March 2007
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ICC demands explanation from Ameren

Ameren LogoThere’s been a lot of press coverage of Ameren’s threats since their bond rating was reduced to junk status by Moody’s Investors Service and the response by the Illinois Commerce Commission (ICC). I’ve seen a lot of quotes from the ICC’s letter, but not the letter in its entirety. It is available online. You can read it by clicking the “Show More” link below, or see a scan of the actual letter on the ICC’s website in PDF format.

I’m glad the ICC is looking into this matter. It certainly appears that Ameren is playing games, and power is nothing to play games with. In today’s society we depend on electricity and gas for heat, cooling, cooking, and other vital needs. Especially gratifying were the parts of the letter that said the ICC expects Ameren to “suspend their common and preferred dividends” and “consider reductions in . . . executive compensation and promotional advertising” before cutting services.

It looks like, in their zeal to stave off attempts by the legislature to reimpose a rate freeze, Ameren went a bit overboard in their dire warnings of what might happen if their credit rating were to suffer. Apparently they didn’t anticipated the ICC would call them on it. The irony is that, in their attempt to rebuff rate regulation, they’re unintentionally making a case for it instead.

March 14, 2007

Mr. Scott Cisel
President and Chief Executive Officer
Ameren Illinois
300 Liberty Street
Peoria, IL 61602

Dear Mr. Cisel:

On March 12, 2007, Moody’s Investors Service downgraded the ratings of Ameren Corporation and its utility subsidiaries to one notch below investment grade. On March 7, 2007, Ameren issued a press release that indicated if its Illinois utilities’ credit ratings were downgraded to junk status (i.e., non-investment grade) that “[s]uch a credit rating agency downgrade for Ameren Illinois utilities would mean:

  • Immediate steps to lay off employees;
  • Nearly all of the companies’ contractors would be laid off;
  • Reliability projects-including tree trimming-would be postponed;
  • Connections for new homes and businesses would be delayed;
  • Response to customer calls would stretch from seconds today to many minutes;
  • Elimination of the proposed $20 million customer credit, primarily for the relief of residential electric heat customers;
  • Elimination of the zero-percent interest Customer Elect Plan (CEP) for phasing in h igher electricity rates;
  • Elimination of the zero-percent deferral assistance program for certain non-residential customers;
  • Elimination of the $15 million pledged for energy assistance, energy efficiency programs and aid for low-income customers; and
  • All community donations and projects would be discontinued.”

The Illinois Commerce Commission is very concerned that many of these actions will preclude Ameren from maintaining the safe and reliable service required by statute. We understand such rating downgrade will impact the Ameren Illinois utilities’ future financing costs and access to capital. Nevertheless, it is unclear to the Commission why such downgrade should result in all the above actions. The credit rating downgrade is a response to potential legislative action that has not and may not occur. It is not a response to any actual reduction in the Ameren Illinois utilities’ cash flows. Therefore, we are requesting a detailed explanation of these actions and have attached to this letter a list of questions regarding those proposed actions that the Commission expects the Ameren Illinois utilities to answer by Friday, March 16, 2007. In addition, we are requesting a copy of all correspondence and all other communications, whether oral, electronic, or otherwise, between the Ameren Illinois utilities and each credit rating agency (i.e., Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings) concerning the credit ratings of the Ameren Illinois utilities during the last 12 months. The Commission expects the Ameren Illinois utilities to answer this request by March 28, 2007.

In the Ameren Illinois utilities’ request for a rate increase in 2006, the Illinois Commerce Commission granted a total of $96.7 million in additional annual revenues to recover just and reasonable operating costs and to provide a fair return on utility investments. In our opinion it is not justifiable that hte Ameren Illinois utilities would consider laying off employees, terminating contractor employment, postponing reliability projects, delaying new service connections, discontinuing community donations and projects when such costs are reflected in the new rates that thave been granted to them and are now being charged to customers.

The Illinois Commerce Commission is aware that in 2006 the Ameren Illinois utilities paid the following amonts in common dividends to their part company AmerenCIPS – $50 million; and AmerenCILCO – $65 million. (While AmerenIP paid no common dividend in 2006, we recognize that it paid $76 million in common dividends in 2005). Further, we are aware that the Ameren Illinois utilities together paid $8 million in preferred deividends in 2006. We expect AmerenCIPS, AmerenCILCO, and AmerenIP to suspend their common and preferred dividends before they begin cuts in service to their customers. In addition, the Commission also expects that the Ameren Illinois utilities will consider reductions in less essential expenditures such as executive compensation and promotional advertising prior to considering cuts in utility service.

The Commission takes seriously the public utilities’ obligations under the Public Utilities Act to, among other things, provide and maintain the service necessary to promote the safety, health, comfort, and convenience of the public. The Commission shall consider undertaking any and all necessary actions or remedies provided by law to ensure safe and reliable service for Illinois ratepayers.

Tim Anderson
Executive Director

6 comments to ICC demands explanation from Ameren

  • Mahkno

    If you drink a few beers and say Ameren really fast over n over… it sounds like Enron.

  • justanobserver

    Too bad there wasn’t this zeal to investigate when the deregulation bill was approved 10 years ago. Funny how the Citizens Utility Board supported CILCO’s bill until the final hours of the legislative session, then switched to the ComEd bill that created all this mess. CILCO’s bill would have created real competition immediately without spinning off power plants, etc. CILCO’s price at the time was 7 cents a KWH, ComEd was over 10 cents and scared to death that CILCO would take away thousands of customers, which of course they would have.

    Also funny how CUB–the protector of consumers in Illinois against the big, bad utility companies–has received
    $1 million a year since 2000 from a “environmental” fund established by, oh my, ComEd.

    There are many aspects of this whole thing that aren’t what they seem. It’s a politican’s dream to be able to dump on the utilities now after forcing a
    10-year rate freeze on them. It was the freeze, by the way, that kept a competitive market from developing because rates were artifically low and no other supplier was going to compete against artifical rates.

    If you want to confirm the payments to CUB, the link is below. You will note there is nothing that indicates what environmental service CUB is performing for its $1 million a year. Improving environmental quality in Illinois is the mission of the group. In political circles this would be referred to as a bribe.

    Remember, the fund was created by ComEd, and CUB supported the ComEd bill.


  • justanobserver

    If you use the link to Illinois Clean Energy, put Citizens Utility Board in the keyword box and their payment history will come up.

  • Eyebrows McGee

    And this morning we see that Lisa Madigan is investigating evidence of price collusion during the 2006 reverse auction. (As well as the Moody’s issue.)

    Way to sleaze, Ameren. Way to sleaze.

  • Hold on to your wallets. Whenever lawyers and our elected reps get together, we end up paying. Watch and see….

  • Mahkno

    Wasn’t Enron implicated in price collusion with regards to the rolling blackouts in California? Could be an interesting summer.