Allegheny Power 2014 Annual Report Download - page 58

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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.
On March 20, 2013, the NJBPU ordered that a generic proceeding be established to investigate the prudence of costs incurred by
all New Jersey utilities for service restoration efforts associated with the major storm events of 2011 and 2012. The Order provided
that if any utility had already filed a proceeding for recovery of such storm costs, to the extent the amount of approved recovery
had not yet been determined, the prudence of such costs would be reviewed in the generic proceeding. On May 31, 2013, the
NJBPU clarified its earlier order to indicate that the 2011 major storm costs would be reviewed expeditiously in the generic proceeding,
with the goal of maintaining the base rate case schedule established by the ALJ where recovery of such costs would be addressed.
The NJBPU further indicated that it would review the 2012 major storm costs in the generic proceeding and the recovery of such
costs would be considered through a Phase II in the existing base rate case or through another appropriate method to be determined
at the conclusion of the generic proceeding. On June 21, 2013, JCP&L filed a detailed report in support of recovery of major storm
costs with the NJBPU. On February 24, 2014, a Stipulation was filed with the NJBPU by JCP&L, the Division of Rate Counsel and
NJBPU Staff which will allow recovery of $736 million of JCP&L’s $744 million of costs related to the significant weather events of
2011 and 2012. As a result, FirstEnergy recorded a regulatory asset impairment charge of approximately $8 million (pre-tax) as of
December 31, 2013. By its Order of March 19, 2014, the NJBPU approved the Stipulation of Settlement. Although the settlement
permits recovery of 2011 and 2012 storm costs, the recovery of the 2011 costs will be addressed in the pending base rate case;
whereas the manner and timing of recovery of the 2012 storm costs totaling $580 million will be determined by the NJBPU.
OHIO
The Ohio Companies primarily operate under their ESP 3 plan which expires on May 31, 2016. The material terms of ESP 3 include:
• Continuing the current base distribution rate freeze through May 31, 2016;
• Continues collection of lost distribution revenues associated with energy efficiency and peak demand reduction programs;
• Continuing to provide economic development and assistance to low-income customers for the two-year plan period at
levels established in the prior ESP;
• A 6% generation rate discount to certain low income customers provided by the Ohio Companies through a bilateral
wholesale contract with FES (FES is one of the wholesale suppliers to the Ohio Companies);
• Continuing to provide power to non-shopping customers at a market-based price set through an auction process;
• Continuing Rider DCR that allows continued investment in the distribution system for the benefit of customers;
• Continuing commitment not to recover from retail customers certain costs related to transmission cost allocations for the
longer of the five-year period from June 1, 2011 through May 31, 2016 or when the amount of costs avoided by customers
for certain types of products totals $360 million, subject to the outcome of certain FERC proceedings;
• Securing generation supply for a longer period of time by conducting an auction for a three-year period rather than a one-
year period, in each of October 2012 and January 2013, to mitigate any potential price spikes for the Ohio Companies'
utility customers who do not switch to a competitive generation supplier; and
• Extending the recovery period for costs associated with purchasing RECs mandated by SB221, Ohio's renewable energy
and energy efficiency standard, through the end of the new ESP 3 period. This is expected to initially reduce the monthly
renewable energy charge for all non-shopping utility customers of the Ohio Companies by spreading out the costs over
the entire ESP period.
Notices of appeal of the Ohio Companies' ESP 3 plan to the Supreme Court of Ohio were filed by the Northeast Ohio Public Energy
Council and the ELPC. The matter has not yet been scheduled for oral argument.
The Ohio Companies filed an application with the PUCO on August 4, 2014 seeking approval of their ESP IV entitled Powering
Ohio's Progress. The Ohio Companies have requested a decision by the PUCO by April 8, 2015. The Ohio Companies filed a partial
Stipulation and Recommendation on December 22, 2014. The evidentiary hearing on the ESP IV is scheduled to commence on
April 13, 2015. The material terms of the proposed plan include:
• Continuing a base distribution rate freeze through May 31, 2019;
• Continuing collection of lost distribution revenues associated with energy efficiency and peak demand reduction programs;
• Providing economic development and assistance to low-income customers for the three-year plan period;