Allegheny Power 2010 Annual Report Download - page 61

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On October 20, 2010, FES participated in a descending clock auction for POLR service administered by the Ohio
Companies and their consultant, CRA International, for the following periods: June 1, 2011 through May 31, 2012; June
1, 2011, through May 31, 2013; and June 1, 2010 through May 31, 2014. The Ohio Companies offered 17, 17, and 16
tranches for these periods, respectively. FES won 10, 7, and 3 tranches, respectively, for these periods. On January 25,
2011, the Ohio Companies conducted a second auction offering the same product for identical time periods. FES won 3,
0, and 3 tranches, respectively, for these periods. FES entered into a Master SSO Supply Agreement to provide
capacity, energy, ancillary services, and congestion costs to the Ohio Companies for the tranches won. Under the ESP in
effect for these time periods, the Ohio Companies are responsible for payment of noncontrollable transmission costs
billed by PJM for POLR service.
On October 18, 2010, FES participated in a descending clock auction for POLR service administered by both Met-Ed and
Penelec and their consultant, National Economic Research Associates (NERA) for the following tranche products and
delivery periods: Residential 5-month, Residential 24-month, Commercial 5-month, Commercial 12-month and Industrial
12-month. All 5-month delivery periods are from January 1, 2011 through May 31, 2011, all 12-month delivery periods
are from June 1, 2011 through May 31, 2012 while all 24-month delivery periods are from June 1, 2011 through May 31,
2013. Met-Ed offered 7 Residential 5-month tranches, 4 Residential 24-month tranches, 6 Commercial 5-month tranches,
6 Commercial 12-month tranches and 1 Industrial tranche while Penelec offered 5 Residential 5-month tranches, 3
Residential 24-month tranches, 5 Commercial 5-month tranches, 5 Commercial 12-month tranches and 1 Industrial
tranche.
For Met-Ed offerings, FES won 4 Residential 5-month tranches, 2 Residential 24-month tranches, 1 Commercial 5-month
tranche, 1 Commercial 12-month tranche and zero Industrial tranches. For Penelec offerings, FES won 1 Residential 5-
month tranche, 1 Residential 24-month tranche, zero Commercial 5-month tranches, zero Commercial 12-month
tranches and zero Industrial tranches. FES entered into separate Supplier Master Agreements (SMA) to provide
capacity, energy, ancillary services, and congestion costs with Met-Ed and Penelec for each product won. Under the
terms and conditions of the SMA, Met-Ed and Penelec are responsible for payment of noncontrollable transmission costs
billed by PJM.
On January 18 to 20, 2011 FES participated in a descending clock auction for POLR service administered by Met-Ed,
Penelec, and Penn Power and their consultant, NERA for the following tranche products and delivery periods:
Residential 12-month, Residential 24-month, Commercial 12-month and Industrial 12-month. All 12-month delivery
periods are from June 1, 2011 through May 31, 2012 while all 24-month delivery periods are from June 1, 2011 through
May 31, 2013. Met-Ed offered 3 Residential 12-month tranches, 4 Residential 24-month tranches, 6 Commercial 12-
month tranches and 11 Industrial tranches. Penelec offered 3 Residential 12-month tranches, 2 Residential 24-month
tranches, 5 Commercial 12-month tranches and 11 Industrial tranches. Penn Power offered 2 Residential 12-month
tranches, 1 Residential 24-month tranche, 3 Commercial 12-month tranches and 3 Industrial tranches.
For Met-Ed offerings, FES won 1 Commercial 12-month tranche and zero for the remaining products. For Penelec and
Penn Power offerings, FES won no tranches. FES entered into a SMA to provide capacity, energy, ancillary services,
and congestion costs with Met-Ed for the product won. Under the terms and conditions of the SMA, Met-Ed is
responsible for payment of noncontrollable transmission costs billed by PJM.
Reliability Initiatives
Federally-enforceable mandatory reliability standards apply to the bulk power system and impose certain operating,
record-keeping and reporting requirements on the Utilities, FES, FGCO, FENOC and ATSI. The NERC, as the ERO is
charged with establishing and enforcing these reliability standards, although it has delegated day-to-day implementation
and enforcement of these reliability standards to eight regional entities, including ReliabilityFirst Corporation. All of
FirstEnergy’s facilities are located within the ReliabilityFirst region. FirstEnergy actively participates in the NERC and
ReliabilityFirst stakeholder processes, and otherwise monitors and manages its companies in response to the ongoing
development, implementation and enforcement of the reliability standards implemented and enforced by the
ReliabilityFirst Corporation.
FirstEnergy believes that it generally is in compliance with all currently-effective and enforceable reliability standards.
Nevertheless, in the course of operating its extensive electric utility systems and facilities, FirstEnergy occasionally learns
of isolated facts or circumstances that could be interpreted as excursions from the reliability standards. If and when such
items are found, FirstEnergy develops information about the item and develops a remedial response to the specific
circumstances, including in appropriate cases “self-reporting” an item to ReliabilityFirst. Moreover, it is clear that the
NERC, ReliabilityFirst and the FERC will continue to refine existing reliability standards as well as to develop and adopt
new reliability standards. The financial impact of complying with new or amended standards cannot be determined at this
time; however, 2005 amendments to the FPA provide that all prudent costs incurred to comply with the new reliability
standards be recovered in rates. Still, any future inability on FirstEnergy’s part to comply with the reliability standards for
its bulk power system could result in the imposition of financial penalties that could have a material adverse effect on its
financial condition, results of operations and cash flows.