DECATUR, Ill., PEORIA, Ill., and SPRINGFIELD, Ill., April 20 /PRNewswire-FirstCall/ -- AmerenCIPS, AmerenCILCO and AmerenIP (the "Ameren Illinois utilities") are deeply disappointed with the passage of Senate Bill 1592 by the Illinois Senate today. The Ameren Illinois utilities believe this legislation, if enacted, violates the United States Constitution and is not in the best interest of its Illinois residential or business electric customers, or the state's economy as a whole.
The Ameren Illinois utilities have fully complied with the law and provided significant benefits to customers throughout the 10-year transition following the enactment of the electric utility restructuring legislation in 1997. Despite the fact that the Ameren Illinois utilities' power costs have increased materially since 2006, should SB 1592 be enacted into law, the Ameren Illinois utilities will be forced to roll back rates to 2006 levels and freeze electric rates for at least one year. They will also be required to provide a refund, plus interest, for services already provided in 2007. This rollback and rate freeze would render the Ameren Illinois utilities financially insolvent absent court intervention and consequently make electricity more expensive for the 1.2 million Ameren Illinois customers.
The enactment into law and implementation of such legislation would result in significant adverse consequences for the Ameren Illinois utilities. These adverse consequences would include a significant drop in credit ratings to deep junk (or speculative) status, a severe limitation on the Ameren Illinois utilities' ability to procure reasonable financing from third party lending sources, higher borrowing costs, higher power supply costs, an inability to make timely energy infrastructure investments, requirements to post collateral or other assurances for certain obligations, the likely disruption in electric and gas service, significant job losses and ultimately the financial insolvency and bankruptcy of the Ameren Illinois utilities.
In summary, if this legislation becomes law and the implementation of such legislation is not promptly halted by the courts, there will not be enough money for the Ameren Illinois utilities to support their operations, which would result in the financial insolvency and bankruptcy of these utilities.
The Ameren Illinois utilities believe much of this could have been avoided. Through discussions with Senate leaders, the Ameren Illinois utilities, Commonwealth Edison and others had agreed to offer more than $150 million in relief to the hardest hit Illinois customers. The Senate's passing of SB 1592 jeopardizes over approximately $85 million of anticipated customer bill credits and other assistance that were specifically targeted for Ameren Illinois customers.
The energy assistance proposal was primarily aimed at residential, small business and not-for-profit users, particularly those Ameren Illinois utilities' customers who depend on electricity for heating their homes. Those customers, who since January 1 have absorbed the largest increases, had been in line for the most benefit from the proposal. Unfortunately, relief for electric customers will not now be immediately available. In addition, Ameren was prepared to reinstate its Customer-Elect rate increase electric rate phase-in plan capping annual increases at 14 percent with no carrying costs on deferred balances.
Such a constructive solution remains in the best interests of all stakeholders, including utility customers and the State of Illinois. It is the Ameren Illinois utilities' desire to resume talks aimed at that kind of settlement. In the meantime, the Ameren Illinois utilities promise their customers they will pursue four goals.
First, they will continue to deliver safe and reliable electricity and natural gas. The Ameren Illinois utilities are committed to keeping the lights on and heat and air conditioning accessible for our customers at a reasonable cost. This goal would be significantly compromised should this legislation be enacted.
Second, if a constructive solution is not reached to the current rate situation in Illinois and the rate rollback and freeze legislation is enacted into law, the Ameren Illinois utilities intend to vigorously pursue all available legal actions and strategies to protect their legal and financial interests, including seeking immediate injunctive relief to prevent the implementation of such legislation. The utilities believe that such actions will be successful in both preventing the implementation of, and ultimately invalidating, such legislation. A rate rollback, refund and freeze does not address the fundamental problem, but rather is a short-term, feel-good measure that would have unintended, negative consequences for Illinois, including the loss of real, immediate relief for the Ameren Illinois utilities' hardest hit customers.
Third, the Ameren Illinois utilities will take all reasonable steps to keep rates affordable to homeowners, renters, businesses, local governments and all other users. The Ameren Illinois utilities make no profit from the recent rise in the cost of the power purchased for their customers; the cost from non-rate-regulated generators is being passed on dollar-for-dollar, without a mark-up. Even so, the Ameren Illinois utilities' residential electric rates are in line with the national average and Commonwealth Edison rates, which are not subject to this legislation.
Fourth, the Ameren Illinois utilities stand ready to resume negotiations with stakeholders or other interested parties to ensure the immediate and long-term needs of their customers are protected, while supporting the downstate economy. "The Ameren Illinois utilities remain open to exploring any constructive approaches that balance the needs of their customers and shareholders," said Ameren Illinois utilities' President and CEO Scott A. Cisel. "We look forward to resuming talks and finding meaningful solutions."
BACKGROUND: Since the Ameren Illinois utilities own no generation, the companies must purchase power from the competitive market to provide customers' energy needs. These costs are passed onto customers -- dollar-for-dollar with no mark-up. These wholesale costs are higher than those contracted for in the past. However, even with the 2007 higher electric rates primarily resulting from increased electric supply costs, the Ameren Illinois utilities residential customers' electric rates are still at the national average.
Ameren Corporation (NYSE: AEE) through its subsidiaries, serves 1.2 million electric and nearly 800,000 natural gas customers in Illinois.
Statements in this report not based on historical facts are considered "forward-looking" and, accordingly, involve risks and uncertainties that could cause actual results to differ materially from those discussed. Although such forward-looking statements have been made in good faith and are based on reasonable assumptions, there is no assurance that the expected results will be achieved. These statements include (without limitation) statements as to future expectations, beliefs, plans, strategies, objectives, events, conditions, and financial performance. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, we are providing this cautionary statement to identify important factors that could cause actual results to differ materially from those anticipated. The following factors, in addition to those discussed elsewhere in this report and in our other filings with the Securities and Exchange Commission, could cause actual results to differ materially from management expectations suggested in such forward-looking statements:
-- regulatory or legislative actions, including changes in regulatory policies and ratemaking determinations, such as the outcome of AmerenCIPS, AmerenCILCO and AmerenIP rate rehearing proceedings, or the enactment of legislation reducing electric rates to 2006 levels and freezing electric rates at such levels or similar actions that impair the full and timely recovery of costs in Illinois; -- the success of any legal efforts or negotiations with key stakeholders; -- changes in laws and other governmental actions; -- disruptions of the capital markets or other events that make access to necessary capital more difficult or costly; -- the impact of the adoption of new accounting standards and the application of appropriate technical accounting rules and guidance; -- actions of credit rating agencies and the effects of such actions; -- the inability of our counterparties and affiliates to meet their obligations with respect to contracts and financial instruments; and legal and administrative proceedings.
Given these uncertainties, undue reliance should not be placed on these forward-looking statements. Except to the extent required by the federal securities laws, we undertake no obligation to update or revise publicly any forward-looking statements to reflect new information or future events.
SOURCE: Ameren Corporation
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