Ameren Missouri’s filing provides a snapshot of how the Inflation Reduction Act, which takes effect Jan. 1, could affect utilities and their customers across the United States.
About two months before the IRA was unveiled in the Senate, Ameren Missouri updated its long-range integrated resource plan, which includes adding 2,700 MW of solar, 2,000 MW of wind and retiring three coal-fired power plants by 2030. The utility also plans to add 800 MW of battery storage by 2040. Those actions stand to produce tax benefits under the IRA.
In its request for a tracker, Ameren Missouri said it expects it will generally elect PTCs over investment tax credits for new solar and wind developments because PTCs will likely provide superior value.
The value of PTCs to Ameren Missouri is expected to increase annually as new renewable resources come online and the credits’ value is adjusted for inflation, according to the St. Louis-based utility. It expects the IRA’s effects will be minimal next year and in 2024, however, the utilit.
Ameren Missouri outlined five categories of tax law changes that will directly affect it:
- Significant extension and modification of tax credits for new solar and wind developments.
- Tax credits for other new zero-emission developments.
- Tax credits for existing nuclear power plants.
- Transferability of IRA tax credits.
- A 15% corporate minimum tax.
The utility said in the filing it can’t estimate how the nuclear tax credit might affect its Callaway plant “because the values depend on volatile energy and capacity market prices and because the IRS has not issued Treasury Regulations to address how gross receipts will be calculated.”
Ameren Missouri expects it will pay $270 million from 2023 to 2032 because of the corporate minimum tax.
Including the CMT, but without possible benefits from nuclear tax credits, Ameren Missouri said it expects the IRA will reduce customer rates by 4.5% compared with what the rates would have been without the law.
The proposed tracker aims to ensure that the IRA’s costs and benefits are fully reflected in Ameren Missouri’s rates, according to Mitchell Lansford, Ameren’s director of regulatory accounting.
“The impact on the Company’s revenue requirements, and therefore customer rates, will be significant, varied, and uncertain as to timing,” Lansford said in the filing.
Without a tracker, Ameren Missouri would retain PTCs that are earned outside of a “test year” that forms the basis for rate proposals, preventing customers from seeing the credits’ benefits, according to Lansford.
The proposed IRA tracker was included in a pending $316 million annual rate hike request that includes a 10.2% return on equity. Ameren Missouri expects the PSC will make a decision on the request by June.
The IRA is taking effect in a period of inflationary pressure that includes sharply rising gas prices, which helps drive up utility costs.
Even if a utility is passing through its fuel costs to ratepayers and not profiting on them, rising gas prices make electricity less affordable and hurt customer relations, according to Glenrock’s Patterson.
“Anytime you can offset the expenses without impacting shareholder profitability, all things being equal, it’s pretty good for the utility,” Patterson said.
Source: Utility Dive
