Allegheny Power 2010 Annual Report Download - page 120

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Met-Ed, Penelec and Penn jointly filed a SMIP with the PPUC on August 14, 2009. This plan proposed a 24-month
assessment period in which the Pennsylvania Companies will assess their needs, select the necessary technology,
secure vendors, train personnel, install and test support equipment, and establish a cost effective and strategic
deployment schedule, which currently is expected to be completed in fifteen years. Met-Ed, Penelec and Penn estimate
assessment period costs of approximately $29.5 million, which the Pennsylvania Companies, in their plan, proposed to
recover through an automatic adjustment clause. The ALJ’s Initial Decision approved the SMIP as modified by the ALJ,
including: ensuring that the smart meters to be deployed include the capabilities listed in the PPUC’s Implementation
Order; denying the recovery of interest through the automatic adjustment clause; providing for the recovery of
reasonable and prudent costs net of resulting savings from installation and use of smart meters; and requiring that
administrative start-up costs be expensed and the costs incurred for research and development in the assessment period
be capitalized. On April 15, 2010, the PPUC adopted a Motion by Chairman Cawley that modified the ALJ’s initial
decision, and decided various issues regarding the SMIP for the Pennsylvania Companies. The PPUC entered its Order
on June 9, 2010, consistent with the Chairman’s Motion. On June 24, 2010, Met-Ed, Penelec and Penn filed a Petition
for Reconsideration of a single portion of the PPUC’s Order regarding the future ability to include smart meter costs in
base rates. On August 5, 2010, the PPUC granted in part the petition for reconsideration by deleting language from its
original order that would have precluded Met-Ed, Penelec and Penn from seeking to include smart meter costs in base
rates at a later time. The costs to implement the SMIP could be material. However, assuming these costs satisfy a just
and reasonable standard they are expected to be recovered in a rider (Smart Meter Technologies Charge Rider) which
was approved when the PPUC approved the SMIP.
By Tentative Order entered September 17, 2009, the PPUC provided for an additional 30-day comment period on
whether the 1998 Restructuring Settlement, which addressed how Met-Ed and Penelec were going to implement direct
access to a competitive market for the generation of electricity, allows Met-Ed and Penelec to apply over-collection of
NUG costs for select and isolated months to reduce non-NUG stranded costs when a cumulative NUG stranded cost
balance exists. In response to the Tentative Order, various parties filed comments objecting to the above accounting
method utilized by Met-Ed and Penelec. Met-Ed and Penelec are awaiting further action by the PPUC.
(D) NEW JERSEY
JCP&L is permitted to defer for future collection from customers the amounts by which its costs of supplying BGS to non-
shopping customers, costs incurred under NUG agreements, and certain other stranded costs, exceed amounts collected
through BGS and NUGC rates and market sales of NUG energy and capacity. As of December 31, 2010, the
accumulated deferred cost balance was a credit of approximately $37 million. To better align the recovery of expected
costs, on July 26, 2010, JCP&L filed a request to decrease the amount recovered for the costs incurred under the NUG
agreements by $180 million annually. On February 10, 2011, the NJBPU approved a stipulation which allows the change
in rates to become effective March 1, 2011.
On March 13, 2009, JCP&L filed its annual SBC Petition with the NJBPU that includes a request for a reduction in the
level of recovery of TMI-2 decommissioning costs based on an updated TMI-2 decommissioning cost analysis dated
January 2009 estimated at $736 million (in 2003 dollars). This matter is currently pending before the NJBPU.
New Jersey statutes require that the state periodically undertake a planning process, known as the EMP, to address
energy related issues including energy security, economic growth, and environmental impact. The NJBPU adopted an
order establishing the general process and contents of specific EMP plans that must be filed by New Jersey electric and
gas utilities in order to achieve the goals of the EMP. On April 16, 2010, the NJBPU issued an order indefinitely
suspending the requirement of New Jersey utilities to submit Utility Master Plans until such time as the status of the EMP
has been made clear. At this time, FirstEnergy and JCP&L cannot determine the impact, if any, the EMP may have on
their operations.
(E) FERC MATTERS
Rates for Transmission Service Between MISO and PJM
On November 18, 2004, the FERC issued an order eliminating the through and out rate for transmission service between
the MISO and PJM regions. The FERC’s intent was to eliminate multiple transmission charges for a single transaction
between the MISO and PJM regions. The FERC also ordered MISO, PJM and the transmission owners within MISO and
PJM to submit compliance filings containing a rate mechanism to recover lost transmission revenues created by
elimination of this charge (referred to as SECA) during a 16-month transition period. In 2005, the FERC set the SECA for
hearing. The presiding ALJ issued an initial decision on August 10, 2006, rejecting the compliance filings made by MISO,
PJM and the transmission owners, and directing new compliance filings. This decision was subject to review and
approval by the FERC. On May 21, 2010, FERC issued an order denying pending rehearing requests and an Order on
Initial Decision which reversed the presiding ALJ’s rulings in many respects. Most notably, these orders affirmed the
right of transmission owners to collect SECA charges with adjustments that modestly reduce the level of such charges,
and changes to the entities deemed responsible for payment of the SECA charges. The Ohio Companies were identified