Allegheny Power 2013 Annual Report Download - page 71

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PJM to convene stakeholder proceedings for the purpose of determining the root causes of the FTR underfunding. FERC went on
to note that its dismissal of the complaint was without prejudice to FES and AE Supply or any other affected entity filing a complaint
if the stakeholder proceedings proved unavailing. FES and AE Supply sought rehearing of FERC's order and, on July 19, 2012,
FERC denied rehearing. In April, 2012, PJM issued a report on FTR underfunding. However, the PJM stakeholder process proved
unavailing as the stakeholders were not willing to change the tariff to eliminate FTR underfunding. Accordingly, on February 15,
2013, FES and AE Supply refiled their complaint with FERC for the purpose of changing the PJM tariff to eliminate FTR underfunding.
Various parties filed responsive pleadings, including PJM. On June 5, 2013, FERC issued its order denying the new complaint. On
July 5, 2013, FirstEnergy filed a request for rehearing of FERC's order. FES and AE Supply's request for rehearing, and all subsequent
filings in the docket, are pending before FERC.
PJM RPM Tariff Amendments
In November 2013, PJM began to submit a series of amendments to its RPM capacity tariff in order to address certain problems
that have been observed in recent auctions. These problems can be grouped into three categories: (i) Demand Response (DR);
(ii) imports; and (iii) modeling of transmission upgrades in calculating geographic clearing prices. The purpose of PJM’s tariff
amendments is to ensure that resources that clear in the RPM auctions are available and able to satisfy all obligations under the
PJM tariffs. In each of the affected dockets, FirstEnergy submitted comments as part of a coalition of utilities (generally including
an affiliate of AEP, Duke and Dayton). The FirstEnergy/coalition position was that all of the PJM proposals should be accepted as
proposed, and that the FERC should order PJM to take additional steps that should have the effect of eliminating additional distortions
and flaws in the RPM market. FERC issued deficiency letters requesting additional information from PJM regarding the imports
and modeling filings, and on January 30, 2014 accepted the DR filing as proposed. On February 18 and 21, 2014, respectively,
PJM filed its responses to FERC's deficiency letters regarding the modeling and imports filings. PJM's compliance filings and all
other filings in the dockets are pending before FERC.
Market-Based Rate Authority, Triennial Update
OE, CEI, TE, Penn, JCP&L, ME, PN, MP, WP, PE, AE Supply, FES, FG, NG, FirstEnergy Generation Mansfield Unit 1 Corp.,
Buchanan Generation, LLC, and Green Valley Hydro, LLC each hold authority from FERC to sell electricity at market-based rates.
One condition for retaining this authority is that every three years each entity must file an update with the FERC that demonstrates
that each entity continues to meet FERC’s requirements for holding market-based rate authority. On December 20, 2013, FESC
submitted to FERC the most recent triennial market power analysis filing for each market-based rate holder for the current cycle
of this filing requirement. That filing is pending before FERC.
ENVIRONMENTAL MATTERS
Various federal, state and local authorities regulate FirstEnergy with regard to air and water quality and other environmental matters.
Compliance with environmental regulations could have a material adverse effect on FirstEnergy's earnings and competitive position
to the extent that FirstEnergy competes with companies that are not subject to such regulations and, therefore, do not bear the risk
of costs associated with compliance, or failure to comply, with such regulations.
CAA Compliance
FirstEnergy is required to meet federally-approved SO2 and NOx emissions regulations under the CAA. FirstEnergy complies with
SO2 and NOx reduction requirements under the CAA and SIP(s) by burning lower-sulfur fuel, utilizing combustion controls and post-
combustion controls, generating more electricity from lower or non-emitting plants and/or using emission allowances.
In July 2008, three complaints representing multiple plaintiffs were filed against FG in the U.S. District Court for the Western District
of Pennsylvania seeking damages based on air emissions from the coal-fired Bruce Mansfield Plant. Two of these complaints also
seek to enjoin the Bruce Mansfield Plant from operating except in a “safe, responsible, prudent and proper manner.” One complaint
was filed on behalf of twenty-one individuals and the other is a class action complaint seeking certification as a class with the eight
named plaintiffs as the class representatives. FG believes the claims are without merit and intends to vigorously defend itself against
the allegations made in these complaints, but, at this time, is unable to predict the outcome of this matter or estimate the possible
loss or range of loss.
In January 2009, the EPA issued an NOV to GenOn Energy, Inc. alleging NSR violations at the Keystone, Portland and Shawville
coal-fired plants based on “modifications” dating back to the mid-1980s. JCP&L, as the former owner of 16.67% of the Keystone
Station, ME, as a former owner and operator of the Portland Station, and PN as former owner and operator of the Shawville Station,
are unable to predict the outcome of this matter or estimate the possible loss or range of loss.
In January 2011, the U.S. DOJ filed a complaint against PN in the U.S. District Court for the Western District of Pennsylvania seeking
injunctive relief against PN based on alleged “modifications” at the coal-fired Homer City generating plant during 1991 to 1994
without pre-construction NSR permitting in violation of the CAA's PSD and Title V permitting programs. The complaint was also
filed against the former co-owner, NYSEG, and various current owners of Homer City, including EME Homer City Generation L.P.
and affiliated companies, including Edison International. In addition, the Commonwealth of Pennsylvania and the states of New
Jersey and New York intervened and filed separate complaints regarding Homer City seeking injunctive relief and civil penalties.