Allegheny Power 2014 Annual Report Download - page 130

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by 1%, with an additional 0.75% reduction each year thereafter through 2014, and retain the 2014 level for 2015 and 2016, and
then increase the benchmark by an additional 0.75% thereafter through 2020.
On March 20, 2013, the PUCO approved the three-year energy efficiency portfolio plans for 2013-2015, estimated to cost the Ohio
Companies approximately $250 million over the three-year period, which is expected to be recovered in rates. Applications for
rehearing were filed by the Ohio Companies and several other parties. 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 offering energy
efficiency and DR 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, which were granted for the sole purpose of further consideration of the issue. On September 24, 2014, the Ohio
Companies filed an amendment to their portfolio plan as contemplated by SB310, seeking to suspend certain programs for the
2015-2016 period in order to better align the plan with the new benchmarks under SB310. On November 20, 2014, the PUCO
approved the Ohio Companies' amended portfolio plan. Several applications for rehearing were filed, and the PUCO granted those
applications for further consideration of the matters specified in those applications.
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
the appeal, which is still pending. The matter has not been scheduled for oral argument.
Ohio law requires electric utilities and electric service companies in Ohio to serve part of their load from renewable energy resources
measured by an annually increasing percentage amount through 2024, except 2015 and 2016 that remain at the 2014 level. The
Ohio Companies conducted RFPs in 2009, 2010 and 2011 to secure RECs to help meet these renewable energy requirements. In
September 2011, the PUCO opened a docket to review the Ohio Companies' alternative energy recovery rider through which the
Ohio Companies recover the costs of acquiring these RECs. The PUCO issued an Opinion and Order on August 7, 2013 approving
the Ohio Companies' acquisition process and their purchases of RECs to meet statutory mandates in all instances except for part
of the purchases arising from one auction and directing the Ohio Companies to credit non-shopping customers in the amount of
$43.4 million, plus interest, on the basis that the Ohio Companies did not prove such purchases were prudent. Based on the PUCO
ruling, a regulatory charge of approximately $51 million, including interest, was recorded in the fourth quarter of 2013. On December
24, 2013, following the denial of their application for rehearing, the Ohio Companies filed a notice of appeal and a motion for stay
of the PUCO's order with the Supreme Court of Ohio, which was granted. On February 18, 2014, the OCC and the ELPC also filed
appeals of the PUCO's order. The Ohio Companies filed their merit brief with the Supreme Court of Ohio on March 6, 2014 and the
briefing process concluded on December 24, 2014. The matter is not yet scheduled for oral argument.
On April 9, 2014, the PUCO initiated a generic investigation of marketing practices in the competitive retail electric service market,
with a focus on the marketing of fixed-price or guaranteed percent-off SSO rate contracts where there is a provision that permits
the pass-through of new or additional charges.
PENNSYLVANIA
The Pennsylvania Companies currently operate under DSPs that expire on May 31, 2015, and provide for the competitive
procurement of generation supply for customers that do not choose an alternative EGS or for customers of alternative EGSs that
fail to provide the contracted service. The default service supply is currently provided by wholesale suppliers through a mix of long-
term and short-term contracts procured through descending clock auctions, competitive requests for proposals and spot market
purchases. On July 24, 2014, the PPUC unanimously approved a settlement of the Pennsylvania Companies' DSPs for the period
of June 1, 2015 through May 31, 2017, that provides for quarterly descending clock auctions to procure 3, 12 and 24-month energy
contracts, as well as one RFP seeking 2-year contracts to secure SRECs for ME, PN and Penn.
The PPUC entered an Order on March 3, 2010 that denied the recovery of marginal transmission losses through the TSC rider for
the period of June 1, 2007 through March 31, 2008, and directed ME and PN to submit a new tariff or tariff supplement reflecting
the removal of marginal transmission losses from the TSC. Pursuant to a plan approved by the PPUC, ME and PN refunded those
amounts to customers over 29-months concluding in the second quarter of 2013. On appeal, the Commonwealth Court affirmed
the PPUC's Order to the extent that it holds that line loss costs are not transmission costs and, therefore, the approximately $254
million in marginal transmission losses and associated carrying charges for the period prior to January 1, 2011, are not recoverable
under ME's and PN's TSC riders. The Pennsylvania Supreme Court denied ME's and PN's Petition for Allowance of Appeal and
the Supreme Court of the United States denied ME's and PN's Petition for Writ of Certiorari. The U.S. District Court for the Eastern
District of Pennsylvania granted the PPUC's motion to dismiss the complaint filed by ME and PN to obtain an order that would
enjoin enforcement of the PPUC and Pennsylvania court orders under a theory of federal preemption on the question of retail rate
recovery of the marginal transmission loss charges. As a result of the U.S. District Court's decision, FirstEnergy recorded a regulatory
asset impairment charge of approximately $254 million (pre-tax) in the quarter ended September 30, 2013. On appeal, on September
16, 2014, in a split decision, two judges of a three-judge panel of the United States Court of Appeals for the Third Circuit affirmed
the U.S. District Court's dismissal of the complaint, agreeing that ME and PN had litigated the issue in the state proceedings and
thus were precluded from subsequent litigation in federal court. On September 30, 2014, ME and PN filed for rehearing and rehearing