Allegheny Power 2014 Annual Report Download - page 59

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• An Economic Stability Program providing for a retail rate stability rider to flow through charges or credits representing the
net result of the costs paid to FES through a proposed 15-year purchase power agreement for the output of Sammis,
Davis-Besse and FES’ share of OVEC against the revenues received from selling the output into the PJM markets over
the same period;
• Continuing to provide power to non-shopping customers at a market-based price set through an auction process;
• Continuing Rider DCR with increased revenue caps of approximately $30 million per year that allows continued investment
supporting the distribution system for the benefit of customers;
• A 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 such costs avoided by customers for
certain types of products totals $360 million, including appropriately such costs from MISO along with such costs from
PJM, subject to the outcome of certain FERC proceedings; and
• General updates to electric service regulations and tariffs to reflect regulatory orders, administrative rule changes, and
current practices.
Under Ohio's energy efficiency standards (SB221 and SB310), and the Ohio Companies' filing of amended energy efficiency plans,
the Ohio Companies are required to implement energy efficiency programs that achieve a total annual energy savings equivalent
of approximately 2,237 GWHs in 2014, 2015 and 2016. The Ohio Companies are also required to reduce peak demand in 2009
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.