Allegheny Power 2013 Annual Report Download - page 66

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On October 29, 2013, ME and PN filed a Notice of Appeal of the U.S. District Court’s decision to dismiss the complaint with the
United States Court of Appeals for the Third Circuit. On December 30, 2013, ME and PN filed a brief with the Third Circuit that
explained why it was legal error for the U.S. District Court to dismiss the complaint. The PPUC filed its brief on February 3, 2014,
and ME and PN filed a reply brief on February 21, 2014. Oral argument has been scheduled for April 9, 2014.
Pennsylvania adopted Act 129 in 2008 to address issues such as: energy efficiency and peak load reduction; generation procurement;
time-of-use rates; smart meters; and alternative energy. Among other things, Act 129 required utilities to file with the PPUC an
energy efficiency and peak load reduction plan (EE&C Plan) by July 1, 2009, setting forth the utilities' plans to reduce energy
consumption by a minimum of 1% and 3% by May 31, 2011 and May 31, 2013, respectively, and to reduce peak demand by a
minimum of 4.5% by May 31, 2013. Act 129 provides for potentially significant financial penalties to be assessed on utilities that
fail to achieve the required reductions in consumption and peak demand. The Pennsylvania Companies submitted a report on
November 15, 2011, in which they reported on their compliance with statutory May 31, 2011, energy efficiency benchmarks. ME,
PN and Penn achieved the 2011 benchmarks; however WP did not. WP could be subject to a statutory penalty of between $1 and
$20 million. On July 15, 2013, the Pennsylvania Companies filed their preliminary energy efficiency and demand reduction results
for the period ending May 31, 2013, indicating that all Pennsylvania Companies are expected to meet their statutory obligations.
On November 15, 2013, the Pennsylvania Companies submitted their energy efficiency and peak demand reduction report for the
period ending May 31, 2013, in which they indicated that all of the Pennsylvania Companies met their statutory requirements.
Pursuant to Act 129, the PPUC was charged with reviewing the cost effectiveness of energy efficiency and peak demand reduction
programs. The PPUC found the energy efficiency programs to be cost effective and in an Order entered on August 3, 2012, the
PPUC directed all of the electric utilities in Pennsylvania to submit by November 15, 2012, a Phase II EE&C Plan that would be in
effect for the period June 1, 2013 through May 31, 2016. The PPUC has deferred ruling on the need to create peak demand reduction
targets until it receives more information from the EE&C statewide evaluator. Based upon information received, the PPUC has not
included a peak demand reduction requirement in the Phase II plans. The Pennsylvania Companies filed their Phase II plans and
supporting testimony in November 2012. On January 16, 2013, the Pennsylvania Companies reached a settlement with all but one
party on all but one issue. The settlement provides for the Pennsylvania Companies to meet with interested parties to discuss ways
to expand upon the EE&C programs and incorporate any such enhancements after the plans are approved, provided that these
enhancements will not jeopardize the Pennsylvania Companies' compliance with their required targets or exceed the statutory
spending caps. On February 6, 2013, the Pennsylvania Companies filed revised Phase II EE&C Plans to conform the plans to the
terms of the settlement. Total costs of these plans are expected to be approximately $234 million. All such costs are expected to
be recoverable through the Pennsylvania Companies reconcilable Phase II EE&C Plan C riders. The remaining issue, raised by a
natural gas company, involved the recommendation that the Pennsylvania Companies include in their plans incentives for natural
gas space and water heating appliances. On March 14, 2013, the PPUC approved the 2013-2016 EE&C plans of the Pennsylvania
Companies, adopting the settlement, and rejecting the natural gas companies recommendations.
In addition, Act 129 required utilities to file a SMIP with the PPUC. On December 31, 2012, the Pennsylvania Companies filed their
Smart Meter Deployment Plan. The Deployment Plan requests deployment of approximately 98.5% of the smart meters to be
installed over the period 2013 to 2019, and the remaining meters in difficult to reach locations to be installed by 2022, with an
estimated life cycle cost of about $1.25 billion. Such costs are expected to be recovered through the Pennsylvania Companies'
PPUC-approved Riders SMT-C. Evidentiary hearings were held and briefs were submitted by the Pennsylvania Companies and
the Office of Consumer Advocate. On November 8, 2013, the ALJ issued a Recommended Decision recommending that the
Pennsylvania Companies' Deployment Plan be adopted with certain modifications, including, among other things, that the
Pennsylvania Companies perform further benchmarking analyses on their costs and hire an independent consultant to perform
further analyses on potential savings. On December 2, 2013, the Pennsylvania Companies submitted exceptions in which they
challenged, among other things, certain recommendations in the ALJ’s decision, and requested approval of a modification to the
deployment schedule so as to allow the entire Penn smart meter system (170,000 meters) to be built by the end of 2015, instead
of the original proposed installation of 60,000 meters by the end of 2016. The Office of Consumer Advocate took exception to one
issue and both parties filed replies to exceptions on December 12, 2013. The case is now before the PPUC for consideration.
A decision is expected during the first quarter of 2014.
In the PPUC Order approving the FirstEnergy and Allegheny merger, the PPUC announced that a separate statewide investigation
into Pennsylvania's retail electricity market would be conducted with the goal of making recommendations for improvements to
ensure that a properly functioning and workable competitive retail electricity market exists in the state. On April 29, 2011, the PPUC
entered an Order initiating the investigation and requesting comments from interested parties on eleven directed questions
concerning retail markets in Pennsylvania to investigate both intermediate and long term plans that could be adopted to further
foster the competitive markets, and to explore the future of default service in Pennsylvania following the expiration of the upcoming
DSPs on May 31, 2015. A final order was issued on February 15, 2013, providing recommendations on the entities to provide default
service, the products to be offered, billing options, customer education, and licensing fees and assessments, among other items.
Subsequently, the PPUC established five workgroups and one comment proceeding in order to seek resolution of certain matters
and to clarify certain obligations that arose from that order.
The PPUC issued a Proposed Rulemaking Order on August 25, 2011, which proposed a number of substantial modifications to the
current Code of Conduct regulations that were promulgated to provide competitive safeguards to the competitive retail electricity
market in Pennsylvania. The proposed changes include, but are not limited to: an EGS may not have the same or substantially
similar name as the EDC or its corporate parent; EDCs and EGSs would not be permitted to share office space and would need to