Allegheny Power 2014 Annual Report Download - page 60

45
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
en banc before the Third Circuit and, on October 15, 2014, the Third Circuit rejected that rehearing request. ME and PN filed a
Petition for Certiorari with the U.S. Supreme Court on February 12, 2015.
Pursuant to Pennsylvania's EE&C legislation (Act 129 of 2008), the PPUC was charged with reviewing the cost effectiveness of
energy efficiency and peak demand reduction programs. The PPUC found the energy efficiency programs to be cost effective and
directed all of the electric utilities in Pennsylvania to submit by November 15, 2012, a Phase II EE&C Plan that would be in effect
for the period June 1, 2013 through May 31, 2016. The PPUC deferred ruling on the need to create peak demand reduction targets
and did not include a peak demand reduction requirement in the Phase II plans. On March 14, 2013, the PPUC adopted a settlement
among the Pennsylvania Companies and interested parties and approved the Pennsylvania Companies' Phase II EE&C Plans for
the period 2013-2016. Total costs of these plans are expected to be approximately $234 million and recoverable through the
Pennsylvania Companies' reconcilable EE&C riders.
On August 4, 2014, the Pennsylvania Companies each filed tariffs with the PPUC proposing general rate increases associated with
their distribution operations. The filings request approval to increase operating revenues by approximately $151.9 million at ME,
$119.8 million at PN, $28.5 million at Penn, and $115.5 million at WP based upon fully projected future test years for the twelve
months ending April 30, 2016 at each of the Pennsylvania Companies. On February 3, 2015, each of the Pennsylvania Companies
filed a Joint Petition for Settlement seeking PPUC approval of the agreements reached in each proceeding which included, among
other things: 1) increases in current distribution revenues of $89.3 million for ME, $90.8 million for PN, $15.9 million for Penn and
$96.8 million for WP; 2) a Universal Services Charge Rider to be established for WP; 3) storm reserve accounts for future storm
recovery to be established for each of the Pennsylvania Companies; and 4) certain other operational and customer service-related
provisions. The sole issue reserved for briefing was with respect to the scope and pricing of the Companies' proposed LED offerings.
Orders on the proposed increases are expected in May 2015.
WEST VIRGINIA
On April 30, 2014, MP and PE filed a rate case, as amended on June 13, 2014, requesting a base rate increase of approximately
$104 million, or 9.9%, based on an historic 2013 test year. The filing also included a request for an additional $48 million to recover
by surcharge costs for new and existing vegetation management programs. On November 3, 2014, a Joint Stipulation was submitted
by all parties which settled all issues in the proceeding. The settlement includes, among other things: a $15 million increase in base
rate revenues effective February 25, 2015; the implementation of a Vegetation Management Surcharge effective February 25, 2015
to recover all costs related to both new and existing vegetation maintenance programs; authority to establish a regulatory asset for
MATS investments placed into service in 2016 and 2017; authority to defer, amortize and recover over a 5-year period approximately
$46 million of storm restoration costs; and elimination of the Temporary Transaction Surcharge for costs associated with MP's
acquisition of the Harrison plant in October 2013 and movement of those costs into base rates effective February 25, 2015. On
February 3, 2015, the WVPSC approved the settlement in full and without modification. MP and PE's new rates will go into effect
February 25, 2015.
On August 29, 2014, MP and PE filed their annual ENEC case proposing an approximate $65.8 million annual increase in ENEC
rates, which is a 5.7% overall increase to existing rates. The increase is comprised of an actual $51.6 million under-recovered
balance as of June 30, 2014, and a projected $14.2 million in under-recovery for the 2015 rate effective period. A settlement was