Allegheny Power 2014 Annual Report Download - page 127

112
The following table summarizes the changes to the ARO balances during 2014 and 2013:
ARO Reconciliation FirstEnergy FES
(In millions)
Balance, January 1, 2013 $ 1,599 $ 965
Liabilities settled (18) (18)
Accretion 115 71
Revisions in estimated cash flows (18) (3)
Balance, December 31, 2013 $ 1,678 $ 1,015
Liabilities settled (9) (7)
Accretion 113 66
Revisions in estimated cash flows (395) (233)
Balance, December 31, 2014 $ 1,387 $ 841
During 2013, revisions to estimated cash flows as a result of increased cost estimates for the closure of LBR increased the associated
ARO liability of FES by $163 million. The revised cost estimates were the result of a Closure Plan submitted to the PA DEP by FG
on March 28, 2013, which provides for placing a final cap over LBR, and a response to a technical deficiency letter issued by the
PA DEP on October 3, 2013. See Note 15, Commitments, Guarantees, and Contingencies for additional information related to the
closure of LBR.
During the third quarter of 2013, studies were completed to update the estimated cost of asbestos remediation for FirstEnergy and
FES. The cost studies resulted in a revision to the estimated cash flows associated with the ARO liabilities of FirstEnergy and FES
and increased the liability by $12 million and $5 million, respectively.
During the fourth quarter of 2013, revisions to estimated nuclear decommissioning cash flows associated with the ARO liability of
FirstEnergy and FES decreased the liability by $193 million and $171 million, respectively. The revision in estimates for the ARO
balances is the result of a decommissioning study that was completed by a third-party in connection with Davis-Besse’s license
renewal that was submitted to the NRC in February 2014. The most significant revision from this study was related to accelerating
the expected date when the DOE would begin to accept spent fuel, to be more in line with the industry assumptions. Additionally,
FirstEnergy also updated and revised its estimates for Perry and Beaver Valley Units 1 and 2, in a consistent manner.
During the fourth quarter of 2014, based on studies completed by a third-party to reassess the estimated costs of decommissioning
certain nuclear generating facilities, FE decreased its ARO by $395 million ($233 million at FES) of which $133 million was credited
against a regulatory asset associated with nuclear decommissioning and spent fuel disposal costs for TMI-2. The decrease in the
ARO primarily resulted from an extension in the number of years in which decommissioning activities are estimated to occur at
Davis-Besse, Perry, TMI-2 and Beaver Valley Units 1 and 2.
14. REGULATORY MATTERS
STATE REGULATION
Each of the Utilities' retail rates, conditions of service, issuance of securities and other matters are subject to regulation in the states
in which it operates - in Maryland by the MDPSC, in Ohio by the PUCO, in New Jersey by the NJBPU, in Pennsylvania by the
PPUC, in West Virginia by the WVPSC and in New York by the NYPSC. The transmission operations of PE in Virginia are subject
to certain regulations of the VSCC. In addition, under Ohio law, municipalities may regulate rates of a public utility, subject to appeal
to the PUCO if not acceptable to the utility.
As competitive retail electric suppliers serving retail customers primarily in Ohio, Pennsylvania, Illinois, Michigan, New Jersey and
Maryland, FES and AE Supply are subject to state laws applicable to competitive electric suppliers in those states, including affiliate
codes of conduct that apply to FES, AE Supply and their public utility affiliates. In addition, if any of the FirstEnergy affiliates were
to engage in the construction of significant new transmission or generation facilities, depending on the state, they may be required
to obtain state regulatory authorization to site, construct and operate the new transmission or generation facility.
MARYLAND
PE provides SOS pursuant to a combination of settlement agreements, MDPSC orders and regulations, and statutory provisions.
SOS supply is competitively procured in the form of rolling contracts of varying lengths through periodic auctions that are overseen
by the MDPSC and a third party monitor. Although settlements with respect to residential SOS for PE customers expired on December
31, 2012, by statute, service continues in the same manner unless changed by order of the MDPSC. The settlement provisions
relating to non-residential SOS have also expired; however, by MDPSC order, the terms of service remain in place unless PE
requests or the MDPSC orders a change. PE recovers its costs plus a return for providing SOS.