Moody’s says it doesn’t like AmerenUE’s declining cash flow or rising operating costs, so it is downgrading the utility’s bonds to Baa2 from Baa1. Such a downgrade is always painful — it will increase the cost of carrying $3.5 billion in debt — but some of Moody’s words will be welcome in the Ameren executive suite.

Moody’s says it is concerned about “the challenging regulatory environment” in Missouri

… as Union Electric is one of the relatively few utilities in the country operating without fuel, purchase power and environmental cost recovery mechanisms. The lack of such automatic cost recovery provisions creates uncertainty regarding the timely recovery of the higher costs and investments being incurred and leads to significant regulatory lag.

AmerenUE is making the same arguments about regulatory lag in a pending Missouri rate case. It wants the ability to change rates quickly when fuel costs rise or fall. The Missouri Public Service Commission refused to grant Ameren such a fuel-adjustment clause in a 2007 rate case.