Allegheny Power 2010 Annual Report Download - page 57

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Additionally under SB221, electric utilities and electric service companies are required to serve part of their load from
renewable energy resources equivalent to 0.25% of the KWH they served in 2009. In August and October 2009, the Ohio
Companies conducted RFPs to secure RECs. The RFPs sought RECs, including solar RECs and RECs generated in
Ohio in order to meet the Ohio Companies’ alternative energy requirements as set forth in SB221 for 2009, 2010 and
2011. The RECs acquired through these two RFPs were used to help meet the renewable energy requirements
established under SB221 for 2009, 2010 and 2011. On March 10, 2010, the PUCO found that there was an insufficient
quantity of solar energy resources reasonably available in the market. The PUCO reduced the Ohio Companies’
aggregate 2009 benchmark to the level of solar RECs the Ohio Companies acquired through their 2009 RFP processes,
provided the Ohio Companies’ 2010 alternative energy requirements be increased to include the shortfall for the 2009
solar REC benchmark. FES also applied for a force majeure determination from the PUCO regarding a portion of their
compliance with the 2009 solar energy resource benchmark, which application is still pending. In July 2010, the Ohio
Companies initiated an additional RFP to secure RECs and solar RECs needed to meet the Ohio Companies’ alternative
energy requirements as set forth in SB221 for 2010 and 2011. As a result of this RFP, contracts were executed in August
2010. On January 11, 2011, the Ohio Companies filed an application with the PUCO seeking an amendment to each of
their 2010 alternative energy requirements for solar RECs generated in Ohio due to the insufficient quantity of solar
energy resources reasonably available in the market. The PUCO has not yet ruled on that application.
On February 12, 2010, OE and CEI filed an application with the PUCO to establish a new credit for all-electric customers.
On March 3, 2010, the PUCO ordered that rates for the affected customers be set at a level that will provide bill impacts
commensurate with charges in place on December 31, 2008 and authorized the Ohio Companies to defer incurred costs
equivalent to the difference between what the affected customers would have paid under previously existing rates and
what they pay with the new credit in place. Tariffs implementing this new credit went into effect on March 17, 2010. On
April 15, 2010, the PUCO issued a Second Entry on Rehearing that expanded the group of customers to which the new
credit would apply and authorized deferral for the associated additional amounts. The PUCO also stated that it expected
that the new credit would remain in place through at least the 2011 winter season, and charged its staff to work with
parties to seek a long term solution to the issue. Tariffs implementing this newly expanded credit went into effect on May
21, 2010, and the proceeding remains open. The hearing in the matter is set to commence on February 16, 2011.
Pennsylvania
The PPUC adopted a Motion on January 28, 2010 and subsequently entered an Order on March 3, 2010 which denied
the recovery of marginal transmission losses through the TSC rider for the period of June 1, 2007 through March 31,
2008, and directed Met-Ed and Penelec to submit a new tariff or tariff supplement reflecting the removal of marginal
transmission losses from the TSC, and instructed Met-Ed and Penelec to work with the various intervening parties to file
a recommendation to the PPUC regarding the establishment of a separate account for all marginal transmission losses
collected from ratepayers plus interest to be used to mitigate future generation rate increases beginning January 1, 2011.
On March 18, 2010, Met-Ed and Penelec filed a Petition with the PPUC requesting that it stay the portion of the March 3,
2010 Order requiring the filing of tariff supplements to end collection of costs for marginal transmission losses. By Order
entered March 25, 2010, the PPUC granted the requested stay until December 31, 2010. Pursuant to the PPUC’s order,
Met-Ed and Penelec filed the plan to establish separate accounts for marginal transmission loss revenues and related
interest and carrying charges and the plan for the use of these funds to mitigate future generation rate increases
commencing January 1, 2011. The PPUC approved this plan on June 7, 2010. On April 1, 2010, Met-Ed and Penelec
filed a Petition for Review with the Commonwealth Court of Pennsylvania appealing the PPUC’s March 3, 2010 Order.
Although the ultimate outcome of this matter cannot be determined at this time, Met-Ed and Penelec believe that they
should prevail in the appeal and therefore expect to fully recover the approximately $252.7 million ($188.0 million for Met-
Ed and $64.7 million for Penelec) in marginal transmission losses for the period prior to January 1, 2011. The argument
before the Commonwealth Court, en banc, was held on December 8, 2010.
On May 20, 2010, the PPUC approved Met-Ed’s and Penelec’s annual updates to their TSC rider for the period June 1,
2010 through December 31, 2010, including marginal transmission losses as approved by the PPUC, although the
recovery of marginal losses will be subject to the outcome of the proceeding related to the 2008 TSC filing as described
above. The TSC for Met-Ed’s customers was increased to provide for full recovery by December 31, 2010.
Met-Ed and Penelec filed with the PPUC a generation procurement plan covering the period January 1, 2011 through
May 31, 2013. The plan is designed to provide adequate and reliable service through a prudent mix of long-term, short-
term and spot market generation supply with a staggered procurement schedule that varies by customer class, using a
descending clock auction. On August 12, 2009, the parties to the proceeding filed a settlement agreement of all but two
issues, and the PPUC entered an Order approving the settlement and the generation procurement plan on November 6,
2009. Generation procurement began in January 2010.
On February 8, 2010, Penn filed a Petition for Approval of its Default Service Plan for the period June 1, 2011 through
May 31, 2013. On July 29, 2010, the parties to the proceeding filed a Joint Petition for Settlement of all issues. Although
the PPUC's Order approving the Joint Petition held that the provisions relating to the recovery of MISO exit fees and one-
time PJM integration costs (resulting from Penn's June 1, 2011 exit from MISO and integration into PJM) were approved,
it made such provisions subject to the approval of cost recovery by FERC. Therefore, Penn may not put these provisions
into effect until FERC has approved the recovery and allocation of MISO exit fees and PJM integration costs.