Allegheny Power 2010 Annual Report Download - page 55

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40
FirstEnergy maintains credit policies with respect to its counterparties to manage overall credit risk. This includes
performing independent risk evaluations, actively monitoring portfolio trends and using collateral and contract provisions
to mitigate exposure. As part of its credit program, FirstEnergy aggressively manages the quality of its portfolio of energy
contracts, evidenced by a current weighted average risk rating for energy contract counterparties of BBB (S&P). As of
December 31, 2010, the largest credit concentration was with J.P. Morgan Chase & Co., which is currently rated
investment grade, representing 10.9% of FirstEnergy’s total approved credit risk composed of 3.3% for FES, 2.2% for
JCP&L, 2.7% for Met-Ed and a combined 2.7% for OE, TE and CEI.
REGULATORY MATTERS
Regulatory assets that do not earn a current return totaled approximately $215 million as of December 31, 2010 (JCP&L
- $38 million, Met-Ed - $131 million, Penelec - $12 million, CEI - $16 million and OE - $18 million). Regulatory assets not
earning a current return (primarily for certain regulatory transition costs and employee postretirement benefits) are
expected to be recovered by 2014 for JCP&L and by 2020 for Met-Ed and Penelec.
FirstEnergy and the Utilities prepare their consolidated financial statements in accordance with the authoritative guidance
for accounting for certain types of regulation. Under this guidance, regulatory assets represent incurred or accrued costs
that have been deferred because of their probable future recovery from customers through regulated rates. Regulatory
liabilities represent the recovery of costs or accrued liabilities that have been deferred because it is probable such
amounts will be returned to customers through future regulated rates. The following table provides the balance of
regulatory assets by Company as of December 31, 2010 and 2009, and changes during 2010:
December 31, December 31, Increase
Regulatory Assets 2010 2009 (Decrease)
(In millions)
OE $ 400 $ 465 $ (65)
CEI 370 546 (176)
TE 72 70 2
JCP&L 513 888 (375)
Met-Ed 296 357 (61)
Penelec 163 9 154
Other 12 21 (9)
Total $ 1,826 $ 2,356 $ (530)
The following table provides information about the composition of regulatory assets as of December 31, 2010 and 2009
and the changes during 2010:
December 31, December 31, Increase
Regulatory Assets by Source 2010 2009 (Decrease)
(In millions)
Regulatory transition costs $ 770 $ 1,100 $ (330)
Customer shopping incentives - 154 (154)
Customer receivables for future income taxes 326 329 (3)
Loss on reacquired debt 48 51 (3)
Employee postretirement benefits 16 23 (7)
Nuclear decommissioning, decontamination
and spent fuel disposal costs (184) (162) (22)
A
sset removal costs (237) (231) (6)
MISO/PJM transmission costs 184 148 36
Deferred generation costs 386 369 17
Distribution costs 426 482 (56)
Other 91 93 (2)
Total $ 1,826 $ 2,356 $ (530)