Allegheny Power 2011 Annual Report Download - page 57

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hours. On March 31, 2009, the NERC initiated a Compliance Violation Investigation in order to determine JCP&L's contribution to
the electrical event and to review any potential violation of NERC Reliability Standards associated with the event. NERC has
submitted first and second Requests for Information regarding this and another related matter. JCP&L is complying with these
requests. JCP&L is not able to predict what actions, if any, the NERC may take with respect to this matter.
On August 23, 2010, FirstEnergy self-reported to RFC a vegetation encroachment event on a Met-Ed 230 kV line. This event did
not result in a fault, outage, operation of protective equipment, or any other meaningful electric effect on any FirstEnergy transmission
facilities or systems. On August 25, 2010, RFC issued a notice of enforcement to investigate the incident. FirstEnergy submitted a
data response to RFC on September 27, 2010. On July 8, 2011, RFC and Met-Ed signed a settlement agreement to resolve all
outstanding issues related to the vegetation encroachment event. The settlement calls for Met-Ed to pay a penalty of $650,000,
and for FirstEnergy to perform certain mitigating actions. These mitigating actions include inspecting FirstEnergy's transmission
system using LiDAR technology, and reporting the results of inspections, and any follow-up work, to RFC. FirstEnergy was performing
the LiDAR work in response to certain other industry directives issued by NERC in 2010. NERC subsequently approved the settlement
agreement and, on September 30, 2011, submitted the approved settlement to FERC for final approval. FERC approved the
settlement agreement on October 28, 2011. Met-Ed subsequently paid the $650,000 penalty and, on December 31, 2011, RFC
sent written notice that this matter has been closed.
In 2011, RFC performed routine compliance audits of parts of FirstEnergy's bulk-power system and generally found the audited
systems and process to be in full compliance with all audited reliability standards. RFC will perform additional audits in 2012.
MARYLAND
By statute enacted in 2007, the obligation of Maryland utilities to provide SOS to residential and small commercial customers, in
exchange for recovery of their costs plus a reasonable profit, was extended indefinitely. The legislation also established a 5-year
cycle (to begin in 2008) for the MDPSC to report to the legislature on the status of SOS. PE now conducts rolling auctions to procure
the power supply necessary to serve its customer load pursuant to a plan approved by the MDPSC. However, the terms on which
PE will provide SOS to residential customers after the current settlement expires at the end of 2012 will depend on developments
with respect to SOS in Maryland over the coming year, including but not limited to, possible MDPSC decisions in the proceedings
discussed below.
The MDPSC opened a new docket in August 2007 to consider matters relating to possible “managed portfolio” approaches to SOS
and other matters. “Phase II” of the case addressed utility purchases or construction of generation, bidding for procurement of
demand response resources and possible alternatives if the TrAIL and PATH projects were delayed or defeated. It is unclear when
the MDPSC will issue its findings in this proceeding.
In September 2009, the MDPSC opened a new proceeding to receive and consider proposals for construction of new generation
resources in Maryland. In December 2009, Governor Martin O'Malley filed a letter in this proceeding in which he characterized the
electricity market in Maryland as a “failure” and urged the MDPSC to use its existing authority to order the construction of new
generation in Maryland, vary the means used by utilities to procure generation and include more renewables in the generation mix.
In December 2010, the MDPSC issued an order soliciting comments on a model RFP for solicitation of long-term energy commitments
by Maryland electric utilities. PE and numerous other parties filed comments, and on September 29, 2011, the MDPSC issued an
order requiring the utilities to issue the RFP crafted by the MDPSC by October 7, 2011. The RFPs were issued by the utilities as
ordered by the MDPSC. The order, as amended, indicated that bids were due by January 20, 2012, and that the MDPSC would be
the entity evaluating all bids. The Chairman of the MDPSC has stated publicly that several bids were received, but no other information
was released. After receipt of further comments from interested parties, including PE, on January 13, 2012, a hearing on whether
more generation is needed, irrespective of what bids may have been received, was held on January 31, 2012. There has been no
further action on this matter.
In September 2007, the MDPSC issued an order that required the Maryland utilities to file detailed plans for how they will meet the
“EmPOWER Maryland” proposal that electric consumption be reduced by 10% and electricity demand be reduced by 15%, in each
case by 2015.
The Maryland legislature in 2008 adopted a statute codifying the EmPOWER Maryland goals. In 2008, PE filed its comprehensive
plans for attempting to achieve those goals, asking the MDPSC to approve programs for residential, commercial, industrial, and
governmental customers, as well as a customer education program. The MDPSC ultimately approved the programs in August 2009
after certain modifications had been made as required by the MDPSC, and approved cost recovery for the programs in October
2009. Expenditures were estimated to be approximately $101 million for the PE programs for the period of 2009 to 2015 and would
be recovered over that six year period. Meanwhile, after extensive meetings with the MDPSC Staff and other stakeholders, PE's
plans for additional and improved programs for the period 2012-2014 were filed on August 31, 2011. The MDPSC held hearings
on PE's and the other utilities' plans in October 2011, and on December 22, 2011, issued an order approving Potomac Edison's
plan with various modifications and follow-up assignments. On January 23, 2012, PE filed a Request for Rehearing because
additional facts not considered by the MDPSC demonstrate, among other things, that conservation voltage reduction program
expenditures should be accorded cost recovery through the EmPOWER surcharge, as has been provided for all other EmPOWER
programs as opposed to recovery of those expenditures being addressed in a future base rate case as the MDPSC found in its
order.