Allegheny Power 2013 Annual Report Download - page 64

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OHIO
The Ohio Companies primarily operate under an ESP, which expires on May 31, 2014. The material terms of the ESP include:
• Generation supplied through a CBP;
• A load cap of no less than 80%, so that no single supplier is awarded more than 80% of the tranches, which also applies
to tranches assigned post-auction;
• A 6% generation discount to certain low income customers provided by the Ohio Companies through a bilateral wholesale
contract with FES (FES is one of the wholesale suppliers to the Ohio Companies);
• No increase in base distribution rates through May 31, 2014; and
• A new distribution rider, Rider DCR, to recover a return of, and on, capital investments in the delivery system.
The Ohio Companies also agreed not to recover from retail customers certain costs related to transmission cost allocations by PJM
as a result of ATSI's integration into PJM for the longer of the five-year period from June 1, 2011 through May 31, 2016 or when
the amount of costs avoided by customers for certain types of products totals $360 million, subject to the outcome of certain PJM
proceedings. The Ohio Companies also agreed to establish a $12 million fund to assist low income customers over the term of the
ESP and agreed to additional matters related to energy efficiency and alternative energy requirements.
On April 13, 2012, the Ohio Companies filed an application with the PUCO to essentially extend the terms of their ESP for two
years. The ESP 3 Application was approved by the PUCO on July 18, 2012. Several parties timely filed applications for rehearing.
The PUCO issued an Entry on Rehearing on January 30, 2013 denying all applications for rehearing. Notices of appeal to the
Supreme Court of Ohio were filed by two parties in the case, Northeast Ohio Public Energy Council and the ELPC. While briefing
has been completed, the matter has not yet been scheduled for oral argument.
As approved, the ESP 3 plan continues certain provisions from the current ESP including:
• Continuing the current base distribution rate freeze through May 31, 2016;
• Continuing to provide economic development and assistance to low-income customers for the two-year plan period at
levels established in the existing ESP;
• A 6% generation rate discount to certain low income customers provided by the Ohio Companies through a bilateral
wholesale contract with FES (FES is one of the wholesale suppliers to the Ohio Companies);
• Continuing to provide power to non-shopping customers at a market-based price set through an auction process; and
• Continuing Rider DCR that allows continued investment in the distribution system for the benefit of customers.
As approved, the ESP 3 plan provides additional provisions, including:
• Securing generation supply for a longer period of time by conducting an auction for a three-year period rather than a one-
year period, in each of October 2012 and January 2013, to mitigate any potential price spikes for the Ohio Companies'
utility customers who do not switch to a competitive generation supplier; and
• Extending the recovery period for costs associated with purchasing RECs mandated by SB221 through the end of the
new ESP 3 period. This is expected to initially reduce the monthly renewable energy charge for all non-shopping utility
customers of the Ohio Companies by spreading out the costs over the entire ESP period.
Under SB221, the Ohio Companies are required to implement energy efficiency programs that achieve a total annual energy savings
equivalent of approximately 1,211 GWHs in 2012 (an increase of 416,000 MWHs over 2011 levels), 1,726 GWHs in 2013, 2,306
GWHs in 2014 and 2,903 GWHs for each year thereafter through 2025. The Ohio Companies were also required to reduce peak
demand in 2009 by 1%, with an additional 0.75% reduction each year thereafter through 2018. On May 15, 2013, the Ohio Companies
filed their 2012 Status Update Report in which they indicated compliance with 2012 statutory energy efficiency and peak demand
reduction benchmarks.
In accordance with PUCO Rules and a PUCO directive, on July 31, 2012 the Ohio Companies filed their three-year portfolio plan
for the period January 1, 2013 through December 31, 2015. Estimated costs for the three Ohio Companies' plans total approximately
$250 million over the three-year period, which is expected to be recovered in rates to the extent approved by the PUCO. Hearings
were held with the PUCO in October 2012. On March 20, 2013, the PUCO approved the three-year portfolio plan for 2013-2015.
Applications for rehearing were filed by the Ohio Companies and several other parties on April 19, 2013. The Ohio Companies filed
their request for rehearing primarily to challenge the PUCO's decision to mandate that they offer planned energy efficiency resources
into PJM's base residual auction. On May 15, 2013, the PUCO granted the applications for rehearing for the sole purpose of further
consideration of the matter. On July 17, 2013, the PUCO denied the Ohio Companies' application for rehearing, in part, but authorized
the Ohio Companies to receive 20% of any revenues obtained from bidding energy efficiency and demand response reserves into
the PJM auction. The PUCO also confirmed that the Ohio Companies can recover PJM costs and applicable penalties associated
with PJM auctions, including the costs of purchasing replacement capacity from PJM incremental auctions, to the extent that such
costs or penalties are prudently incurred. On August 16, 2013, ELPC and OCC filed applications for rehearing under the basis that
the PUCO's authorization for the Ohio Companies to share in the PJM revenues was unlawful. The PUCO granted rehearing on
September 11, 2013 for the sole purpose of further consideration of the issue.
On September 16, 2013, the Ohio Companies filed with the Supreme Court of Ohio a notice of appeal of the PUCO's July 17, 2013
Entry on Rehearing related to energy efficiency, alternative energy, and long-term forecast rules stating that the rules issued by the
PUCO are inconsistent with and are not supported by statutory authority. On October 23, 2013, the PUCO filed a motion to dismiss