our cash provided by operating activities. 54
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Ameren's cash provided by operating activities increased$423 million in the first three months of 2022, compared with the year-ago period. The following items contributed to the increase: •A$471 million increase resulting from increased customer collections and decreased expenditures under the PGA and FAC, primarily as a result of the significant increase from customer demand and prices for natural gas and electricity experienced inmid-February 2021 due to extremely cold weather and a net increase attributable to other regulatory recover mechanisms. See Outlook below for additional information about the extension of the collection period for the PGA related to the extremely cold weather inmid-February 2021 . •A$41 million decrease in the cost of natural gas held in storage, primarily atAmeren Illinois , because of higher prices as a result of extremely cold winter weather inmid-February 2021 . •A$15 million decrease in major storm restoration costs atAmeren Illinois , primarily due to aJanuary 2021 storm.
The following items partially offset the increase in
•A$25 million increase in net collateral posted with counterparties, primarily due to changes in the market prices of power, natural gas, and other fuels. •A$15 million increase in interest payments, primarily due to an increase in the average outstanding debt. •A$14 million decrease resulting from an increase in coal inventory levels at Ameren Missouri, as less coal was purchased in 2021 due to service-related delivery disruptions. •A$12 million increase in property tax payments at Ameren Missouri, primarily due to higher assessed property tax values. •A$10 million increase in payments for certain cloud computing arrangements.
Ameren Missouri
Ameren Missouri's cash provided by operating activities increased$107 million in the first three months of 2022, compared with the year-ago period, primarily as a result of a$181 million increase from higher customer collections and decreased expenditures under the FAC and PGA due to the significant increase from customer demand and prices for natural gas and electricity experienced inmid-February 2021 due to extremely cold weather, and a net increase attributable to other regulatory recovery mechanisms. See Outlook below for additional information about the extension of the collection period for the PGA related to the extremely cold weather inmid-February 2021 .
The following items partially offset the increase in Ameren Missouri's cash from operating activities between periods:
•A$33 million increase in net collateral posted with counterparties, primarily due to changes in the market prices of power, natural gas, and other fuels. •A$14 million decrease resulting from an increase in coal inventory levels, as less coal was purchased in 2021 due to service-related delivery disruptions. •A$12 million increase in property tax payments, primarily due to higher assessed property tax values. •A$9 million increase in interest payments, primarily due to an increase in the average outstanding debt. •A$7 million increase in payments for certain cloud computing arrangements.
Ameren Illinois' cash provided by operating activities increased$329 million in the first three months of 2022, compared with the year-ago period. The following items contributed to the increase: •A$289 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 and electricity experienced in mid-February due to extremely cold weather and a net increase attributable to other regulatory recover mechanisms. See Outlook below for additional information about the extension of the collection period for the PGA related to the extremely cold weather inmid-February 2021 . •A$39 million decrease in the cost of natural gas held in storage because of higher prices as a result of extremely cold winter weather inmid-February 2021 . •A$15 million decrease in major storm restoration costs, primarily due to aJanuary 2021 storm. •An$8 million increase in net collateral received from counterparties, primarily due to changes in the market prices of natural gas. The increase inAmeren Illinois' cash from operating activities between periods was partially offset by an$8 million increase in payments for certain cloud computing arrangements. 55
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Cash Flows from Investing Activities
Ameren's cash used in investing activities decreased$109 million during the first three months of 2022, compared with the year-ago period, primarily as a result of a$113 million decrease in capital expenditures, largely resulting from a reduction in expenditures related to wind generation assets atAmeren Missouri , and$17 million in insurance proceeds for the Callaway Energy Center's generator. The decrease inAmeren's cash used in investing activities was partially offset by a$15 million increase due to the timing of nuclear fuel expenditures at Ameren Missouri. Ameren Missouri's cash used in investing activities increased$19 million during the first three months of 2022, compared with the year-ago period, primarily as a result of a$139 million return of net money pool advances in the year-ago period, and a$15 million increase due to the timing of nuclear fuel expenditures. This increase was partially offset by a$120 million decrease in capital expenditures, primarily resulting from a reduction in expenditures related to wind generation assets, and$17 million in insurance proceeds for the Callaway Energy Center's generator.Ameren Illinois' cash used in investing activities increased$5 million during the first three months of 2022, compared with the year-ago period, as a result of a$5 million increase in capital expenditures.
Cash Flows from Financing Activities
Cash provided by, or used in, financing activities is a result of our financing needs, which depend on the level of cash provided by operating activities, the level of cash used in investing activities, the level of dividends, and our long-term debt maturities, among other things. Due to extremely cold winter weather inmid-February 2021 , Ameren Missouri andAmeren Illinois experienced higher than anticipated commodity costs for natural gas purchased for resale and purchased power, which contributed to the acceleration of the timing of certain planned 2021 debt issuances.Ameren's cash provided by consolidated financing activities decreased$404 million during the first three months of 2022, compared with the year-ago period. During the first three months of 2022,Ameren utilized proceeds from net commercial paper issuances of$555 million along with cash provided by operating activities to fund, in part, investing activities. In addition,Ameren received aggregate cash proceeds of$5 million from the issuance of common stock under the DRPlus and the 401(k) plan. In comparison, during the first three months of 2021,Ameren utilized proceeds from the issuance of$450 million of long-term debt for general corporate purposes, including to repay then-outstanding short-term debt, and to fund, in part, investing activities.Ameren also utilized proceeds from net commercial paper issuances of$399 million and cash on hand to fund operating activities, including increased purchases in natural gas for resale and purchased power costs as a result of the significant increase in customer demand and prices for natural gas and electricity experienced inmid-February 2021 due to extremely cold weather, and to fund, in part, investing activities. In addition,Ameren received aggregate cash proceeds of$125 million from the settlement of the remaining portion of the forward sale agreement of common stock and the issuance of common stock under the DRPlus and the 401(k) plan. During the first three months of 2022,Ameren paid common stock dividends of$152 million , compared with$140 million in the year-ago period, as a result of an increase in both the dividend rate and the number of common shares outstanding. Ameren Missouri's cash provided by financing activities increased$46 million during the first three months of 2022, compared with the year-ago period. During the first three months of 2022, Ameren Missouri utilized proceeds from net commercial paper issuances of$363 million and cash provided by operating activities to fund, in part, investing activities. In comparison, during the first three months of 2021, Ameren Missouri utilized proceeds from net commercial paper issuances of$204 million and cash on hand to fund operating activities, including increased purchases in natural gas for resale and purchased power costs as a result of the significant increase in customer demand and prices for natural gas and electricity experiencedmid-February 2021 due to extremely cold weather, and to fund, in part, investing activities. In addition, Ameren Missouri received a$113 million capital contribution fromAmeren (parent) during the first three months of 2021.Ameren Illinois' cash provided by financing activities decreased$322 million during the first three months of 2022, compared with the year-ago period. During the first three months of 2021,Ameren Illinois utilized proceeds from net commercial paper issuances of$323 million to fund operating activities, including increased purchases in natural gas for resale and purchased power costs as a result of the significant increase in customer demand and prices for natural gas and electricity experienced inmid-February 2021 due to extremely cold weather, and to fund, in part, investing activities.Ameren Illinois also received a$40 million capital contribution fromAmeren (parent) during the first three months of 2021. In addition,Ameren repaid$19 million of money pool borrowings and redeemed$13 million of preferred stock during the first three months of 2021.
See Long-term Debt and Equity in this section for additional information on maturities and issuances of long-term debt, issuances of common stock, and redemptions of preferred stock.
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Credit Facility Borrowings and Liquidity
The following table presentsAmeren's consolidated liquidity as ofMarch 31, 2022 : Available at March 31, 2022Ameren (parent) and Ameren Missouri: Missouri Credit Agreement - borrowing capacity $ 1,200 Less: Ameren (parent) commercial paper outstanding 300 Less: Ameren Missouri commercial paper outstanding 528 Less: Ameren Missouri letters of credit 2 Missouri Credit Agreement - subtotal 370Ameren (parent) andAmeren Illinois : Illinois Credit Agreement - borrowing capacity 1,100 Less: Ameren (parent) commercial paper outstanding 166 Less: Ameren Illinois commercial paper outstanding 107 Illinois Credit Agreement - subtotal 827 Subtotal $ 1,197 Add: Cash and cash equivalents 7 Net Available Liquidity(a) $ 1,204
(a)Does not include
The Credit Agreements, among other things, provide$2.3 billion of credit until maturity inDecember 2025 . See Note 3 - Short-term Debt and Liquidity under Part I, Item 1, of this report for additional information on the Credit Agreements. During the three months endedMarch 31, 2022 ,Ameren (parent), Ameren Missouri, andAmeren 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 andAmeren Illinois will access funds from the utility money pool, the Credit Agreements, or the commercial paper programs depending on which option has the lowest interest rates. See Note 3 - Short-term Debt and Liquidity under Part I, Item 1, of this report for additional information on credit agreements, commercial paper issuances,Ameren's money pool arrangements and related borrowings, and relevant interest rates. The issuance of short-term debt securities byAmeren's utility subsidiaries is subject toFERC approval under the Federal Power Act. InMarch 2022 , theFERC issued an order authorizing Ameren Missouri to issue up to$1 billion of short-term debt securities throughMarch 2024 . In 2020, theFERC issued an order authorizingAmeren Illinois to issue up to$1 billion of short-term debt securities throughSeptember 2022 . In 2021, theFERC issued an order authorizing ATXI to issue up to$300 million of short-term debt securities, which expires inJuly 2023 . The Ameren Companies continually evaluate the adequacy and appropriateness of their liquidity arrangements for changing business conditions. When business conditions warrant, changes may be made to existing credit agreements or to other borrowing arrangements, or other arrangements may be made. 57
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Long-term Debt and Equity
The following table presentsAmeren's issuances (net of any issuance premiums or discounts) of long-term debt and equity, redemptions of preferred stock for the three months endedMarch 31, 2022 and 2021: Month Issued, Redeemed, or Matured 2022 2021 Issuances of Long-term Debt Ameren: 1.75% Senior unsecured notes due 2028 March $ -$ 450 Total Ameren long-term debt issuances $ -$ 450 Issuances of Common Stock Ameren: DRPlus and 401(k) (a) Various$ 5 (b)$ 12 August 2019 forward sale agreement (c) February - 113 Total Ameren common stock issuances (d)$ 5 $ 125 Redemptions of Preferred Stock Ameren Illinois: 6.625% Series March $ -$ 12 7.75% Series March - 1 TotalAmeren Illinois preferred stock redemptions $ -$ 13 (a)Ameren issued a total of 0.1 million and 0.1 million shares of common stock under its DRPlus and 401(k) plan in the three months endedMarch 31, 2022 and 2021, respectively. (b)Excludes an$8 million receivable atMarch 31, 2022 . (c)Ameren issued 1.6 million shares of common stock to settle the remainder of theAugust 2019 forward sale agreement. (d)Excludes 0.4 million and 0.5 million shares of common stock valued at$31 million and$33 million issued for no cash consideration in connection with stock-based compensation for the three months endedMarch 31, 2022 and 2021, respectively.
See Note 4 - Long-term Debt and Equity Financings under Part I, Item 1, of this
report for additional information, including proceeds from issuances of
long-term debt, including Ameren Missouri's
Indebtedness Provisions and Other Covenants
AtMarch 31, 2022 , the Ameren Companies were in compliance with the provisions and covenants contained in their credit agreements, indentures, and articles of incorporation, as applicable, and ATXI was in compliance with the provisions and covenants contained in its note purchase agreements. See Note 3 - Short-term Debt and Liquidity under Part I, Item 1, of this report and Note 4 - Short-term Debt and Liquidity and Note 5 - Long-term Debt and Equity Financings under Part II, Item 8, of the Form 10-K for a discussion of provisions, applicable cross-default provisions, and covenants contained in our credit agreements, in ATXI's note purchase agreements, and in certain of the Ameren Companies' indentures and articles of incorporation. We consider access to short-term and long-term capital markets to be a significant source of funding for capital requirements not satisfied by cash provided by our operating activities. Inability to raise capital on reasonable terms, particularly during times of uncertainty in the capital markets, could negatively affect our ability to maintain and expand our businesses. After assessing its current operating performance, liquidity, and credit ratings (see Credit Ratings below),Ameren , Ameren Missouri, andAmeren Illinois each believes that it will continue to have access to the capital markets on reasonable terms. However, events beyondAmeren's , Ameren Missouri's, andAmeren Illinois' control may create uncertainty in the capital markets or make access to the capital markets uncertain or limited. Such events could increase our cost of capital and adversely affect our ability to access the capital markets.
Dividends
The amount and timing of dividends payable onAmeren's common stock are within the sole discretion ofAmeren'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, includingAmeren's overall payout ratio, payout ratios of our peers, projected cash flow and potential future cash flow requirements, historical earnings and cash flow, projected earnings, impacts of regulatory orders or legislation, and other key business considerations.Ameren expects its dividend payout ratio to be between 55% and 70% of annual earnings over the next few years.
See Note 4 - Short-term Debt and Liquidity and Note 5 - Long-term Debt and
Equity Financings under Part II, Item 8, of the Form 10-K for additional
discussion of covenants and provisions contained in certain of the Ameren
Companies' financial agreements and articles of incorporation that would
restrict the Ameren Companies' payment of dividends in certain circumstances. At
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circumstances existed at
The following table presents common stock dividends declared and paid by
Three Months
2022 2021
Ameren $ 152 $ 140
ATXI - 25
Credit Ratings
Our credit ratings affect our liquidity, our access to the capital markets and credit markets, our cost of borrowing under our credit facilities and our commercial paper programs, and our collateral posting requirements under commodity contracts.
The following table presents the principal credit ratings by Moody's and S&P, as applicable, effective on the date of this report:
Moody's S&P
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$110 million forAmeren and Ameren Missouri and cash collateral posted by external parties were$35 million ,$4 million , and$31 million forAmeren , Ameren Missouri, andAmeren Illinois , respectively, atMarch 31, 2022 . A sub-investment-grade issuer or senior unsecured debt rating (below "Baa3" from Moody's or below "BBB-" from S&P) atMarch 31, 2022 , could have resulted inAmeren , Ameren Missouri, orAmeren Illinois being required to post additional collateral or other assurances for certain trade obligations amounting to$98 million ,$68 million , and$30 million , respectively. Changes in commodity prices could trigger additional collateral postings and prepayments. Based on credit ratings atMarch 31, 2022 , if market prices were 15% higher or lower thanMarch 31, 2022 levels in the next 12 months and 20% higher or lower thereafter through the end of the term of the commodity contracts, thenAmeren and Ameren Missouri could be required to post an immaterial amount, compared to each company's liquidity, of collateral or provide other assurances for certain trade obligations.
OUTLOOK
Below are some key trends, events, and uncertainties that may reasonably affect
our results of operations, financial condition, or liquidity, as well as our
ability to achieve strategic and financial objectives, for 2022 and beyond. The
continued effect of the COVID-19 pandemic on our results of operations,
financial position, and liquidity in subsequent periods will depend on its
severity and longevity, future
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regulatory or legislative actions with respect thereto, and the resulting impact on business, economic, and capital market conditions. Although restrictions on social activities and nonessential businesses implemented in our service territories in 2020 have been relaxed, additional restrictions may be imposed in the future. We continue to monitor the impacts the COVID-19 pandemic is having on our businesses, including but not limited to impacts on our liquidity; demand for residential, commercial, and industrial electric and natural gas services; supply chain operations; the availability of our employees and contractors; counterparty credit; capital construction; infrastructure operations and maintenance; and pension valuations. For additional information regarding recent rate orders, lawsuits, and pending requests filed with state and federal regulatory commissions, including those discussed below, see Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report and Note 2 - Rate and Regulatory Matters under Part II, Item 8, of the Form 10-K.
Operations
•In the first three months of 2022, our sales volumes, which have been, and continue to be, affected by the COVID-19 pandemic, among other things, were comparable to the same period in 2021, excluding the estimated effects of weather and customer energy-efficiency programs. While total sales volume levels were also comparable to pre-pandemic levels, there has been a shift in sales volumes by customer class, which began in 2020, with an increase in residential sales, and a decrease in commercial and industrial sales. Because of their regulatory frameworks,Ameren Illinois' and ATXI's revenues are largely decoupled from changes in sales volumes. •ThePISA permits Ameren Missouri to defer and recover 85% of the depreciation expense and earn a return at the applicable WACC on investments in certain property, plant, and equipment placed in service, and not included in base rates. The regulatory asset for accumulatedPISA deferrals also earns a return at the applicable WACC, with all approvedPISA deferrals added to rate base prospectively and recovered over a period of 20 years following a regulatory rate review. Additionally, under the RESRAM, Ameren Missouri is permitted to recover the 15% of depreciation expense not recovered under thePISA , and earn a return at the applicable WACC for investments in renewable generation plant placed in service to comply withMissouri's renewable energy standard. Accumulated RESRAM deferrals earn carrying costs at short-term interest rates. ThePISA and the RESRAM mitigate the effects of regulatory lag between regulatory rate reviews. Those investments not eligible for recovery under thePISA and the remaining 15% of certain property, plant, and equipment placed in service, unless eligible for recovery under the RESRAM, remain subject to regulatory lag. Ameren Missouri defers its cost of debt relating toPISA eligible investments as an offset to interest charges with the difference between the applicable WACC and its cost of debt recognized in revenues when recovery of such deferrals is reflected in customer rates. As a result of thePISA election, additional provisions of the law apply to Ameren Missouri, including limitations on electric customer rate increases. Ameren Missouri does not expect to exceed these rate increase limitations in 2022. Both the rate increase limitation and thePISA are effective throughDecember 2023 , unless Ameren Missouri requests and the MoPSC approves an extension throughDecember 2028 . InMay 2022 , Senate Bill 745 passed theMissouri General Assembly and was sent to the governor for approval. If enacted, among other things, the bill would extend thePISA election throughDecember 2028 and allow for an additional five-year extension throughDecember 2033 if requested by Ameren Missouri and approved by the MoPSC. In addition, a 2.5% limit on customer rate increases resulting fromPISA deferrals would become effective beginning in 2024. For information on the rate increase limitation effective through 2023, see Note 2 - Rate and Regulatory Matters under Part II, Item 8, of the Form 10-K. •In 2018, the MoPSC issued an order approving Ameren Missouri's MEEIA 2019 plan. The plan includes a portfolio of customer energy-efficiency programs throughDecember 2023 and low-income customer energy-efficiency programs throughDecember 2024 , along with a rider. Ameren Missouri intends to invest approximately$360 million over the life of the plan, including$70 million in 2022 and$75 million in 2023. The plan includes the continued use of the MEEIA rider, which allows Ameren Missouri to collect from, or refund to, customers any difference in actual MEEIA program costs and related lost electric margins and the amounts collected from customers. In addition, the plan includes a performance incentive that provides Ameren Missouri an opportunity to earn additional revenues by achieving certain customer energy-efficiency goals. If the target goals were achieved for 2021 and are achieved for 2022, additional revenues of$24 million would be recognized in 2022, and, if target goals are achieved for 2023, additional revenues of$13 million would be recognized in 2023. •InDecember 2021 , the MoPSC issued an order in Ameren Missouri's 2021 electric service regulatory rate review, resulting in an increase of$220 million to Ameren Missouri's annual revenue requirement for electric retail service. As a result of this order, Ameren Missouri expects a year-over-year increase to 2022 earnings, compared to 2021, primarily in the third quarter of 2022 due to seasonal electric customer rates and higher demand during the summer.Ameren Missouri expects earnings to increase approximately$23 million in the third quarter of 2022, compared to the same period in 2021. •Ameren Illinois and ATXI use a forward-looking rate calculation with an annual revenue requirement reconciliation for each company's electric transmission business. Based on expected rate base and the currently allowed 10.52% ROE, which includes a 50 basis point incentive adder for participation in an RTO, the revenue requirements included in 2022 rates forAmeren Illinois' and ATXI's electric transmission businesses are$422 million and$195 million , respectively. These revenue requirements represent an increase inAmeren Illinois' revenue requirement of$42 million and a decrease in ATXI's revenue requirements of$5 million from the revenue requirements reflected in 2021 rates, primarily due to higher expected rate base atAmeren Illinois and a lower expected rate base at ATXI. These 60
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rates will affectAmeren Illinois' and ATXI's cash receipts during 2022, but will not determine their respective electric transmission service operating revenues, which will instead be based on 2022 actual recoverable costs, rate base, and a return on rate base at the applicable WACC as calculated under theFERC formula ratemaking framework. •The allowed base ROE forFERC -regulated transmission rates previously charged under the MISO tariff is the subject of an appeal filed with theUnited States Court of Appeals for the District of Columbia Circuit . Depending on the outcome of the appeal, the transmission rates charged during previous periods and the currently effective rates may be subject to change. Additionally, inMarch 2019 , theFERC issued a Notice of Inquiry regarding its transmission incentives policy. InMarch 2020 , theFERC issued a Notice of Proposed Rulemaking on its transmission incentives policy, which addressed many of the issues in the Notice of Inquiry on transmission incentives. The Notice of Proposed Rulemaking included an increased incentive in the allowed base 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. InApril 2021 , theFERC 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. TheFERC is under no deadline to issue a final rule on this matter.Ameren is unable to predict the ultimate impact of any changes to theFERC's incentives policy, or any further order on base ROE. A 50 basis point change in theFERC -allowed base ROE would affectAmeren's andAmeren Illinois' annual net income by an estimated$12 million and$8 million , respectively, based on each company's 2022 projected rate base. •Ameren Illinois' electric distribution service performance-based formula ratemaking framework under the IEIMA allowsAmeren Illinois to reconcile electric distribution service rates to its actual revenue requirement on an annual basis to reflect actual recoverable costs incurred and a return at the applicable WACC on year-end rate base. If a given year's revenue requirement varies from the amount collected from customers, an adjustment is made to electric operating revenues with an offset to a regulatory asset or liability to reflect that year's actual revenue requirement, independent of actual sales volumes. The regulatory balance is then collected from, or refunded to, customers within two years from the end of the year. Pursuant to an order issued by the ICC inMarch 2021 ,Ameren Illinois expects to use the current IEIMA formula framework to establish annual customer rates effective through 2023, and reconcile the related revenue requirement for customer rates established for 2022 and 2023. As such,Ameren Illinois' 2022 and 2023 revenues would reflect each year's actual recoverable costs, year-end rate base, and a return at the applicable WACC, with the ROE component based on the annual average of the monthly yields of the 30-year United States Treasury bonds plus 580 basis points. For more information on theMarch 2021 ICC order, see Note 2 - Rate and Regulatory Matters under Part II, Item 8, of the Form 10-K. By law, the decoupling provisions extend beyond the end of existing performance-based formula ratemaking, which ensures thatAmeren 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 inSeptember 2021 ,Ameren Illinois may file an MYRP with the ICC to establish base rates for electric distribution service to be charged to customers for each calendar year of a four-year period. An MYRP would allowAmeren Illinois to reconcile electric distribution service rates to its actual revenue requirement on an annual basis, subject to a reconciliation cap and adjustments to the ICC-determined ROE for performance incentives and penalties.Ameren Illinois' existing riders will remain effective whether it elects to file an MYRP or a traditional regulatory rate review. Additionally, electric distribution service revenues would continue to be decoupled from sales volumes under either election. Subject to a constructive outcome regarding the ICC's determination of performance metrics,Ameren Illinois anticipates filing an MYRP bymid-January 2023 , with rates effective beginning in 2024. IfAmeren Illinois does not file an MYRP for rates effective beginning in 2024, its next opportunity to file an MYRP would be for rates effective beginning in 2028. For additional information regarding ratemaking under an MYRP, including details of the reconciliation cap, see Note 2 - Rate and Regulatory Matters under Part II, Item 8, of the Form 10-K. •In 2021, the ICC issued an order inAmeren Illinois' annual update filing that approved a$58 million increase inAmeren Illinois' electric distribution service rates beginning inJanuary 2022 .Ameren Illinois' 2022 electric distribution service revenues will be based on its 2022 actual recoverable costs, 2022 year-end rate base, and a return at the applicable WACC, with the ROE component based on the annual average of the monthly yields of the 30-year United States Treasury bonds plus 580 basis points. As ofMarch 31, 2022 ,Ameren Illinois expects its 2022 electric distribution year-end rate base to be$3.9 billion . The 2022 revenue requirement reconciliation adjustment will be collected from, or refunded to, customers in 2024. A 50 basis point change in the annual average of the monthly yields of the 30-year United States Treasury bonds would result in an estimated$11 million change inAmeren's andAmeren Illinois' annual net income, based onAmeren Illinois' 2022 projected year-end rate base, including electric energy-efficiency investments.Ameren Illinois' allowed ROE for the first three months of 2022 was based on an estimated annual average of the monthly yields of the 30-year United States Treasury bonds of 2.66%. •InApril 2022 ,Ameren Illinois filed its annual electric distribution service performance-based formula rate update with the ICC to be used for 2023 rates, requesting an increase of$83 million . An ICC decision in this proceeding is required byDecember 2022 , with new rates effective inJanuary 2023 . These rates will affectAmeren Illinois' cash receipts during 2023, but will not affect electric distribution service 61
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revenues, which will be based on 2023 actual recoverable costs, 2023 year-end rate base, and a return at the applicable WACC as calculated under theIllinois performance-based formula ratemaking framework. •Pursuant toIllinois 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 forAmeren Illinois to invest approximately$100 million per year in electric energy-efficiency programs through 2025, the ICC has the ability to reduce the amount of electric energy-efficiency savings goals in future plan program years if there are insufficient cost-effective programs available, which could reduce the investments in electric energy-efficiency programs. The electric energy-efficiency program investments and the return on those investments are collected from customers through a rider and are not recovered through the electric distribution service performance-based formula ratemaking framework. InApril 2022 ,Ameren Illinois filed a revised energy-efficiency plan with the ICC to invest approximately$120 million per year in electric energy-efficiency programs through 2025, which reflects the increased level of annual investments allowed under the IETL. The ICC is under no deadline to issue an order in this proceeding. •Ameren Missouri's scheduled refueling and maintenance outage at itsCallaway Energy Center began inApril 2022 . Ameren Missouri expects to incur approximately$50 million in maintenance expenses related to the outage. 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's next refueling and maintenance outage at itsCallaway energy center is scheduled for the fall of 2023. •InDecember 2021 , Ameren Missouri filed a motion with theUnited States District Court for the Eastern District of Missouri to modify aSeptember 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 district court is under no deadline to issue a ruling revising the remedy order. InJanuary 2022 , the MISO completed a preliminary informational assessment regarding potential impacts of the retirement to the regional electric power system, which indicated transmission upgrades and voltage support would be needed in advance of the retirement of the Rush Island Energy Center to address reliability concerns. InFebruary 2022 , Ameren Missouri formally notified the MISO of its intent to retire the Rush Island Energy Center and requested the MISO to perform a final reliability assessment, which is expected to be completed inMay 2022 . The MISO must also separately approve the specific upgrades and transmission support required to address reliability concerns noted in the final assessment. Additionally, the MISO will determine whether reliability concerns require the Rush Island Energy Center to be classified as a system support resource, which should continue operating until the completion of to-be-specified transmission upgrades. If the Rush Island Energy Center were identified as a system support resource, an agreement detailing the manner of and time for continued operation would be filed with theFERC for approval. The district court has the authority to determine the retirement date and operating parameters for theRush Island Energy Center and is not bound by the MISO determination orFERC's approval. For additional information on the NSR and Clean Air Act litigation, see Note 9 - Commitments and Contingencies under Part I, Item 1, of this report.Ameren Missouri expects to file an update to the 2020 IRP with the MoPSC inJune 2022 to reflect 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. InFebruary 2022 , the MoPSC issued an order directing the MoPSC staff to review Ameren Missouri's planned accelerated retirement of theRush Island Energy Center, including potential impacts on the reliability and cost ofAmeren Missouri's service to its customers, Ameren Missouri's plans to mitigate the customer impacts of the accelerated retirement, and the prudence ofAmeren Missouri's actions and decisions with regard to the Rush Island Energy Center, among other things. InApril 2022 , the MoPSC staff filed an initial report with the MoPSC in which the staff concluded early retirement of theRush Island Energy Center may cause reliability concerns. The MoPSC staff is under no deadline to complete this review. As ofDecember 31, 2021 , andMarch 31, 2022 ,Ameren and Ameren Missouri classified the remaining net book value of the Rush Island Energy Center as plant to be abandoned, net, within "Property, Plant, and Equipment, Net" onAmeren'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 otherMissouri utilities with similar facts. •InJanuary 2022 , Ameren Missouri received notice of a proposed determination by theEPA that it has rejected Ameren Missouri's requests to extend the timeline for operating certain impoundments located at the Sioux and Meramec energy centers. Pursuant to the terms of the proposed determination, compliance with the CCR Rule's requirements for closure of the impoundments would be required 135 days after theEPA issues a final determination, which Ameren Missouri expects to be issued in the spring of 2022. If Ameren Missouri was no longer able to use the surface impoundments at the Sioux or Meramec energy centers, Ameren Missouri would not be able to operate the energy centers unless an alternative for handling the CCR material was available. Ameren Missouri will retire the Meramec Energy Center in 2022, and construction is underway to complete a CCR Rule-compliant impoundment at the Sioux Energy Center to allow for continued operations. Additionally, Ameren Missouri is seeking a reliability determination from the MISO, which, if 62
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granted and accepted by theEPA , would extend the deadline to comply with the requirement to close the surface impoundments and allow the energy centers to operate.Ameren expects the MISO determination to be completed inJune 2022 . Ameren Missouri does not expect that this matter will have a material adverse effect on its results of operations, financial position, or liquidity. •The IETL established emission standards that became effective inSeptember 2021 . Ameren Missouri's natural gas-fired energy centers inIllinois are subject to limits on emissions, including CO2 and NOx, equal to their unit-specific average emissions from 2018 through 2020, for any rolling twelve-month period beginningOctober 1, 2021 , through 2029. Further reductions to emissions limits will become effective between 2030 and 2040, which could limit the operations of Ameren Missouri's five natural gas-fired energy centers located in the state ofIllinois , and will result in the closure of the Venice Energy Center by 2030. These energy centers are utilized to support peak loads. Subject to conditions in the IETL, these energy centers may be allowed to exceed the emissions limits in order to maintain reliability of electric utility service as necessary. Ameren Missouri is reviewing the emission standards and the effect they may have on its generation strategy, including any increases in capital expenditures or operating costs, and changes to the useful life of the Venice Energy Center. Ameren Missouri expects to file an update to the 2020 IRP with the MoPSC inJune 2022 to reflect, among other things, the impact of these new emissions standards. •InApril 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 andAmeren Illinois' service territories. The projected shortage resulted in higher capacity prices forJune 2022 throughMay 2023 , and the MISO indicated that the shortage may lead to temporary, controlled interruptions of service to maintain system reliability. •We are observing inflationary pressures on the prices of commodities, labor, services, materials, and supplies. Ameren Missouri andAmeren 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 could impact our ability to control costs and/or make substantial investments in our businesses, including our ability to recover costs and investments, and to earn our allowed ROEs within frameworks established by our regulators, while maintaining rates that are affordable to our customers. Based on estimated power prices and customer demand, the capacity price set by theApril 2022 MISO auction, and the amounts of energy and capacity hedged through IPA procurement events,Ameren Illinois estimates an increase to purchased power costs for calendar year 2022, compared to 2021, of approximately$400 million . The actual increase to purchased power costs will vary due to differences between estimated and realized power prices as well as customer demand, which will be affected by changes in customers' elections to useAmeren Illinois or an alternative retail electric supplier for their energy needs. 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. The deferred amount is either billed or refunded to customers in a subsequent period. These pass-through costs do not affectAmeren Illinois' net income, as any change in costs are offset by a corresponding change in revenues. •Ameren Missouri andAmeren 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 andAmeren 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 andAmeren Illinois continue to face cost recovery pressures, including limited economic growth in their service territories, increasing inflation, economic impacts of the COVID-19 pandemic, customer conservation efforts, the impacts of additional customer energy-efficiency programs, and increased customer use of increasingly cost-effective technological advances, 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 for efficiencies 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
•While our customers' payment for our services had previously been adversely affected by the COVID-19 pandemic, payment activity has returned to levels more comparable to pre-pandemic levels. However, our liquidity and our capital expenditure plans could be adversely affected by other impacts resulting from the COVID-19 pandemic, including but not limited to potential impacts on our ability to access the capital markets on reasonable terms when needed and the timing of tax payments and the utilization of tax credits. We expect to make significant capital expenditures to improve our electric and natural gas utility infrastructure, however, disruptions to the capital markets and the ability of our suppliers and contractors to perform as required under their contracts could impact the execution of our capital investment strategy. For further discussion on the impacts to our ability to access the capital markets, see below.
•In
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and includes investments that will upgrade the grid and accommodate more renewable energy. Investments under the plan are expected to total approximately$8.4 billion over the five-year period from 2022 through 2026, with expenditures largely recoverable under thePISA and the RESRAM. The planned investments in 2024 through 2026 are based on the assumption that Ameren Missouri requests and receives MoPSC approval of an extension of thePISA fromDecember 2023 toDecember 2028 . For additional information on Senate Bill 745, and its impact on thePISA , see above. •In connection with Ameren Missouri's 2020 IRP,Ameren established a goal of achieving net-zero carbon emissions by 2050.Ameren is also targeting a 50% CO2 emission reduction by 2030 and an 85% reduction by 2040 from the 2005 level.Ameren's CO2 emission reduction targets encompass direct emissions fromAmeren Missouri's andAmeren Illinois' operations, with nearly all of those emitted by Ameren Missouri's generation fleet. In 2021, the MoPSC issued an order affirming the plan's compliance withMissouri law. The plan targets cleaner and more diverse sources of energy generation, including solar, wind, hydro, and nuclear power, and supports increased investment in new energy technologies. It also includes expanding renewable sources by adding 3,100 MWs of renewable generation by the end of 2030 and a total of 5,400 MWs of renewable generation by 2040. These amounts include 700 MWs related to the High Prairie Renewable andAtchison Renewable energy centers, which support Ameren Missouri's compliance with the state ofMissouri's requirement of achieving 15% of native load sales from renewable energy sources that began in 2021. The plan also includes accelerating the retirement dates of the Sioux andRush Island coal-fired energy centers to 2028 and 2039, respectively, the continued implementation of customer energy-efficiency programs, and the expectation that Ameren Missouri will seek NRC approval for an extension of the operating license for the Callaway Energy Center beyond its current 2044 expiration date. Additionally, the plan includes retiring the Meramec andLabadie coal-fired energy centers at the end of their useful lives (by 2022 and 2042, respectively). Ameren Missouri's plan could be affected by, among other factors: Ameren Missouri's ability to obtain certificates of convenience and necessity from the MoPSC, and any other required approvals for the addition of renewable resources, retirement of energy centers, and new or continued customer energy-efficiency programs; the ability to enter into build-transfer agreements for renewable generation and acquire that generation at a reasonable cost; the ability of developers to meet contractual commitments and timely complete projects, which is dependent upon the availability of necessary labor, materials, and equipment, including those that are affected by the disruptions in the global supply chain caused by the COVID-19 pandemic or government actions, among other things; changes in the scope and timing of projects; the availability of federal production and investment tax credits related to renewable energy and Ameren Missouri's ability to use such credits; the cost of wind, solar, and other renewable generation and storage technologies; changes in environmental regulations, including those related to carbon emissions; energy prices and demand; and Ameren Missouri's ability to obtain necessary rights-of-way, easements, and transmission interconnection agreements at an acceptable cost and in a timely fashion. InDecember 2021 , the MoPSC issued an order in Ameren Missouri's 2021 electric service regulatory rate review, which, among other things, approved a change in the depreciable lives of the Sioux andRush Island energy centers' assets consistent with Ameren Missouri's 2020 IRP. Due to the NSR andClean Air Act Litigation discussed in Note 9 - Commitments and Contingencies under Part I, Item 1, of this report, Ameren Missouri plans to retire the Rush Island Energy Center prior to the 2039 date discussed above. Ameren Missouri expects to file an update to the 2020 IRP with the MoPSC inJune 2022 to reflect an accelerated retirement date for the Rush Island Energy Center and the impact of new emission standards pursuant to the IETL, as discussed in Note 9 - Commitments and Contingencies, among other things. The next integrated resource plan is expected to be filed inSeptember 2023 . •Missouri law allowsMissouri electric utility companies to petition the MoPSC for a financing order to authorize the issuance of securitized utility tariff bonds to finance the cost of retiring electric generation facilities before the end of their useful lives, including the repayment of existing debt. In connection with the planned accelerated retirement of the Rush Island Energy Center due to the NSR andClean 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. •InFebruary 2022 , Ameren Missouri, through a subsidiary, entered into a build-transfer agreement to acquire a 150-MW solar generation facility after construction. The facility is expected to be located in southeasternIllinois . The acquisition is subject to certain conditions, including the issuance of a certificate of convenience and necessity by the MoPSC, obtaining a MISO transmission interconnection agreement, and approval by theFERC .Ameren Missouri expects to file for a certificate of convenience and necessity with the MoPSC by mid-2022. Depending on the timing of regulatory approvals and the impact of potential sourcing issues discussed below, the project could be completed as early as 2024. Capital expenditures related to this facility are not included inAmeren's and Ameren Missouri's expected capital investments discussed below. •Ameren Missouri's 2020 IRP targets cleaner and more diverse sources of energy generation, including solar generation. While rights to acquire the 150-MW solar facility discussed above were secured through a build-transfer agreement, 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 this project and other solar generation projects. The supply of solar panels tothe United States has been significantly disrupted as a result of an investigation initiated by theDepartment of Commerce in lateMarch 2022 , which could result in punitive tariffs on solar panels imported from four Southeast Asian countries. The investigation is in response to complaints of Chinese solar manufacturers shifting solar cells to these countries to avoid tariffs required on imports fromChina .The Department of Commerce is 64
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required to issue a preliminary determination within 150 days of its initiation of an investigation, with final determination taking 300 days or more. Additionally, certain solar panels fromChina have been subject to detention by theUnited States Customs and Border Protection Agency as a result of the Uyghur Forced Labor Prevention Act that was passed inDecember 2021 . Any tariffs or other outcomes resulting from the investigation by theDepartment of Commerce or actions by theUnited States Customs and Border Protection Agency could affect the cost and the availability of solar panels and the timing and amount of Ameren Missouri's estimated capital expenditures associated with solar generation investments. •Through 2026, we expect to make significant capital expenditures to improve our electric and natural gas utility infrastructure, with a major portion directed to our transmission and distribution systems. We estimate that we will invest up to$18.0 billion (Ameren Missouri - up to$9.2 billion ;Ameren Illinois - up to$8.6 billion ; ATXI - up to$0.2 billion ) of capital expenditures during the period from 2022 through 2026. These planned investments are based on the assumption of continued constructive regulatory frameworks, including an assumption that Ameren Missouri requests and receives MoPSC approval of an extension of thePISA fromDecember 2023 toDecember 2028 .Ameren's andAmeren Missouri's estimates exclude renewable generation investment opportunities of 1,200 MWs by 2026, which are included in Ameren Missouri's 2020 IRP, and additional investment opportunities that may be approved by the MISO to address reliability concerns in connection with the planned accelerated retirement of the Rush Island Energy Center. •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. InFebruary 2022 , the MISO updated a list of projects under consideration for the first phase of the roadmap, and is expected to approve certain projects for the first phase in lateJuly 2022 . Expenditures that result from the MISO long-range transmission planning roadmap may cause adjustments to our estimated 2022 through 2026 capital expenditures. •Environmental regulations, including those related to CO2 emissions, or other actions taken by theEPA or state regulators, or requirements that may result from the NSR andClean Air Act Litigation discussed in Note 9 - Commitments and Contingencies under Part I, Item 1, of this report, could result in significant increases in capital expenditures and operating costs. Regulations enacted by a prior federal administration can be reviewed and repealed, and replacement or alternative regulations can be proposed or adopted by the current federal administration including theEPA . The ultimate implementation of any of these regulations, as well as the timing of any such implementation, is uncertain. However, the individual or combined effects of existing and new environmental regulations could result in significant capital expenditures, increased operating costs, or the closure or alteration of some of Ameren Missouri's coal and natural gas-fired energy centers. Ameren Missouri's capital expenditures are subject to MoPSC prudence reviews, which could result in cost disallowances as well as regulatory lag. The cost ofAmeren 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 andAmeren Missouri's earnings could benefit from increased investment to comply with environmental regulations if those investments are reflected and recovered on a timely basis in customer rates. •The Ameren Companies have multiyear credit agreements that cumulatively provide$2.3 billion of credit throughDecember 2025 , subject to a 364-day repayment term for Ameren Missouri andAmeren Illinois , with the option to seek incremental commitments to increase the cumulative credit provided to$2.7 billion . See Note 3 - Short-term Debt and Liquidity under Part I, Item 1, of this report and Note 4 - Short-term Debt and Liquidity under Part II, Item 8, in the Form 10-K for additional information regarding the Credit Agreements. By the end of 2022,$55 million ,$400 million , and$50 million of long-term debt obligations are due to mature at Ameren Missouri,Ameren Illinois , and ATXI, respectively.Ameren , Ameren Missouri, andAmeren Illinois believe that their liquidity is adequate given their expected operating cash flows, capital expenditures, and financing plans. To date, the Ameren Companies have been able to access the capital markets on reasonable terms when needed. However, there can be no assurance that significant changes in economic conditions, disruptions in the capital and credit markets, or other unforeseen events will not materially affect their ability to execute their expected operating, capital, or financing plans. •Ameren expects its cash used for currently planned capital expenditures and dividends to exceed cash provided by operating activities over the next several years. As part of its funding plan for capital expenditures,Ameren is using newly issued shares of common stock, rather than market-purchased shares, to satisfy requirements under the DRPlus and employee benefit plans and expects to continue to do so through at least 2026.Ameren expects these issuances to provide equity of about$100 million annually. In addition, in 2021,Ameren established an ATM program under whichAmeren may offer and sell from time to time up to$750 million of its common stock, which includes the ability to enter into forward sales agreements, subject to market conditions and other factors. For additional information regarding outstanding forward sale agreements, including settlement dates, see Note 4 - Long-Term Debt and Liquidity under Part I, Item 1, of this report.Ameren expects to settle the forward sale agreements byDecember 31, 2022 .Ameren plans to issue approximately$300 million of equity each year from 2022 to 2026 in addition to issuances under the DRPlus and employee benefit plans.Ameren expects its equity to total capitalization ratio to be approximately 45% throughDecember 31, 2026 , with the long-term intent to support solid investment-grade credit ratings.Ameren Missouri andAmeren Illinois expect to fund cash flow needs through debt issuances, adjustments of dividends toAmeren (parent), and/or capital contributions fromAmeren (parent). 65
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•As ofMarch 31, 2022 ,Ameren had$136 million in tax benefits from federal and state income tax credit carryforwards and$35 million in tax benefits from federal and state net operating loss carryforwards, which will be utilized in future periods.Ameren expects federal income tax payments at the required minimum levels from 2022 to 2026 resulting from the anticipated use of existing production tax credits generated by Ameren Missouri's High Prairie Renewable and Atchison Renewable energy centers, existing tax net operating losses, tax credit carryforwards, tax overpayments, and outstanding refunds. •As a result of the significant increase in customer demand and prices for natural gas and electricity experienced inmid-February 2021 due to extremely cold weather, for the month ofFebruary 2021 , Ameren Missouri andAmeren Illinois had under-recovered costs under their PGA clauses and, forAmeren Missouri , under the FAC (Ameren Missouri - PGA$53 million , FAC$50 million ;Ameren Illinois - PGA$221 million ). Ameren Missouri's PGA and FAC under-recoveries are designed to be collected from customers over 12 months beginningNovember 2021 and eight months beginningOctober 2021 , respectively. InOctober 2021 , the MoPSC issued an order allowing Ameren Missouri to extend the collection period for the cumulative PGA under-recovery as ofAugust 2021 , which includes theFebruary 2021 under-recovery, from 12 months to 36 months beginningNovember 2021 , to lessen the impact on customer rates.Ameren Illinois is collecting the PGA under-recovery over 18 months beginningApril 2021 . The above items could have a material impact on our results of operations, financial position, and liquidity. Additionally, in the ordinary course of business, we evaluate strategies to enhance our results of operations, financial position, and liquidity. These strategies may include acquisitions, divestitures, opportunities to reduce costs or increase revenues, and other strategic initiatives to increaseAmeren's shareholder value. We are unable to predict which, if any, of these initiatives will be executed. The execution of these initiatives may have a material impact on our future results of operations, financial position, or liquidity.
REGULATORY MATTERS
See Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report.
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