Allegheny Power 2013 Annual Report Download - page 23

8
JCP&L Rate Filing Update
On September 7, 2011, the Division of Rate Counsel filed a Petition with the NJBPU asserting that it has reason to believe that
JCP&L is earning an unreasonable return on its New Jersey jurisdictional rate base. The Division of Rate Counsel requested that
the NJBPU order JCP&L to file a base rate case petition so that the NJBPU may determine whether JCP&L's current rates for
electric service are just and reasonable. JCP&L's rate case petition was filed on November 30, 2012. JCP&L is requesting an
increase in base rate revenues of approximately $20.6 million. Hearings in the rate case have concluded. Initial briefs were filed
on January 27, 2014. In the initial briefs, the Division of Rate Counsel and the Staff of the NJBPU recommended current rate
revenues be decreased by $214.9 million and $207.4 million, respectively. Such amounts do not address the revenue requirements
associated with the major storm events of 2011 and 2012. Reply briefs were filed on February 24, 2014.
On February 24, 2014, a Stipulation was filed with the NJBPU by JCP&L, the Division of Rate Counsel and NJBPU Staff which will
allow recovery of $736 million of JCP&L’s $744 million of costs related to the significant weather events of 2011 and 2012. As a
result, FirstEnergy recorded a regulatory asset impairment charge of approximately $8 million (pre-tax) as of December 31, 2013,
included in Amortization of regulatory assets, net within the Consolidated Statements of Income. The agreement, upon which no
other party took a position to oppose or support, is now pending before the NJBPU. Recovery of 2011 storm costs will be addressed
in the pending base rate case; recovery of 2012 storm costs will be determined by the NJBPU.
Financial Matters
In early 2013, FirstEnergy announced a financial plan with the intention of strengthening the balance sheets of its subsidiaries.
Completion of the plan was also expected to significantly improve credit metrics at the Competitive Energy Services segment and
included the net transfer of 1,476 MW of the Harrison and Pleasants power plants between AE Supply and MP, and the proposed
sale of up to 1,240 MW of unregulated hydro assets. In line with these efforts, FirstEnergy and its subsidiaries executed its 2013
financial plan as described below.
FE
On March 5, 2013, FE issued in aggregate $1.5 billion of senior unsecured notes in two series: $650 million of 2.75% senior notes
due March 15, 2018 and $850 million of 4.25% senior notes due March 15, 2023. The stated interest rates are subject to adjustments
based upon changes in the credit ratings of FirstEnergy but will not decrease below the issued rates. The proceeds were used to
repay short-term borrowings and to invest in the money pool for FES and AE Supply's use in funding a portion of their tender offers.
During the second quarter of 2013, FE also completed a $1.5 billion equity contribution to FES.
On September 25, 2013, FE filed a registration statement with the SEC to register 4 million shares of common stock to be issued
to registered shareholders and its employees and the employees of its subsidiaries under its Stock Investment Plan. In addition,
during December 2013, FE began fulfilling certain share-based benefit plan obligations through the issuance of authorized but
unissued common stock.
During December of 2013, FE entered into an agreement to extend and amend its $150 million term loan agreement with a maturity
date of December 31, 2014. The maturity of the loan was extended to December 31, 2015 and the principal amount was increased
to $200 million.
Competitive Energy Services
On March 28, 2013, pursuant to tender offers launched in February 2013, FES and AE Supply repurchased $369 million and $294
million, respectively, of outstanding senior notes with interest rates ranging from 5.75% to 6.8%. FES and AE Supply paid $67
million and $43 million, respectively, in premiums to repurchase the tendered senior notes.
On April 15, 2013 FES redeemed $400 million of its 4.8% senior notes due 2015 and paid $31 million of premiums in connection
with the redemption.
On June 3, 2013, FG exercised a mandatory put option and repurchased approximately $235 million of PCRBs due 2023, which
FG is currently holding for remarketing subject to future market and other conditions.
On September 4, 2013, FESC, on behalf of FG, AE Supply and Green Valley Hydro LLC applied for authorization from FERC to
sell eleven hydroelectric power stations in Pennsylvania, Virginia and West Virginia to subsidiaries of Harbor Hydro, a subsidiary
of LS Power. The hydroelectric power stations involved have a total generating capacity of approximately 527 MW, which represents
less than 3 percent of FirstEnergy's competitive generation fleet output. An asset purchase agreement was entered into on August
23, and amended and restated as of September 4, 2013. On February 12, 2014, the sale of the hydroelectric power plants to LS
Power closed for approximately $395 million. In the first quarter of 2014, FirstEnergy expects to recognize a pre-tax gain of
approximately $145 million (FES - $177 million) related to the sale.
On November 15, 2013, AE Supply optionally redeemed $235 million of its 7.00% PCRBs due July 15, 2039 at 100% of the principal
amount in connection with the deactivation of operations at Hatfield's Ferry.