Illinois Rate Case to Set Regulatory Tone for Ameren Subsidiary

Ameren AEE is a regulated utility that operates in Illinois and Missouri, two historically challenging but rapidly improving regulatory jurisdictions. With improving rate regulation come significant investment opportunities, supporting the company’s five-year $19.7 billion capital investment plan.

We expect the company to reach the high end of Ameren’s 6%-8% growth outlook, giving it one of the higher growth rates among its utility peers and supporting 8% rate base growth. Looking beyond the current plan, Ameren has its sights set on more than $48 billion of additional investment opportunities over the next 10 years, providing a long runway of growth for the company.

Management is to be applauded for attaining constructive utility legislation in Missouri. Its patient yet persistent yearslong efforts resulted in increased investment opportunities across the territory, a stark change from the past.

With an improved regulatory framework in Missouri, management is keeping its promise to invest in jurisdictions that support investment. Ameren is allocating over half of its investment plan to Missouri. Projects will focus on renewable energy, upgrading aging and underperforming assets, transmission, and employing smart grids and connected grid services.

Regulation in Illinois is also changing for the better. Performance-based ratemaking, in which allowed returns on equity were tied to the average 30-year U.S. Treasury yield, was constructive. However, low interest rates led to some of the lowest allowed returns in the sector.

New legislation allows Illinois utilities to opt in for a four-year rate plan beginning in 2024.

Ameren’s first multiyear rate plan remains ongoing. We expect the outcome will set the tone for the regulatory environment in the state. Regulatory staff recently recommended an 8.9% allowed return on equity, which would be among the lowest allowed ROE among peer utilities if adopted by regulators. We expect ROE in line with industry peer averages, higher than historical returns, but well below the 10.5% return requested in the first year of the plan.