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There are no quick fixes

By Scott Cisel, President & CEO Ameren Illinois utilities

Sunday, March 18, 2007 7:19 AM CDT

All of us at the Ameren Illinois utilities understand the frustration many of our customers and stakeholders have voiced. We realize we are not meeting all of our customers' expectations and remain committed to continually improving our operations. We also remain committed to developing a constructive solution to the electricity supply procurement process that will ensure safe and reliable delivery of electricity for downstate Illinois.

The 1997 de-regulation law and resulting competitive model has not worked as intended - especially for Illinois' downstate residential and small to medium sized non-residential customers. It did provide our customers with more than $1 billion in savings through the electric rate freeze and it has nurtured a growing competitive market for large commercial and industrial customers.

However, the sudden increase in electricity prices has created an economic hardship for many across downstate Illinois. Residential and small business customers have not realized choice. New rates and above normal winter usage have resulted in utility bills higher than anyone expected.

Legislative rollback and freeze proposals have caused the recent credit rating downgrades of the Ameren Illinois utilities, resulting in increased financing costs and requirements for the utilities to either prepay or to provide collateral before natural gas is delivered. Eventually we may be forced to take drastic measures which could impair the reliability of our delivery systems. Legislation enacting rate freezes and rollbacks and the resulting consequences will be in no one's best interest. The Ameren Illinois utilities simply followed the law, and the competitive model has delivered rates that approximate the national average. That alone is not enough to meet our customer's expectations. Revisions may be needed.

Despite what you may have heard, the reality is there are no quick fixes. Our customers are telling us they need greater long-term certainty of supply and price - especially residential, municipal and small to medium size non-residential customers.

That's why we at the Ameren Illinois utilities are proposing to begin a dialog with key stakeholders that we believe will lead to a constructive long-term solution that will bring greater rate stability, fairness and equity for our customers. The proposed framework could include the following concepts:

Reconsidering options for residential and small to medium sized non-residential customer choice.

Modifying or replacing the current auction power procurement process.

Allowing electric utilities to enter into Illinois Commerce Commission-approved long-term power supply arrangements.

Allowing utilities to purchase and/or build generating plants.

Giving large electric non-residential users and certain other customers the option to either select the re-regulated bundled rates or purchase electricity from alternative suppliers.

Returning to a fully regulated model for residential and small to medium sized non-residential customers, that is known and proven, may provide greater price stability and long-term certainty of electric supply, while still giving large users the option of alternative suppliers. It also creates an opportunity for utilities to invest in new generation, creating jobs and growing our downstate economy.

We believe the re-regulation of the generation component for the Ameren Illinois utilities could be a constructive solution that works for our customers, employees, regulators, elected officials and other stakeholders. It will require careful consideration, it will not be simple, it will take some time to accomplish and it will not likely result in immediate rate reductions. We also acknowledge that what works in Chicago doesn't necessarily work for downstate Illinois.

We look forward to the opportunity to work with the members of the General Assembly, the Illinois Commerce Commission and other stakeholders to look for constructive long-term solutions as opposed to quick fixes. By working together we are confident that we can deliver safe, reliable electricity with greater rate stability for the people and economy of downstate Illinois.