Allegheny Power 2014 Annual Report Download - page 128

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The Maryland legislature adopted a statute in 2008 codifying the EmPOWER Maryland goals to reduce electric consumption by
10% and reduce electricity demand by 15%, in each case by 2015. PE's initial plan submitted in compliance with the statute was
approved in 2009, at which time expenditures were estimated to be approximately $101 million for the PE programs for the entire
period of 2009-2015. PE's third plan, covering the three-year period 2015-2017, was approved by the MDPSC on December 23,
2014. The projected costs of the 2015-2017 plan are approximately $64 million for that three year period. PE continues to recover
program costs subject to a five-year amortization. Maryland law only allows for the utility to recover lost distribution revenue
attributable to energy efficiency or demand reduction programs through a base rate case proceeding, and to date such recovery
has not been sought or obtained by PE.
The MDPSC adopted rules, effective May 28, 2012, that set utility-specific SAIDI and SAIFI targets for 2012-2015; prescribed
detailed tree-trimming requirements, outage restoration and downed wire response deadlines; imposed other reliability and customer
satisfaction requirements; and established annual reporting requirements. The MDPSC is required to assess each utility's compliance
with the new rules, and may assess penalties of up to $25,000 per day, per violation. The MDPSC issued orders accepting PE's
reports on compliance under the new rules on September 3, 2013 and August 27, 2014.
On February 27, 2013, the MDPSC issued an order (the February 27 Order) requiring the Maryland electric utilities to submit
analyses, relating to the costs and benefits of making further system and staffing enhancements in order to attempt to reduce storm
outage durations. The order further required the Staff of the MDPSC to report on possible performance-based rate structures and
to propose additional rules relating to feeder performance standards, outage communication and reporting, and sharing of special
needs customer information. PE's final filing on September 3, 2013, discussed the steps needed to harden the utility's system in
order to attempt to achieve various levels of storm response speed described in the February 27 Order, and projected that it would
require approximately $2.7 billion in infrastructure investments over 15 years to attempt to achieve the quickest level of response
for the largest storm projected in the February 27 Order. On July 1, 2014, the Staff of the MDPSC issued a set of reports that
recommended the imposition of extensive additional requirements in the areas of storm response, feeder performance, estimates
of restoration times, and regulatory reporting. The Staff also recommended the imposition of penalties, including customer rebates,
for a utility's failure or inability to comply with the escalating standards of storm restoration speed proposed by the Staff. In addition,
the Staff proposed that the utilities be required to develop and implement system hardening plans, up to a rate impact cap on cost.
The MDPSC conducted a hearing September 15-18, 2014, to consider certain of these matters, and has not yet scheduled further
proceedings on any of the matters.
NEW JERSEY
JCP&L currently provides BGS for retail customers who do not choose a third party EGS and for customers of third party EGSs
that fail to provide the contracted service. The supply for BGS, which is comprised of two components, is provided through contracts
procured through separate, annually held descending clock auctions, the results of which are approved by the NJBPU. One BGS
component and auction, reflecting hourly real time energy prices, is available for larger commercial and industrial customers. The
other BGS component and auction, providing a fixed price service, is intended for smaller commercial and residential customers.
All New Jersey EDCs participate in this competitive BGS procurement process and recover BGS costs directly from customers as
a charge separate from base rates.
In an order issued July 31, 2012, the NJBPU ordered JCP&L to file a base rate case using a historical 2011 test year. The rate case
petition was filed on November 30, 2012 by JCP&L requesting approval to increase revenues by approximately $31 million, which
included the recovery of 2011 storm restoration costs but excluded approximately $603 million of costs incurred in 2012 associated
with the impact of Hurricane Sandy. In the initial briefs of the parties, the Division of Rate Counsel recommended that base rate
revenues be reduced by $214.9 million while the NJBPU Staff recommended a $207.4 million reduction (such amounts do not
address the revenue requirements associated with the major storm events of 2011 and 2012). On May 5, 2014, JCP&L submitted
updated schedules to reflect the result of the generic storm cost proceeding, discussed below, to revise the debt rate to 5.93%, and
to request that base rate revenues be increased by $9.1 million, including the recovery of 2011 storm costs. The record in the case
was closed as of June 30, 2014. The ALJ provided his initial Decision on January 8, 2015, which recommended an annual revenue
reduction of $107.5 million and did not include the recovery of 2012 storm costs or any CTA. On February 11, 2015, the NJBPU
approved a 45-day extension to render a final decision.
On January 23, 2013, the NJBPU opened a generic proceeding to review its policies with respect to the use of a CTA in base rate
cases. The NJBPU and its Staff solicited, and were provided, input from interested stakeholders, including utilities and the Division
of Rate Counsel. On June 18, 2014, the NJBPU Staff proposed to amend current CTA policy by: 1) calculating savings using a 5
year look back from the beginning of the test year; 2) allocating savings with 75% retained by the company and 25% allocated to
rate payers; and 3) excluding transmission assets of electric distribution companies in the savings calculation. JCP&L and other
stakeholders filed written comments on the Staff proposal. In its Order issued October 22, 2014, the NJBPU stated it would continue
to apply its current CTA policy in base rate cases, subject to incorporating the staff proposed modifications (as discussed above).
For pending base rate cases in which the record had closed, such as JCP&L’s, the NJBPU would, following an initial decision of
the ALJ, reopen the record for the limited purpose of adding a CTA calculation reflecting the modified policy and allow parties the
opportunity to comment. FirstEnergy expects the application of the modified policy in the pending JCP&L base rate case to reduce
annual revenues by approximately $5 million. On November 5, 2014, the Division of Rate Counsel appealed the NJBPU Order to
the New Jersey Superior Court. JCP&L has filed to participate as a respondent in that proceeding.