Allegheny Power 2010 Annual Report Download - page 20

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FES continued implementation of its retail strategy by focusing on direct, governmental aggregation and POLR sales
opportunities. As of February 8, 2011, FES committed sales (as a percentage of total projected sales) for 2011 and 2012
were 96% and 65% respectively.
Operational Matters
PJM RTO Integration
In March 2010 two FRR Integration Auctions were conducted by PJM on behalf of the Ohio Companies to secure electric
capacity for delivery years June 1, 2011, through May 31, 2012, and June 1, 2012, through May 31, 2013. In the 2011/2012
auction, 27 suppliers participated and 12,583 MW of unforced capacity (the MW bid into the auction after adjusting for
historical forced outage rates) cleared at a price of $108.89/MW-day. The 2012/2013 auction had 28 market participants,
with 13,038 MW of unforced capacity clearing at a price of $20.46/MW-day. FirstEnergy plans to integrate its operations into
PJM by June 1, 2011.
Nuclear Generation
On February 28, 2010, the Davis-Besse Nuclear Plant (908 MW) shut down for its 16th scheduled refueling outage to
exchange 76 of 177 fuel assemblies and to conduct numerous safety inspections. During the outage, it was determined
through testing that modification work also needed to be performed on certain CRDM nozzles that penetrate the reactor
vessel head. Modifications of 24 of the 69 nozzles on the reactor head were completed and Davis-Besse returned to service
on June 29, 2010. The plant was originally scheduled to have a new reactor vessel head installed in 2014. This timeline
was voluntarily accelerated, and FirstEnergy plans to install the new reactor head in the fall of 2011.
On August 30, 2010, FENOC submitted an application to the NRC for renewal of the Davis-Besse operating license. In a
letter dated October 18, 2010, the NRC determined that the Davis-Besse license renewal application was complete and
acceptable for docketing and further review. Davis-Besse currently is licensed until 2017; if approved, the renewal would
extend operations for an additional 20 years, until 2037.
On October 2, 2010, Beaver Valley Nuclear Power Station Unit 1 (911 MW) began its scheduled refueling and maintenance
outage. During the outage FENOC exchanged 60 of the 157 fuel assemblies, conducted safety inspections and performed
routine maintenance work. The plant returned to service on November 4, 2010.
Coal and Gas Fired Generation
On March 31, 2010, FGCO closed the sale of its 340 MW Sumpter Plant in Sumpter, Michigan, to Wolverine Power Supply
Cooperative, Inc. FirstEnergy recorded a $6 million impairment of the Sumpter plant in December 2009 and a loss of $9
million with the sale in the first quarter of 2010. The plant consists of four 85 MW natural gas turbines and represented
FirstEnergy’s only generation assets in Michigan.
On August 12, 2010, FirstEnergy announced that operational changes would be made to some of the smaller coal-fired units
in response to the slow economy, the lower demand for electricity and uncertainty related to proposed new federal
environmental regulations. Beginning September 2010, Bay Shore units 2-4, Eastlake units 1-4, the Lake Shore Plant, and
the Ashtabula Plant, which total 1,620 MW of capacity, began operating with minimum three-day notice and in response to
consumer demand. FGCO recognized an impairment of $303 million ($190 million after tax) related to these assets in 2010.
On November 17, 2010, we announced plans to cancel repowering Units 4 and 5 (312 MW) at the R.E. Burger Plant to
generate electricity principally with biomass. FGCO recognized an impairment of $72 million ($45 million after tax) and
permanently shut down these units on December 31, 2010, due to the current market conditions.
During the third quarter of 2010, FGCO re-evaluated the schedule for completing the Fremont Plant (707 MW) due to market
conditions and the extension of the tax incentives included in the Small Business legislation through 2011. As a result,
FGCO extended the plant’s expected completion to December 31, 2011, to reduce overtime labor cost and outside
contractor spend for the remainder of the project. On February 3, 2011, FirstEnergy and American Municipal Power, Inc.,
entered into a non-binding Memorandum of Understanding (MOU) for the sale of our Fremont Energy Center. The MOU
provides, among other things, for the parties to engage in exclusive negotiations towards a definitive agreement expected to
be executed in March, 2011, with a targeted closing date in July, 2011.
On December 28, 2010, FirstEnergy closed the sale of 6.65% of FGCO’s participation interest in the output of OVEC
(approximately 150 MW) to Peninsula Generation Cooperative, a subsidiary of Wolverine Power Supply Cooperative, Inc.,
effective December 31, 2010. FirstEnergy’s remaining interest in OVEC is 4.85%. The gain from this transaction increased
2010 net income by $53.8 million.