Allegheny Power 2013 Annual Report Download - page 147

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during 2000 and 2001. The above-noted transactions with CDWR are the basis for including AE Supply in this complaint. AE Supply
filed a motion to dismiss, which was granted by FERC in May 2011, and affirmed by FERC in June 2012. The California Attorney
General has appealed FERC's dismissal of its complaint to the Ninth Circuit, which has consolidated the case with other pending
appeals related to California refund claims, and stayed the proceedings pending further order.
FirstEnergy cannot predict the outcome of either of the above matters or estimate the possible loss or range of loss.
PATH Transmission Project
The PATH project was proposed to be comprised of a 765 kV transmission line from West Virginia through Virginia and into Maryland,
modifications to an existing substation in Putnam County, West Virginia, and the construction of new substations in Hardy County,
West Virginia and Frederick County, Maryland. PJM initially authorized construction of the PATH project in June 2007. On August
24, 2012, the PJM Board of Managers canceled the PATH project, which it had suspended in February 2011. As a result, approximately
$62 million and approximately $59 million in costs incurred by PATH-Allegheny and PATH-WV, respectively, were reclassified from
net property, plant and equipment to a regulatory asset for future recovery. On September 28, 2012, those companies requested
authorization from FERC to recover the costs with a proposed return on equity of 10.9% (10.4% base plus 0.5% RTO membership)
from PJM customers over the next five years. Several parties protested the request. On November 30, 2012, FERC issued an order
denying the 0.5% return on equity adder for RTO membership and allowing the tariff changes enabling recovery of these costs to
become effective on December 1, 2012, subject to settlement judge procedures and hearing if the parties do not agree to a settlement.
The issues subject to settlement include the prudence of the costs, the base return on equity and the period of recovery. PATH-
Allegheny and PATH-WV are currently engaged in settlement discussions with the other parties. Depending on the outcome of a
possible settlement or hearing, if settlement is not achieved, PATH-Allegheny and PATH-WV may be required to refund certain
amounts that have been collected under their formula rate.
PATH-Allegheny and PATH-WV have requested rehearing of FERC's denial of the 0.5% return on equity adder for RTO membership;
that request for rehearing remains pending before FERC. In addition, FERC has consolidated for settlement judge procedures and
hearing purposes three formal challenges to the PATH formula rate annual updates submitted to FERC in June 2010, June 2011
and June 2012, with the September 28, 2012 filing for recovery of costs associated with the cancellation of the PATH project.
Hydroelectric Asset Sale
On September 4, 2013, certain of FirstEnergy’s subsidiaries submitted filings with FERC for authorization to sell eleven hydroelectric
power plant projects to subsidiaries of Harbor Hydro Holdings, LLC (Harbor Hydro), a subsidiary of LS Power Equity Partners II,
LP (LS Power). The eleven hydroelectric projects are: the Seneca Pumped Storage Project, Allegheny Lock & Dam No. 5, Allegheny
Lock & Dam No. 6, the Lake Lynn Project, the Millville Hydro Project, the Dam No. 4 Project, the Dam No. 5 Project, and four
additional projects located in Shenandoah, Front Royal and Luray, Virginia. The eleven projects have a combined generating
capacity of approximately 527 MW. On February 12, 2014, the sale of the hydroelectric power plants to LS Power closed for
approximately $395 million. See Note 20, Discontinued Operations and Assets Held for Sale for additional information regarding
the assets sold.
MISO Capacity Portability
On June 11, 2012, FERC issued a Notice of Request for Comments regarding whether existing rules on transfer capability act as
barriers to the delivery of capacity between MISO and PJM. FERC is responding to suggestions from MISO and the MISO
stakeholders that PJM's rules regarding the criteria and qualifications for external generation capacity resources be changed to
ease participation by resources that are located in MISO in PJM's RPM capacity auctions. FirstEnergy submitted comments and
reply comments in August 2012. In the fall of 2012, FirstEnergy participated in certain stakeholder meetings to review various
proposals advanced by MISO. Although none of MISO's proposals attracted significant stakeholder support, in January 2013, MISO
filed a pleading with FERC that renewed many of the arguments advanced in prior MISO filings and asked FERC to take expedited
action to address MISO's allegations. FirstEnergy and other parties subsequently submitted filings arguing that MISO's concerns
largely are without foundation and suggesting that FERC order that the remaining concerns be addressed in the existing stakeholder
process that is described in the PJM/MISO Joint Operating Agreement. On April 2, 2013, FERC issued an order directing MISO
and PJM to make presentations to FERC regarding ongoing regional efforts to address whether barriers to transfer capability exist
between the MISO and PJM regions and the actions the FERC should take to address any such barriers. The RTOs presented
their respective positions to FERC on June 20, 2013 and provided additional information regarding their stakeholder prioritization
survey, in response to a FERC request on June 27, 2013. On September 26, 2013, the RTOs jointly submitted an informational
filing providing a description of and schedule for their Joint and Common Market initiatives. On December 19, 2013, FERC issued
an order directing that FERC staff are to attend the “joint and common market” stakeholder meetings for the purpose of monitoring
progress on the initiatives described in the September 26, 2013 joint informational filing and establishing a new proceeding to reflect
the broadened scope of issues contemplated by that filing and the RTOs' joint and common market initiatives. FERC has not acted
on the presentations, and the RTOs and affected parties are working to address the MISO's proposal in stakeholder proceedings.
Changes to the criteria and qualifications for participation in the PJM RPM capacity auctions could have a significant impact on the
outcome of those auctions, including a negative impact on the prices at which those auctions would clear.