Allegheny Power 2011 Annual Report Download - page 149

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Authorization to operate the project is by a license issued by the FERC. The existing license expires on February 28, 2013.
In February 2011, JCP&L and PSEG filed a joint application with FERC to renew the license for an additional forty years. The
companies are pursuing relicensure through FERC's ILP. Under the ILP, FERC will assess the license applications, issue draft and
final Environmental Assessments/Environmental Impact Studies (as required by NEPA), and provide opportunities for intervention
and protests by affected third parties. FERC may hold hearings during the two-year ILP licensure period. FirstEnergy expects FERC
to issue the new license within the remaining portion of the two-year ILP period. To the extent, however, that the license proceedings
extend beyond the February 28, 2013 expiration date for the current license, the current license will be extended yearly as necessary
to permit FERC to issue the new license.
Seneca
The Seneca Pumped Storage Project is a 451 MW hydroelectric project located in Warren County, Pennsylvania owned and operated
by FGCO. FGCO holds the current FERC license that authorizes ownership and operation of the project. The current FERC license
will expire on November 30, 2015. FERC's regulations call for a five-year relicensing process. On November 24, 2010, and acting
pursuant to applicable FERC regulations and rules, FGCO initiated the relicensing process by filing its notice of intent to relicense
and PAD in the license docket.
On November 30, 2010, the Seneca Nation filed its notice of intent to relicense and PADs necessary for them to submit a competing
application. Section 15 of the FPA contemplates that third parties may file a "competing application" to assume ownership and
operation of a hydroelectric facility upon (i) relicensure and (ii) payment of net book value of the plant to the original owner/operator.
Nonetheless, FGCO believes it is entitled to a statutory “incumbent preference” under Section 15.
The Seneca Nation and certain other intervenors have asked FERC to redefine the “project boundary” of the hydroelectric plant to
include the dam and reservoir facilities operated by the U.S. Army Corps of Engineers. On May 16, 2011, FirstEnergy filed a Petition
for Declaratory Order with FERC seeking an order to exclude the dam and reservoir facilities from the project. The Seneca Nation,
the New York State Department of Environmental Conservation, and the U.S. Department of Interior each submitted responses to
FirstEnergy's petition, including motions to dismiss FirstEnergy's petition. The “project boundary” issue is pending before FERC.
On September 12, 2011, FirstEnergy and the Seneca Nation each filed “Revised Study Plan” documents. These documents describe
the parties' respective proposals for the scope of the environmental studies that should be performed as part of the relicensing
process. On October 11, 2011, FERC Staff issued a letter order that addressed the Revised Study Plans. In the order, FERC Staff
approved FirstEnergy's Revised Study Plan, subject to a finding that the Project is located on “aboriginal lands” of the Seneca
Nation. Based on this finding, FERC Staff directed FirstEnergy to consult with the Seneca Nation and other parties about the data
set, methodology, and modeling of the hydrological impacts of project operations. FirstEnergy is performing the work necessary to
develop a study proposal from which to conduct such consultations. The study process will extend through approximately November
of 2013.
FirstEnergy cannot predict the outcome of this matter or estimate the possible loss or range of loss.
16. COMMITMENTS, GUARANTEES AND CONTINGENCIES
NUCLEAR INSURANCE
The Price-Anderson Act limits the public liability which can be assessed with respect to a nuclear power plant to $12.6 billion
(assuming 104 units licensed to operate) for a single nuclear incident, which amount is covered by: (i) private insurance amounting
to $375 million; and (ii) $12.2 billion provided by an industry retrospective rating plan required by the NRC pursuant thereto. Under
such retrospective rating plan, in the event of a nuclear incident at any unit in the United States resulting in losses in excess of
private insurance, up to $118 million (but not more than $18 million per unit per year in the event of more than one incident) must
be contributed for each nuclear unit licensed to operate in the country by the licensees thereof to cover liabilities arising out of the
incident. Based on their present nuclear ownership and leasehold interests, FirstEnergy’s maximum potential assessment under
these provisions would be $470 million (OE-$40 million, NGC-$408 million, and TE-$22 million) per incident but not more than $70
million (OE-$6 million, NGC-$61 million, and TE-$3 million) in any one year for each incident.
In addition to the public liability insurance provided pursuant to the Price-Anderson Act, FirstEnergy has also obtained insurance
coverage in limited amounts for economic loss and property damage arising out of nuclear incidents. FirstEnergy is a member of
NEIL, which provides coverage (NEIL I) for the extra expense of replacement power incurred due to prolonged accidental outages
of nuclear units. Under NEIL I, FirstEnergy’s subsidiaries have policies, renewable yearly, corresponding to their respective nuclear
interests, which provide an aggregate indemnity of up to approximately $2.0 billion (OE-$168 million, NGC-$1.7 billion, TE-$90
million) for replacement power costs incurred during an outage after an initial 26-week waiting period. Members of NEIL I pay annual
premiums and are subject to assessments if losses exceed the accumulated funds available to the insurer. FirstEnergy’s present
maximum aggregate assessment for incidents at any covered nuclear facility occurring during a policy year would be approximately
$13 million (OE-$1 million, NGC-$12 million, and TE-less than $1 million).
FirstEnergy is insured as to its respective nuclear interests under property damage insurance provided by NEIL to the operating
company for each plant. Under these arrangements, up to $2.8 billion of coverage for decontamination costs, decommissioning