EUR 850.00 For Business Accounts Only

Morningstar | Illinois Legislation Would Extend Constructive Regulation for the Next Decade

Ameren is a regulated utility that operates in Illinois and Missouri, two historically challenging regulatory jurisdictions that are rapidly improving.Management is to be applauded for attaining constructive utility legislation in Missouri. Management's patient, yet persistent years-long efforts resulted in increased investment opportunities across the territory, a stark change from just one year ago. Numerous trackers are in place for fuel adjustments, pension, and tax positions. We consider these mechanisms attributes of a constructive regulatory environment. Continued execution and support from regulators could lead us to increase our moat to narrow.Ameren's policy efforts have led to new investment in renewable energy and electric grid modernization in Missouri. The subsidiary is planning at least 700 megawatts of new wind generation totaling $1 billion. To date, Ameren has agreements to secure 557 MW of wind in Missouri. The secured wind generation has been approved by regulators and is part of Ameren's five-year capital plan. We believe there will be additional opportunities as Ameren supports the state's renewable energy goals. Regulation for Ameren's Illinois utility is supportive. The automatic annual rate-adjustment mechanism has dialed up investment in the state's system modernization. Proposed legislation would extend the current formula rate-making 10 years beyond the current expiration of Dec. 31, 2022. The bill has served investors and the state well by allowing a constructive framework for grid modernization investments in the state. The legislative session ends May 31, and we think extension of the regulation is a sign that lawmakers and regulators are committed to a constructive Illinois regulatory environment.Ameren has also benefited from transmission investments, which have been a strong earnings contributor. We expect that to slow. Ameren Illinois plans to invest $2.1 billion through 2023 while Ameren Transmission Company is winding down its large investment projects, with plans to invest $250 million through 2023. Opportunities under FERC Order 1000 have been limited.