Breaking story…

The downgrade of the ratings of Ameren, Central llinois Public Service, CILCORP, Central Illinois Light, and Illinois Power is prompted by the passage of rate freeze legislation by both the Illinois House and by a committee of the Illinois Senate last week and the growing support for a rate freeze in both chambers.

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Download the full press release here.

Moody’s had already downgraded Ameren’s debt a little over a year ago…

December 15, 2005 - The agency said the downgrades reflect a difficult political and regulatory environment for electric utilities in Illinois, while the company is working on plans to buy power and to raise rates starting in 2007. […]

“The downgrade of parent company Ameren’s ratings reflects the importance of the Illinois utility businesses to its consolidated financial profile, particularly since the acquisition of Illinois Power last year,” the report said.

Moody’s said the ratings remain under review for possible further downgrade.

*** UPDATE 1 *** Statement from Lt. Gov. Pat Quinn…

“You reap what you sow,” said Lt. Gov. Pat Quinn. “Ameren’s shareholders and Illinois ratepayers should understand that they’re being asked to foot the bill for years of fumbling and bumbling by the utility company’s overpaid top executives.”

*** UPDATE 2 *** One thing to remember about ratings agencies and utilities is that they sometimes work hand in hand to influence public policy. As this NY Times article showed, one agency allegedly assisted an Oregon utility in its quest for a rate hike…

The documents show that Standard & Poor’s solicited comment from the utility on a draft report and then made at least 48 changes that the utility sought before releasing its report on Sept. 25. Those changes included adding the words “uncertain regulatory environment” and a second crucial phrase supporting Portland G.E.’s request to shift all fuel-cost risks off its shareholders and onto customers. The utility then used the report as independent corroboration of its request to raise rates. […]

S.& P. said that there was nothing unusual about the revisions, which it said were made in light of new facts and in accord with the standards of the International Organization of Securities Commissions. […]

[Jason Eisdorfer, a lawyer with the Oregon Citizens Utility Board, a consumer group] said he disagreed with Standard & Poor’s assertion that most of the changes were factual, contending that they “seem to be an attempt to influence a commission decision.” “This was meddling in the rate-making process,” he added.

*** UPDATE 3 *** Citizens Utility Board executive Director Dave Kolata…

“Ameren had record profits under our old rate structure. This is part of a political strategy of bankruptcy blackmail… There’s been a massive transfer of wealth from consumers to generating companies… We certainly think that this type of approach is very unfortunate and we don’t think it’s justifiable.”

So do you think Ameren had anything to do with this rating change, I asked?

“I don’t know. It’s worth investigating… What I do know is Ameren is making windfall profits off this auction scheme… Trying to force one part of its business into bankruptcy is the wrong way to go and would be unfortunate if they moved in that direction.”

*** UPDATE 4 *** S&P threatened a downgrade last Friday…

The Standard & Poor’s credit rating agency said it would immediately downgrade the credit ratings of Ameren Corp.’s three Illinois utilities to junk status if state lawmakers pass electric rate freeze legislation.
Credit downgrades can increase a utility company’s cost of borrowing and reduce access to capital, meaning consumers ultimately could pay even more for their electricity. […]

While some people have likened Ameren’s claims to fearmongering, Ameren Corp. spokesman Leigh Morris said Friday’s Standard & Poor’s bulletin shows the company was not making hollow threats.

“It confirms our ongoing concern that the credit ratings of the three Ameren Illinois utilities will be downgraded,” if the Legislature passes electric rate freeze legislation, Morris said.

*** UPDATE 5 *** Earlier today, the Illinois Commerce Commission approved Ameren’s consumer “relief” plan that has been all but completely rejected by the General Assembly as not nearly enough…

Ameren’s plan to give customers a one-time credit on their electric bills received approval from the Illinois Commerce Commission today.

The utility giant wants to spend 20 (M) million dollars on rebates for residential customers who use the most electricity. The proposal would also eliminate the interest customers currently pay to defer bill payments.

*** UPDATE 6 *** As the Pantagraph reported earlier this month, most consumers wouldn’t benefit from the proposed discount…

During hearings with state lawmakers this week, Ameren President and Chief Executive Officer Scott Cisel offered to give credits to customers who use more than 1,250 kilowatt hours of electricity each month. Generally speaking, the credits range from $40 to $300, and customers with electric heat are most likely to benefit.

Ameren spokesman Natalie Hemmer didn’t know how many residential customers would be eligible for the credit. But according to Cisel’s testimony, the average customer uses about 867 kilowatt hours each month, so many would likely not qualify.

*** UPDATE 7 *** Much of the company’s debt was downgraded to “Baa2,” but some was downgraded to “Ba3.” And the “Probability of Default Rating” for CILCORP is set at “Ba1.” Here’s an explanation of Moody’s ratings…

* Investment Grade
Aaa – “gilt edged”
Aa1, Aa2, Aa3 – high-grade
A1, A2, A3 – upper-medium grade
Baa1, Baa2, Baa3 – medium grade

* Speculative Grade
Ba1, Ba2, Ba3 – speculative elements
B1, B2, B3 – lack characteristics of a desirable investment
Caa1, Caa2, Caa3 – bonds of poor standing
Ca – highly speculative
C – lowest rating, extremely poor prospects of attaining any real investment standing

*** UPDATE 8 *** The AP has a brief bit up…

Ameren spokesman Neal Johnson said Monday night that the company would be contacting the ICC Tuesday to inform them of the credit downgrade.

“This credit action triggers a most regrettable event in the history of the Ameren Illinois utilities,” spokesman Leigh Morris said in a statement.

“The Company’s next steps are being finalized.”

*** UPDATE 9 *** Well that didn’t last long. Ameren’s rate “relief” plan is now off the table…

Citing the state’s attempt to refreeze newly deregulated utility rates, a bond rating agency on Monday downgraded Ameren’s Illinois utilities to junk status.

That move, in turn, prompted the embattled utility to pull back a $20 million give-back program aimed at easing the rate hike pain of customers.