Allegheny Power 2014 Annual Report Download - page 133

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In series of orders, including certain of the orders related to the Order No. 1000 proceedings, FERC has asserted that the PJM
transmission owners do not hold an incumbent “right of first refusal” to construct, own and operate transmission projects within their
respective footprints that are approved as part of PJM’s RTEP process. FirstEnergy and other PJM transmission owners have
appealed these rulings, and those appeals are pending before the U.S. Court of Appeals for the D.C. Circuit.
To demonstrate compliance with the regional cost allocation principles of Order No. 1000, the PJM transmission owners, including
FirstEnergy, proposed a hybrid allocation of 50% beneficiary pays and 50% socialized to be effective for RTEP projects approved
by the PJM Board of Managers on, and after, the requested February 1, 2013 effective date of the compliance filing. FERC has
accepted that approach.
Separately, the PJM transmission owners, including FirstEnergy, submitted filings to FERC setting forth the cost allocation method
for projects that cross the borders between the PJM Region and: (1) the NYISO region; (2) the MISO region; and (3) the FERC-
jurisdictional members of the SERTP region. These filings propose to allocate the cost of these interregional transmission projects
based on the costs of projects that otherwise would have been constructed separately in each region, or, in the case of MISO,
indicate that the cost allocation provisions for interregional transmission projects provided in the Joint Operating Agreement between
PJM and MISO comply with the requirements of Order No. 1000. FERC accepted the PJM/MISO and PJM/SERTP filing, subject
to refund and further compliance requirements. The PJM/NYISO cross-border project cost allocation filing remains pending before
FERC.
The outcome of these proceedings and their impact, if any, on FirstEnergy cannot be predicted at this time.
RTO Realignment
On June 1, 2011, ATSI and the ATSI zone transferred from MISO to PJM. While many of the matters involved with the move have
been resolved, FERC denied recovery under ATSI's transmission rate for certain charges that collectively can be described as "exit
fees" and certain other transmission cost allocation charges totaling approximately $78.8 million until such time as ATSI submits a
cost/benefit analysis demonstrating net benefits to customers from the move. FERC rejected a proposed settlement agreement to
resolve the exit fee and transmission cost allocation issues, stating that its action is without prejudice to ATSI submitting a cost/
benefit analysis demonstrating that the benefits of the RTO realignment decisions outweigh the exit fee and transmission cost
allocation charges. FirstEnergy's request for rehearing of FERC's order remains pending.
Separately, the question of ATSI's responsibility for certain costs for the “Michigan Thumb” transmission project continues to be
disputed. Potential responsibility arises under the MISO MVP tariff, which has been litigated in complex proceedings before FERC
and certain U.S. appellate courts. In the event of a final non-appealable order that rules that ATSI must pay these charges, ATSI
will seek recovery of these charges through its formula rate. On a related issue, FirstEnergy joined certain other PJM transmission
owners in a protest of MISO's proposal to allocate MVP costs to energy transactions that cross MISO's borders into the PJM Region.
On January 22, 2015, FERC issued an order establishing a paper hearing on remand from the Seventh Circuit of the issue of
whether any limitation on "export pricing" for sales of energy from MISO into PJM is justified in light of applicable FERC precedent.
Initial comments on the MISO/PJM MVP issue are due March 9, 2015, and reply comments are due April 8, 2015.
In addition, in a May 31, 2011 order, FERC ruled that the costs for certain "legacy RTEP" transmission projects in PJM approved
before ATSI joined PJM could be charged to transmission customers in the ATSI zone. The amount to be paid, and the question of
derived benefits, is pending before FERC as a result of the Seventh Circuit's June 25, 2014 order described above under PJM
Transmission Rates.
The outcome of those proceedings that address the remaining open issues related to ATSI's move into PJM cannot be predicted
at this time.
2014 ATSI Formula Rate Filing
On October 31, 2014, ATSI filed a proposal with FERC to change the structure of its formula rate. The proposed change requested
to move from an “historical looking” approach, where transmission rates reflect actual costs for the prior year, to a “forward looking”
approach, where transmission rates would be based on the estimated costs for the coming year, with an annual true up. Several
parties protested ATSI's filing. On December 31, 2014, FERC issued an order accepting ATSI's filing effective January 1, 2015, as
requested, subject to refund and the outcome of hearing and settlement proceedings. Settlement discussions under a FERC-
appointed settlement judge are ongoing. FERC also initiated an inquiry pursuant to Section 206 of the FPA into ATSI's ROE and
certain other matters, with a refund effective date of January 12, 2015, for any refund resulting from the inquiry. A procedural schedule
for the Section 206 inquiry has not yet been established.