Allegheny Power 2011 Annual Report Download - page 145

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market. Teleconferences are scheduled through March 2012, with another en banc hearing to be held on March 21, 2012, to explore
the future of default service in Pennsylvania following the expiration of the upcoming default service plans on May 31, 2015. Following
the issuance of a Tentative Order and comments filed by numerous parties, the Commission entered a final order on December
16, 2011, providing recommendations for components to be included in upcoming default service plans. An intermediate work plan
was also presented on December 16, 2011, by Tentative Order, on which initial comments were submitted by Met-Ed, Penelec,
Penn and WP on January 17, 2012. FES also submitted comments. Reply comments were submitted on February 1, 2012. It is
expected that a final order implementing the intermediate work plan and a long range plan will be presented by the PPUC, both in
March 2012.
The PPUC issued a Proposed Rulemaking Order on August 25, 2011, which proposed a number of substantial modifications to the
current Code of Conduct regulations that were promulgated to provide competitive safeguards to the competitive retail electric
market in Pennsylvania. The proposed changes include, but are not limited to: an EGS may not have the same or substantially
similar name as the EDC or its corporate parent; EDCs and EGSs would not be permitted to share office space and would need to
occupy different buildings; EDCs and affiliated EGSs could not share employees or services, except certain corporate support,
emergency, or tariff services (the definition of "corporate support services" excludes items such as information systems, electronic
data interchange, strategic management and planning, regulatory services, legal services, or commodities that have been included
in regulated rates at less than market value); and an EGS must enter into a trademark agreement with the EDC before using its
trademark or service mark. The Proposed Rulemaking Order, which was published on February 11, 2012, calls for comments to
be submitted by March 27, 2012. If implemented these rules could require a significant change in the way FES, Met-Ed, Penelec,
Penn and WP do business in Pennsylvania, and could possibly have an adverse impact on their results of operations and financial
condition.
In November 2011, Met-Ed, Penelec, Penn and WP filed a Joint Petition for Approval of their Default Service Plan for the period
June 1, 2013 through May 31, 2015. The Pennsylvania Companies' direct case was submitted in its entirety on December 20, 2011.
Evidentiary hearings are scheduled for April 11-13, 2012, and a final order must be entered by the PPUC by August 17, 2012.
WEST VIRGINIA
In 2009, the West Virginia Legislature enacted the AREPA, which generally requires that a specified minimum percentage of electricity
sold to retail customers in West Virginia by electric utilities each year be derived from alternative and renewable energy resources
according to a predetermined schedule of increasing percentage targets, including 10% by 2015, 15% by 2020, and 25% by 2025.
In November 2010, the WVPSC issued RPS Rules, which became effective on January 4, 2011. Under the RPS Rules, on or before
January 1, 2011, each electric utility subject to the provisions of this rule was required to prepare an alternative and renewable
energy portfolio standard compliance plan and file an application with the WVPSC seeking approval of such plan. MP and PE filed
their combined compliance plan in December 2010. A hearing was held at the WVPSC on June 13, 2011. An order was issued by
the WVPSC in September 2011, which conditionally approved MP's and PE's compliance plan, contingent on the outcome of the
resource credits case discussed below.
Additionally, in January 2011, MP and PE filed an application with the WVPSC seeking to certify three facilities as Qualified Energy
Resource Facilities. The application was approved and the three facilities are capable of generating renewable credits which will
assist the companies in meeting their combined requirements under the AREPA. An annual update filing is due on March 31, 2012.
Further, in February 2011, MP and PE filed a petition with the WVPSC seeking an Order declaring that MP is entitled to all alternative
and renewable energy resource credits associated with the electric energy, or energy and capacity, that MP is required to purchase
pursuant to electric energy purchase agreements between MP and three non-utility electric generating facilities in West Virginia.
The City of New Martinsville and Morgantown Energy Associates, each the owner of one of the contracted resources, has participated
in the case in opposition to the Petition. A hearing was held at the WVPSC on August 25 and 26, 2011. On November 22, 2011,
the WVPSC issued an order granting ownership of all RECs produced by the facilities to MP. On December 22, 2011, the WVPSC
order was appealed, and the order was stayed pending the outcome of the appeal. MP's brief was filed on February 13, 2012.
Should MP be unsuccessful in the appeal, it will have to procure the requisite RECs to comply with AREPA from other sources. MP
expects to recover such costs from customers.
In September 2011, MP and PE filed with the WVPSC to recover costs associated with fuel and purchased power (the ENEC) in
the amount of $32 million which represents an approximate 3% overall increase in such costs over the past two years, primarily
attributable to rising coal prices. The requested increase was partially offset by $2.5 million of synergy savings directly resulting
from the merger of FirstEnergy and AE, which closed in February 2011. Under a cost recovery clause established by the WVPSC
in 2007, MP and PE customer bills are adjusted periodically to reflect upward or downward changes in the cost of fuel and purchased
power. The utilities' most recent request to recover costs for fuel and purchased power was in September 2009. MP and PE entered
into a Settlement Agreement related to this matter. The WVPSC issued an order on December 30, 2011, approving the settlement
agreement. The approved settlement resulted in an increase of $19.6 million, instead of the requested $32 million, with additional
costs to be recovered over time with a carrying charge.