Allegheny Power 2013 Annual Report Download - page 146

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FirstEnergy, submitted filings to FERC setting forth the cost allocation method for projects that cross the borders between: (1) the
PJM region and the NYISO region and; (2) the PJM region and the FERC-jurisdictional members of the SERTP region. These filings
propose to allocate the cost of these interregional transmission projects based on the costs of projects that otherwise would have
been constructed separately in each region. On the same date, also in response to Order No. 1000, the PJM transmission owners,
including FirstEnergy, also submitted to FERC a filing stating that the cost allocation provisions for interregional transmission projects
provided in the Joint Operating Agreement between PJM and MISO comply with the requirements of Order No. 1000. On December
30, 2013, FERC conditionally accepted the PJM/SERTP cross-border project cost allocation filing, subject to refund and future
orders in PJM's and SERTP's related Order No. 1000 interregional compliance proceedings. The PJM/NYISO and PJM/MISO cross-
border project cost allocation filings remain pending before FERC. On January 16, 2014, FERC issued an order regarding the
effective date of PJM's separate Order No. 1000 compliance filing, noting that it would address the merits of the comments on and
protests to that filing and related compliance filings in a future order.
Numerous parties, including ATSI, FES, TrAIL, OE, CEI, TE, Penn, JCP&L, ME, MP, PN, WP and PE, have sought judicial review
of Order No. 1000 before the U.S. Court of Appeals for the D.C. Circuit. Briefing was completed in December 2013 and oral argument
is scheduled for March 20, 2014.
The outcome of these proceedings and their impact, if any, on FirstEnergy cannot be predicted at this time.
RTO Realignment
On June 1, 2011, ATSI and the ATSI zone transferred from MISO to PJM. The move was performed as planned with no known
operational or reliability issues for ATSI or for the wholesale transmission customers in the ATSI zone. While many of the matters
involved with the move have been resolved, FERC denied recovery by means of ATSI's transmission rate for certain charges that
collectively can be described as "exit fees" and certain other transmission cost allocation charges totaling approximately $78.8
million until such time as ATSI submits a cost/benefit analysis that demonstrates net benefits to customers from the move. On
December 21, 2012, ATSI and other parties filed a proposed settlement agreement with FERC to resolve the exit fee and transmission
cost allocation issues. However, FERC subsequently rejected that settlement stating that its action is without prejudice to ATSI
submitting a cost/benefit analysis demonstrating that the benefits of the RTO realignment decisions outweigh the exit fee and
transmission cost allocation charges. On October 21, 2013, FirstEnergy filed a request for rehearing of FERC's order.
Separately, the question of ATSI's responsibility of certain costs for the “Michigan Thumb” transmission project continues to be
disputed. Potential responsibility arises under the MISO MVP tariff, which has been litigated in complex proceedings in front of
FERC and certain U.S. appellate courts. The MISO and its allied parties assert that the benefits to the ATSI zone for the Michigan
Thumb project are roughly commensurate with the costs that MISO desires to charge to the ATSI zone, estimated to be as much
as $16 million per year. ATSI has submitted evidence that the Michigan Thumb project provides no electric benefits to the ATSI
zone and, on that basis, opposes the MISO’s efforts to impose these costs to the ATSI zone loads. The MISO and its allied parties
also assert that certain language in the MISO Transmission Owners Agreement requires ATSI to pay these charges. In the event
of a final non-appealable order that rules that ATSI must pay these charges, ATSI will seek recovery of these charges through its
formula rate. While FERC proceedings regarding whether the MISO can charge ATSI for MVP costs remain pending, on February
24, 2014, the U.S. Supreme Court declined to hear appeals filed by FirstEnergy and other parties of the Seventh Circuit's June
2013 decision upholding FERC's acceptance of the MISO's generic MVP cost allocation proposal.
In the May 31, 2011 order, FERC ruled that the costs for certain "legacy RTEP" transmission projects in PJM could be charged to
transmission customers in the ATSI zone. ATSI sought rehearing of the question of whether the ATSI zone should pay these legacy
RTEP charges and, on September 20, 2012, FERC denied ATSI's request for rehearing. ATSI subsequently filed a petition for review
with the U.S. Court of Appeals for the D.C. Circuit. The case thereafter was briefed and oral arguments took place on December
11, 2013. A decision currently is expected in the second quarter of 2014.
The outcome of those proceedings that address the remaining open issues related to ATSI's move into PJM cannot be predicted
at this time.
California Claims Matters
In October 2006, several California governmental and utility parties presented AE Supply with a settlement proposal to resolve
alleged overcharges for power sales by AE Supply to the California Energy Resource Scheduling division of the CDWR during
2001. The settlement proposal claims that CDWR is owed approximately $190 million for these alleged overcharges. This proposal
was made in the context of mediation efforts by FERC and the U.S. Court of Appeals for the Ninth Circuit in several pending
proceedings to resolve all outstanding refund and other claims, including claims of alleged price manipulation in the California
energy markets, during 2000 and 2001. The Ninth Circuit had previously remanded one of those proceedings to FERC, which
dismissed the claims of the California Parties in May 2011, and affirmed the dismissal in June 2012. On June 20, 2012, the California
Parties appealed FERC's decision back to the Ninth Circuit. Briefing was completed before the Ninth Circuit on October 23, 2013.
The timing of further action by the Ninth Circuit is unknown.
In another proceeding, in June 2009, the California Attorney General, on behalf of certain California parties, filed another complaint
with FERC against various sellers, including AE Supply, again seeking refunds for transactions in the California energy markets