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Ameren Illinois Operating Companies Respond To Criticism of Auction Process for Buying Future Power Supplies
Ameren's Illinois operating utilities---AmerenCILCO, AmerenCIPS and AmerenIP\- responded today to criticism from the Citizens Utilities Board (CUB) and Attorney General for Illinois of the companies' proposed energy procurement process.

In response to today's filings by Illinois Commerce Commission (ICC) staff, CUB and other parties, Ameren officials pointed to the strong support members of the ICC staff, CUB, other consumer representatives, and interested power suppliers expressed for the process Ameren companies proposed. For several months, these major stakeholders met and reached a consensus that a declining price auction was the most fair, transparent and competitive process for energy procurement. On Dec. 2, 2004, the ICC staff released a report that favors Ameren's proposed declining price auction as the fairest and most efficient approach.

In February 2005, Ameren companies filed a request asking the ICC to evaluate and approve this approach for supplying electricity after 2006 to the companies' more than one million Illinois retail electric customers.

Ameren companies are only seeking to pass through the costs they will pay to purchase electricity from the successful bidders in the auction. As delivery companies that own almost no generation, Ameren Illinois utilities do not profit from the procurement process; however, they are charged with seeking suppliers for 7,500 megawatts of retail load. The Ameren companies' procurement process is designed to guard against price volatility by staggering the maturity of the contracts. In addition, the auction will be conducted by an independent auction monitor, and the ICC will oversee the auction process and has the right to accept or reject auction results.

"This declining price auction solution best satisfies the need for a fully competitive, open and transparent procurement process and is in accord with the Federal Energy Regulatory Commission (FERC) guidelines," says Ameren Executive Vice President and Chief Financial Officer Warner L. Baxter. "Competitive procurement processes have been successful in a number of states facing similar policy issues, including New Jersey, Maryland, Rhode Island, Connecticut, Massachusetts, Maine and Texas."

The auction approach is an outgrowth of the 1997 Electric Service Customer Choice and Rate Relief Law (commonly referred to as the Customer Choice Law), through which utilities were encouraged to sell their generation assets and residential consumers received decreases in rates ranging from five to 20 percent. Ameren's Illinois retail electric customers benefited by saving $750 million in the 1998-2004 timeframe and continue to benefit from a rate freeze that remains in effect until Jan. 1, 2007. That date marks the expiration of long-term power supply contracts that resulted from the restructuring of Illinois' energy markets.

Ameren officials today stressed that the request for approval of this rate structure would not result in an immediate change in rates, which will remain frozen until year-end 2006.

The companies anticipate receiving regulatory approval by December 2005 and to hold a first auction in 2006.

With assets of more than $17 billion, Ameren Corporation (NYSE: AEE) through its subsidiaries, serves 2.3 million electric and more than 900,000 natural gas customers in Illinois and Missouri.

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