Ameren Corporation (AEE) CEO Warner Baxter on Q2 2020 Results – Earnings Call Transcript


Ameren Corporation (NYSE:AEE) Q2 2020 Earnings Conference Call August 7, 2020 10:00 AM ET

Company Participants

Andrew Kirk – Director of Investor Relations for Ameren Corporation

Warner Baxter – Chairman, President and Chief Executive Officer

Michael Moehn – Executive Vice President and Chief Financial Officer

Conference Call Participants

Jeremy Tonet – JPMorgan

Julien Dumoulin-Smith – Bank of America Merrill Lynch

Shahriar Pourreza – Guggenheim

Paul Patterson – Glenrock Associates

Insoo Kim – Goldman Sachs

Operator

Greetings, and welcome to Ameren Corporation’s Second Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode [Operator Instructions]. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Andrew Kirk, Director of Investor Relations for Ameren Corporation. Thank you, Mr. Kirk. You may begin.

Andrew Kirk

Thank you, and good morning. On the call with me today are Warner Baxter, our Chairman, President and Chief Executive Officer and Michael Moehn, our Executive Vice President and Chief Financial Officer, as well as other members of the Ameren management team joining remotely. Warner and Michael will discuss our earnings results and guidance, as well as provide a business update. Then we will open the call for questions.

Before we begin, let me cover a few administrative details. This call contains time-sensitive data that is accurate only as of the date of today’s live broadcast, and redistribution of this broadcast is prohibited. To assist with our call this morning, we have posted a presentation on the amereninvestors.com homepage that will be referenced by our speakers.

As noted on Page 2 of the presentation, comments made during this conference call may contain statements that are commonly referred to as forward-looking statements. Such statements include those about future expectations, beliefs, plans, strategies, objectives, events, conditions and financial performance. We caution you that various factors could cause actual results to differ materially from those anticipated. For additional information concerning these factors, please read the forward-looking statements section in the news release we issued yesterday and the forward-looking statements and risk factors sections in our filings with the SEC. Lastly, all per share earnings amounts discussed during today’s presentation, including earnings guidance, are presented on a diluted basis unless otherwise noted.

Now here’s Warner who will start on Page 4 of the presentation.

Warner Baxter

Thanks, Andrew. Good morning, everyone, and thank you for joining us. Before I jump into our presentation, I’ll start by saying that I hope you, your families and colleagues are safe and healthy during this challenging time. This morning I will begin our presentation by providing a COVID-19 update and in particular highlight the actions we have taken to support our customers, communities and coworkers. I’ll then touch on our second quarter results and 2020 earnings guidance and finish with a discussion of several key elements of our strategy that we continue to execute very well, which will position us to continue delivering strong long-term value for our customers and shareholders.

Turning now to Slide 4 and COVID-19. Our strong commitment to the safety of our coworkers, customers and communities remains constant, so to is our strong focus on delivering safe, reliable and affordable electric and natural gas service during this unprecedented time. We recognize that major customers in Missouri and Illinois are depending on us. I can’t express enough appreciation to my coworkers who have shown great agility, innovation, determination, and a keen focus on safety and delivering on our mission to power the quality of life.

While we are focused on delivering a safe, reliable and affordable service, we also recognize that our mission goes beyond this during this challenging time. We recognize that our customers and communities have significant needs. That is why we are working directly with our customers and special payment plans for the utility bills. We’re also working closely with many dedicated community partners, and have contributed approximately $15 million for energy assistance and COVID-19 support to our customers in Missouri and Illinois.

And I’m very pleased to tell you that our coworkers and Board of Directors are directly engaged in this effort to our AmerenCares Power of Giving program for COVID-19. Together, these programs are helping our residential, small business and not for profit customers meet their needs. In addition, we are tirelessly working with our customers to help them gain access to a host of federal support programs, including low income Energy Assistance funds. Our customers are at the center of our strategy and we will continue to take steps to help them during this unprecedented time.

Throughout this challenging period, I’m also pleased to say that we have been effectively executing our strategy across all of our businesses. The key element of our strategy is to invest in energy infrastructure to benefit our customers, and in so doing provide important jobs to support the local economy, as well as local suppliers at a time when they are needed most.

Looking ahead, we recognize that we will need to be managing the impacts of COVID-19 for some time, with safety and delivering on our mission and strategy at the top of our minds. We plan to continue managing our business under our current COVID-19 protocols, which includes having a significant portion of our workforce working remotely for at least the end of this year. We also continue to carefully monitor the impact of COVID-19 on our electric sales, liquidity and supply chain. To-date, these impacts have been manageable and in line with our expectations. At the same time, we remain focused on exercising financial discipline to mitigate the potential impacts of COVID-19, while capitalizing on some key opportunities that we have identified during this crisis, including benefits we are realizing from our digital transformation investments and streamline operating practices.

Turning now to Page 5 for an update on second quarter results and 2020 earnings guidance. Yesterday, we announced second quarter 2020 earnings of $0.98 per share compared to $0.72 per share earned in 2019. The summary of the key drivers of the year-over-year increase of $0.26 per share is provided on this page, which Mike will discuss in more detail in a moment. The strong execution of our strategic plan drove strong quarterly earnings results, and enabled us to affirm our 2020 earnings guidance range of $3.40 per share to $3.60 per share.

Moving to Page 6, here we reiterate our strategic plan, which as I just mentioned, we’ve been executing very well throughout the year. We expect our plan to continue delivering significant value for our customers and strong long-term earnings growth for our shareholders. The first pillar of our strategy stresses investing in and operating our utilities in a manner consistent with existing regulatory frameworks. This has driven our multiyear focus on investing in energy infrastructure for the long-term benefit of customers and all of our jurisdictions.

As you can see on the right side of this page, during the first half of this year, we invested significant capital in each of our business segments to better serve our customers, most notably Ameren Transmission, where we effectively managed a nearly 25% increase in infrastructure investment compared to the first half of 2019. These investments are delivering value to our customers and community. Our energy grid is becoming more reliable, resilient and secure, and our digital investments are enhancing our customer’s experience. Of course, we’re not done.

Looking ahead, we continue to see the need for robust energy infrastructure investments to meet our customer’s energy needs and exceed their expectations of keeping rates affordable. Our electric rates in both Missouri and Illinois continue to be well below the Midwest and national averages. As we discussed in our first quarter earnings call, new electric rates went into effect on April 1st of this year as a result of a constructive settlement in Ameren Missouri’s electric rate review. The settlement included a $32 million annual revenue decrease, which marks the second consecutive decrease since 2018.

Since Ameren Missouri’s last electric rate review in 2017 if customer rates have decreased by 7%, while at the same time, we’ve continued to make significant investments in energy infrastructure to benefit our customers. As Michael will cover in more detail later, we have also been very busy managing our electric and natural gas regulatory proceedings in Illinois. We expect the final decision in the electric proceedings by December of this year, and a final decision in the gas proceeding by January of next year. Finally, another important element of the first pillar of our strategy has been and remains our relentless focus on continuous improvements and disciplined cost management to keep rates affordable.

Moving to the second pillar of our strategy, which includes enhancing regulatory frameworks for the benefit of all stakeholders. As you know, we continue to support the proposed Downstate Clean Energy Affordability Act in Illinois. This important legislation would allow Ameren Illinois to make significant investments in solar energy and battery storage to improve reliability, as well as to make investments in transportation and electrification, in order to benefit customers and the economy across Central and Southern Illinois. In addition, it would help address the pressing energy policy challenges facing the state, including the need for additional renewable sources and better electric vehicle charging infrastructure.

This bill will help address these challenges and move the State of Illinois closer to reaching the score of 100% clean energy by 2050. In addition, this legislation would modify the allowed return on equity formula to increase the basis point adder to the average 30-year treasury rate from 580 to 680 and would also extend the electric performance based rate making framework through 2032. Importantly, this legislation builds on Ameren Illinois’ efforts to modernize the energy grid into a transparent and stable regulatory framework that it support a significant investment to modernize the energy grid, while improving reliability and creating approximately 1,400 jobs, all while keeping rates well below the Midwest and national averages.

In fact, all in residential rates in 2020 are down 1% compared to 2012, the first year of performance based rates. Simply put, the performance based grid modernization legislation that was passed in 2011 and extended twice by the Illinois legislature under different administrations has been an overwhelming success for Illinois. With all these benefits in mind, we remain focused on working with key stakeholders to get this important legislation passed.

Turning now to Page 7, I’ll provide an update on for regulatory matters. In May, the FERC issued an order on the rehearing request related to its November 2019 order addressing two complaint cases that reduced MISO’s base return on equity. The order establish a new base return on equity methodology using three models, the risk premium model, capital asset pricing model and the discounted cash flow model. To revise order sets of base return on equity of 10.02% for transmission projects for the first complaint case period and effective as of September 28, 2016. This results in return on equity of 10.52% for Ameren Transmission, including the 50 basis point adder being a part of MISO.

The FERC also dismissed the second complaint case. We’re pleased with the order and believe it is to be constructive as the new three model methodology expands the range of reasonableness used to assess whether current returns on equity are just unreasonable. The FERC also issued a notice of proposed rule making in March. Overall, we believe that the policies outlined in the proposed rule making are constructive. As a result, we along with the other MISO transmission owners, filed comments in June in support of the proposed increase to the RTO adder, reliability and benefit based incentives and the ROE cap. We are unable to predict the ultimate timing or impact of these matters as the FERC is under no timeline to issue decision.

Moving now to Page 8 for an update on the third pillar of our strategy, creating and capitalizing on options for investment for the benefit of our customers, shareholders and the environment. Here we provide an update on our $1.2 billion wind generation investment plan to achieve compliance with Missouri’s renewable energy standard through the acquisition of 700 megawatts of new wind generation at two sites in Missouri. In short, there’s been no significant change to the project schedules from what we discussed on our first quarter call in May. Construction is well underway at both facilities. We are working closely with the developers for both projects to monitor the timing of manufacturing, shipment and installation of facility components. We continue to expect the 400 megawatt facility to be in service by the end of 2020.

Regarding the 300 megawatt facility, we expect it to be substantially in service by the end of 2020. However, as a result of certain delays we discussed on our first quarter earnings call in May, we expect the portion of the project, representing approximately $100 million of investment to be placed in service in the first quarter of 2021. We expect no reduction in production tax credits, because of the recent rule changes made by the U.S. Department of the Treasury to extend the in-service criteria by one year to December 31, 2021.

Furthermore, we will continue to explore additional renewable energy investment opportunities that will drive long term value for our customers and shareholders. Right now, Ameren Missouri is in the process of finalizing its next integrated resource plan. For several months, we’ve been working closely with key stakeholders and developing our plan. We are carefully looking at several approaches to best meet our customers’ future energy needs and effectively transition our generation to a cleaner, more diverse portfolio in a responsible fashion.

We’ll be finalizing our plan for the next 45 days and plan to file our IRP with the Missouri PSC by September 30th. We are excited about the benefits that our current wind generation project will deliver to all stakeholders, as well as the prospects for additional renewable generation resources to meet our customers’ energy needs in the future.

Moving to Page 9. Looking ahead through the end of this decade, we have a robust pipeline of investment opportunities of over $36 billion that will deliver significant value to all of our stakeholders and making our energy grid stronger, smarter and cleaner. These investment opportunities exclude any potential new renewable generation from Missouri integrated resource plan, as well as any potential new multivalue transmission projects that would increase the reliability and resiliency of the energy grid, as well as enable additional renewable generation projects.

Of course, our investment opportunities not only create a stronger and cleaner energy grid to meet our customers’ needs and exceed their expectations, but they will also create thousands of jobs for local economies. Maintaining constructive energy policies that support robust investment and energy infrastructure will be critical to meeting our country’s future energy needs and delivering on our customers’ expectations.

Moving to Page 10. to sum up our value proposition, the consistent execution of our strategy over many years and on many fronts does position as well for future success. We remain firmly convinced that the execution of this strategy in 2020 and beyond will deliver superior value to our customers, shareholders and the environment. In May, we affirmed our five year growth plan, which included our expectation of 6% to 8% compound annual earnings per share growth for the 2020 through 2024 period using the 2020 EPS guidance range midpoint as the base.

This earnings growth is primarily driven by our approximate 9% compound annual rate base growth from 2019 through 2024 and compares very favorably with our regulated utility peers. I am confident in our ability to execute our investment plans and strategies across all four of our business segments as we have an experienced and dedicated team to get it done.

Further, our shares continue to offer investors a solid dividend. Our strong earnings growth expectations position us well for future dividend growth. Of course, future dividend decisions will be driven by earnings growth in addition to cash flows and other business conditions. Together, we believe our strong earnings growth outlook, combined with our solid dividend, results in a very attractive total return opportunity for shareholders.

Again, thank you all for joining us today. And I’ll now turn the call over to Michael. Michael?

Michael Moehn

Thanks, Warner and good morning, everyone. Turning now to page 12 of our presentation. Yesterday, we reported second quarter 2020 earnings of $0.98 per share compared to earnings of $0.72 per share for the year ago quarter. The key factors by segment that drove the overall $0.26 per share increase are highlighted on the page.

Ameren Missouri, our largest segment reported increased earnings of $0.18 per share. The increase in earnings is driven by lower operations and maintenance expenses, including the absence of a scheduled Callaway Energy Center refueling and maintenance outage, as well as disciplined cost management and favorable market returns and company owned life insurance investments, which together increased earnings by $0.15 per share.

The year-over-year improvement also reflected new electric service rates effective April 1st, driven in part by increased infrastructure investments. The year-over-year impact from electric sales was flat at the $0.05 per share benefit from near normal temperatures in the second quarter compared to milder than normal temperatures in the previous year were offset by $0.05 per share reduction from lower weather normalized sales, primarily due to the impacts of COVID-19.

Moving now to Ameren Transmission, earnings per share were up $0.07. This increase reflected the impact of the FERC order on the MISO base allowed return on equity, which increased earnings $0.04 per share, as well as increased infrastructure investments.

Earnings for Ameren Illinois Natural Gas were up $0.03 per share due to increased infrastructure investments and lower operations and maintenance expenses. Ameren Illinois Electric Distribution earnings were down $0.01 per share, reflecting a lower expected allowed return on equity under performance based rate making, partially offset by increased infrastructure investments. And finally, Ameren Parent and other results also decreased $0.01 per share, primarily due to increased interest expense resulting from the long-term debt issuance in early April.

Moving now to Page 13 of our presentation, I’d like to briefly touch on key drivers impacting our 2020 earnings guidance. As Warner stated, we continue to expect 2020 diluted earnings to be in the range of $3.40 to $3.60 per share. This guidance range assumes normal weather and the remaining six months of the year, as well as reflect sales updates from our first quarter earnings call in May primarily related to COVID-19. On our call in May, we estimated COVID-19 related sales impact to the Ameren Missouri would reduce our 2020 earnings per share expectations by approximately $0.10 per share, and we believe this will be a solid estimate. For the year, we still expect total weather normalized sales to be down approximately 2.5%.

Broken down by customer class, we expect 2020 commercial sales to decline approximately 7.5%, industrial sales decline approximately 4.5% and residential sales to increase approximately 4%. While we’ve seen a slight change in the relative mix of sales. Overall, our update today is largely consistent with our expectations outlined in our call in May in terms of both total sales and EPS impacts for 2020 due to COVID-19.

Before moving on, I would note that Ameren Missouri customer sales for June, excluding the impact of warmer than normal weather, were down approximately 0.2% compared to the prior year, reflecting the impact of COVID-19. Broken down by customer class and compared to the prior year, Ameren Missouri June weather normalized commercial and industrial sales declined approximately 9.5% and 3% respectively, which were largely offset by an increased weather normalized sales to residential customers of approximately 11%. These statistics are notable given they represent the first full month of sales after the stay at home orders were lifted.

Before moving on, let me briefly cover electric sales transfer at Ameren Illinois Electric Distribution for the first six months of this year compared to the first six months of last year. Weather normalized kilowatt hour sales to Illinois residential customers increased about 4% and weather normalized kilowatt hour sales to Illinois commercial and industrial customers decreased approximately 7% and 8% respectively. Recall that changes in electric sales in Illinois, no matter the cause, do not affect earnings since we have full revenue decoupling.

Moving on to other guidance considerations, select earnings considerations by quarter for the balance of the year are listed on this page. Our 2020 earnings guidance range also incorporates an estimated 2020 allowed ROE for Ameren Illinois Electric Distribution of 7.2%, which reflects a 30-year treasury yield yield of approximately 4%. Finally, we also remain very focused on maintaining disciplined cost management for the remainder of the year.

Moving now to Page 14 for the regulatory matters. In April, we made our required annual electric distribution rate update filing. Under Illinois performance based rate making, our utilities are required to file annual updates to systematically adjust cash flows overtime for changes in cost of service and to drip any prior period over or under recoveries of such cost. In late June, the ICC staff recommended a $53 million base rate decrease compared to our request of $45 million base rate decrease.

A decision is expected in December with new rates expected to be effective in January 2021. Earlier this year, we also filed with the ICC for an annual increase in Ameren Illinois Natural Gas distribution rates using a 2021 future test year, and has since updated our request in our July rebuttal testimony. In June, the ICC staff and other interveners, including the Citizens Utility Board and Illinois Industrial and Energy Consumers filed a rebuttal testimony in a rate review. Our original request as well as our July rebuttal testimony incorporated a 10.5% return on equity, while staff and other interveners have recommended a 9.32% and 9.2% return on equity respectively. We continue to seek 54% equity ratio compared to the ICC staffs and other interveners’ recommendation of 50.43% and 50% respectively. A decision is expected by January 2021 with new rates expected to be effective in February of 2021.

Finally, turning to Page 15 and I will summarize. We have a strong team and are well positioned to continue executing on our plan. We continue to expect to deliver strong earnings growth in 2020 and we’re successfully executing our strategy and navigate the impacts of COVID-19. As we look to the longer term, we continue to expect strong earnings per share growth, driven by robust rate based growth and disciplined cost management. Further, we believe this growth compares very favorably to the growth of our utility peers. And Ameren shares continue to offer investors an attractive dividends. In total, we have an attractive total shareholder return story that compares very favorably to our peers.

And now, I’ll turn it back over to Warner.

Warner Baxter

Great. Thanks, Michael. While we spend a great deal of time this morning talking about how we’re effectively addressing issues associated with COVID-19 and delivering strong results for our customers and shareholders, I think it’s important to note that another matter is at top of our minds, that matter is that level of profound racial prejudice, injustice and intolerance that we still have in this country and in our own community, especially against black people.

We’ve recently seen too many sizzle tests of African Americans. And to be clear, there’s absolutely no place for racism, injustice or hatred of any kind at Ameren, in our community, in our country or anywhere in the world. We must challenge such behavior when we witness it and take steps to drive positive changes to eliminate it. And that is exactly what we’re doing in Ameren. In Ameren, diversity, equity and inclusion is a core value. While we’ve been recognized by DiversityInc is one of the top facilities in the country for our diversity, equity and inclusion practices, we are not standing still. In fact, we recently conducted a virtual diversity, equity and inclusion summit in St. Louis. The theme of this summit was the courage to love your values. Ameren leaders, community leaders and national leaders came together to begin listening to each other more thoughtfully and to begin taking even more steps to address this critical issue. We have made the entire program available on our Web site. I encourage you to take time and listen to the amazing stories of courage and passion for diversity, equity and inclusion.

We’re now ready to take your questions.

Question-and-Answer Session

Operator

Thank you. We will now be conducting a question answer session [Operator Instructions]. Our first question comes from line of Jeremy Tonet with JPMorgan. Please proceed with your question.

Jeremy Tonet

Just want to start off with the IRP here and just want to see how the outreach is progressing and any early thoughts that you can share with us at this point or feedback with the filing coming soon here?

Warner Baxter

Well, as you know noticed, this is an extensive process with stakeholders has been going on for several months. Marty Lyons and his team have been did just a terrific job of just outlining some of our perspectives and getting insights which is really important. So I would say, as you know, we’re getting to the tail end of that process. And it would be really inappropriate to say just exactly what the feedback is then because we’re putting together all that and we’ll ultimately issue our integrated resource plan here at the end of September. But I can tell you the conversations have been constructive, the insight is great and we look forward to submitting that that integrated resource plan.

And as you heard in my talking points, we’ve looked at a lot of things in this integrated resource plan. We certainly look at the technology, which is out there and we’ve certainly seen renewable energy technology and their related costs continue to come down. Take a careful look at our coal-fired energy centers and the useful lives of those plants and we really think about what’s really going to deliver value to our customers in the State of Missouri. And so we look forward to submitting that plan at the end of September.

Jeremy Tonet

Just pivoting to the O&M savings side, with what you guys realize so far year to date this quarter. What portion do you think you might be able to retain on an ongoing basis? And do you have any kind of updated thoughts on cost savings into 2021 at this point?

Warner Baxter

Maybe Michael, I want you to hit a little bit on the quarter and then I can maybe address some of the ongoing. So, I’ll let you take the first shot at it…

Michael Moehn

Jeremy, we said on that first quarter call and I think even if you think back to sort of the beginning of the year, we said that O&M was going to be up. We didn’t say how much for the overall year and then we came forward to the first quarter call and we said O&M was going to be down. And you can see that obviously, we are doing a good job of managing, the teams working hard on managing cost down where we can, being very careful about headcount. Obviously, where we have opportunities on because of reduced load, there’s reduced maintenance costs. Obviously, from a travel, entertainment perspective, being very thoughtful there. And so, I think the team has done a nice job continuing to help offset some of these things going into 2020.

In terms of sort of what we retain and what is reoccurring. I mean, Warner can certainly touch on 2021. But I mean at the moment, we’re just going to continue to watch this closely, it’s helping us offset some of these sales headwinds that we have. And it’s across the board. I know we focus a lot on the Missouri side, because that’s where it hits the bottom line, but it is across Illinois distribution, Illinois natural gas as well.

Warner Baxter

Yes, well said, Michael. Jeremy, the reality is that, obviously, we’re very focused on 2020. But we’re looking ahead too. We do see several of these savings that we’re realizing today that we can really carry over into next year. Things like, what was different perspective on how we think about travel, what was a different perspective in terms of the consultants that we have to bring in to work with us and how they can work remotely. And our digital investments have really been a step change, not just for our current workforce but how we engage and work with others. You think about real estate too and facilities costs. We’ve had to explore because of our digital team and the investments that we’re making, and we’re exploring other facilities to lease in the future, because we’re simply outgrowing what we currently have. We see opportunities there and that’s just not going to be necessary prospectively, because reality is we can work very effectively remotely.

And so now that coupled with some really, I said in my talking points, how the team has really done some innovative things and been agile out in the field in terms of our work practices. Not only are they safer than they are. I mean, they’re going to give us the ability to work more effectively and productively. And that coupled with our digital investments, I think these are the types of things that we are already going to put in our playbook, not just for this year but for many years ahead. So stay tuned. More to come when we talk more about the future in our O&M.

Operator

Our next question comes from Julien Dumoulin-Smith with Bank of America Merrill Lynch. Please proceed with your question.

Julien Dumoulin-Smith

If I can follow up on the last question here on the IRT and I understand that with this thing fairly imminent, you can’t comment too much. But can you give us a little bit of perspective on how that might eventually flow into your formal CapEx projections, especially to the extent to which we’re talking about incremental renewables and how [Multiple Speakers] your future recovery?

Warner Baxter

Julien, it would be just premature to really say how that would play out. I mean, number one, we have to roll out the IRP plan. We’ll talk about what additional investment opportunities might be there, of course, associated with renewable energy. And then we’ll take a look at that in terms of our five year plans and to what extent that has an impact. So as opposed to doing a piecemeal we’ll be better served for everybody when we roll out the plan to be able to really talk about it in a comprehensive fashion. And so we’ll be in a good position to do that certainly during our third quarter conference call. And as we move into EEI, that will be a great topic of conversation just as it was in 2017 when we announced our 700 megawatts of wind generation and 100 megawatts of solar. We anticipate having a very comprehensive discussion at that time as well.

Julien Dumoulin-Smith

And then if I can also follow up on the last question around cost management and to you off of the sustainable cost savings that you talk about, you’ve identified and you anticipate holding on to. When you think about the pressures created from these lower 30 year treasury. Is it potentially an offset as you think about it? You could take that anywhere you want. but I’m curious on how you would frame the five year view given those longer data pressures here?

Michael Moehn

Just putting in context of not necessarily a number. But absolutely, I mean O&M customer affordability has always been a lever that we’ve used. I mean, it’s not something that’s sort of we’ve discovered here during 2020 as a result of this pandemic. But obviously, there’s been more accelerated focus on it. But absolutely, I mean, it is something that helps us work through these headwinds that we’ve had. And as you know that 30-year treasury has been a headwind for a while and we’ve continued to offset that with it.

Warner Baxter

And Julien as we — we’re mindful of the low 30-year treasuries. And certainly O&M is one of those levers for all the reasons that Michael said. But look we also have levers in terms of robust capital plan as we talked about on the call that we have infrastructure that we can move forward, especially at this lower cost of capital it might make sense for customers and for us to do that. And so we’ll look at that and of course, we always take a look at capital allocation and many other levers. So this is how we operate the business in terms of looking not just at one lever but multiple levers to make sure we’re delivering on our promises.

Operator

Our next question comes from line of Shahriar Pourreza with Guggenheim. Please proceed with your question.

Shahriar Pourreza

So first, just on the timing of the next rate case in Missouri. Just wondering if you have any updated thoughts here. In the past, you’ve pointed to potentially filing the summer for new rates at the beginning of next year. But obviously, of course, wind has the potential to move into the first quarter of next year. How are you thinking about this now given all the moving pieces and the buyer [Technical Difficulty] Illinois, just wondering why have you been hearing from the legislature in terms of continued interest. Has it still been on the mind of lawmakers, is there having kind of taken a backseat as other pressing issues related to the virus have come to the forefront? And then just [Multiple Speakers] consideration…

Warner Baxter

No, please finish your question…

Shahriar Pourreza

Just wondering if something could get done in the veto session in November, is it more likely to get pushed into next year?

Warner Baxter

Let me try and take that in several pieces, and Rich and Mark and his team have continued to work very hard to have conversations, virtually of course, with the key stakeholders, and not just legislators or stakeholders. So couple things to think about there. In terms of energy policy, I think energy policy broadly in the State of Illinois is still at the top of a lot of folks’ minds and rightfully so, because energy policy is important. That’s why as we said as part of our talking points and as well as what you’ve heard us say before, that’s why we support so strongly the downstate clean energy affordability act, because it really addresses many of the key issues that the State of Illinois is focused on, more renewable energy resources, more investments in electrification, as well as grid modernization. These are things that have been really important for the State of Illinois, and will continue to be. And so we continue to have conversations with key stakeholders around that particular piece of legislation that we still support.

Having said that, as you know, there’s been a lot of dialog and some concerns raised as a result of the Commonwealth Edison federal investigation, so we understand that. And so consequently, as we think ahead what we’re going to do is continue to double down on our efforts to work with stakeholders collaboratively, listen to their concerns, but make sure that we point out the value of the current regulatory framework and our proposal. And at the end of the day, our focus is going to continue to be to try and find a solution that gives us the ability collectively in the State of Illinois to invest in critical infrastructure, and give us the ability to earn a fair return and deliver values to our customers in the State of Illinois.

Now in terms of timing, I’ve learned a long time ago that I don’t predict when things will be addressed by any legislature or when things will ultimately get done. And obviously, things are a little bit more complicated as we approach this upcoming veto session. In light of a lot of the activities, my best perspective and Rich and I’ve talked a lot about this, whether something gets done in the veto session around the Downstate Clean Energy Affordability Act, I would tell you it’s, from my perspective, a challenge or as I like to use force analogies, I call it a long pot to get done in the veto session. So that’s our best perspective on it in terms of what we think may still happen this year but importantly, where we’re going to continue to focus our efforts on.

Operator

Our next question comes from the line of Paul Patterson with Glenrock Associates. Please proceed with your question.

Paul Patterson

Some of my questions before have been answered here. But just to sort of follow-up on the Illinois thing, there does seem to be this lease with a vocal group, sort of this unhappiness with the formula rate plan, which you outlined the benefits of and in fact the low cost of capital associated with it and what have you. And I’m just wondering if you could elaborate a little bit more as to what’s sort of driving that? The same people seem to be sort of interested in the issues you also discussed, which are FX and diversity and economic justice that sort of thing. And so I’m just wondering, is there some room here to sort of address their concerns, or is there something more fundamentally that’s happening here that’s just not clear to me with respect to this concern about formulate rate plans? And I realized that you guys are just one part of it, there’s this big northern part of the state that has its own issues. I was just wondering if you could talk about that?

Warner Baxter

I guess, a couple of comments. Yes, clearly, we’ve seen the governor and other groups come out and say they oppose the existing framework that’s out there. And look the thing that we think is important, recognizing that a lot of that may be and so I’m speculating a bit, just simply surrounding the issues with Commonwealth Edison and the investigations and how it was linked to when performance based rate making was put in place many years ago.

Our job and Rich and his team, they do a terrific job at this. And we’re just going to sit down and just make sure we meet with stakeholders in a collaborative way and just sit there and explain what this framework has really done. And that’s really what we should do, it’s been some open and transparent framework that essentially every year the Illinois Commerce Commission takes to look at what we’re doing. And you’ve heard me say and espouse the benefits of this particular framework. And the real winner has been the State of Illinois and our customers. It’s been an overwhelming success in so many ways.

And so it’s just important that we make sure that we level set everybody. At the same time, we’re going to be at the table listening to their concerns and if they have legitimate concerns, we’ll see what ways we can try to bridge whatever gaps there maybe. And so, that’s just how we will continue to do business. And as I said a moment ago, really the key from our perspective is sitting at the table and really to put in place constructive energy policies. They’re going to support investment and infrastructure, energy infrastructure in particular, gives us the ability to earn a fair return on those investments but also to deliver significant value to our customers in the State of Illinois and create thousands of jobs.

So we think there’s opportunities and there will be opportunities to sit down and talk with these stakeholders and make sure we have a good understanding of what’s been done and what we think can be done prospectively. And so there’s a lot of noise. Look, we recognize and that creates challenges, I get it. But at the same time, just because there’s noise does it mean that we’re not going to sit down and have a collaborative approach with these key stakeholders.

Operator

[Operator Instructions] Our next question comes from line of Insoo Kim with Goldman Sachs. Please proceed with your question.

Insoo Kim

My only remaining question is, I guess partially relate to the IRP. But could you just give us the latest on the U.S. district disorder from last fall to install scrubbers on couple of your coal plants, including Rush Island and how are you incorporating or thinking about this when you’re developing your IRP process?

Warner Baxter

So Insoo, I want to make sure. Are you talking about the new scores reviews? Is that what you’re referring to? Or something different?

Insoo Kim

It is just the, I think a violation of the clean air…

Warner Baxter

Yes, that’s right. And so just a quick update on that one. So as you know, this has been a matter of litigation related to our Rush Island energy center back to 2011. And we’ve been through the courts. And so at the state of play right now is that we’ve appealed the decision to the court of appeals and made it all the appropriate briefings and filings with the courts. And my sense is that there is no specific time frame but it’ll be this fall before you probably see any kind of activity associated with this. But again, there’s no specific time frame but all the briefs have been filed here in the first half in May. And so, I would just say stay tuned. No real developments other than going through the standard process.

Insoo Kim

And I guess in terms of the thought on the generation free transformation and the upcoming IRP. Your assumption will be that you haven’t violated the act, so you’ll plan accordingly based on that assumption?

Warner Baxter

Yes, rest assured we clearly believe we have not violated the act. And so, yes, that would be a fair statement and assumption that we’ll have going into the integrated resource plan.

Operator

Thank you. We have no further questions at this time. Mr. Kirk, I would now like to turn the floor back over to you for closing comments.

Andrew Kirk

Thank you for participating in this call. A replay of this call will be available for one year on our Web site. If you have questions, you may call the contacts listed on earnings release. Financial analyst inquiries should be directed to me, Andrew Kirk. Media should call Erin Davis. Again, thank you for your interest in Ameren, and have a great day.

Operator

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at the time. Thank you for your participation and have a wonderful day.

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