Allegheny Power 2014 Annual Report Download - page 84

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69
December 31, 2014 December 31, 2013
Property, Plant and Equipment In Service Accum. Depr. Net Plant In Service Accum. Depr. Net Plant
(In millions)
Regulated Distribution $ 23,973 $ (6,759) $ 17,214 $ 23,098 $ (6,514) $ 16,584
Regulated Transmission 6,634 (1,595) 5,039 5,564 (1,511) 4,053
Competitive Energy Services(1) 16,442 (5,598) 10,844 15,206 (5,088) 10,118
Corporate/Other 435 (198) 237 360 (167) 193
Total $ 47,484 $ (14,150) $ 33,334 $ 44,228 $ (13,280) $ 30,948
(1) Primarily consists of generating assets.
The major classes of property, plant and equipment are largely consistent with the segment disclosures above, with the exception
of Regulated Distribution which has approximately $2 billion of regulated generation net plant in service.
FirstEnergy provides for depreciation on a straight-line basis at various rates over the estimated lives of property included in plant
in service. The respective annual composite rates for FirstEnergy's and FES' electric plant in 2014, 2013 and 2012 are shown in
the following table:
Annual Composite Depreciation Rate
2014 2013 2012
FirstEnergy 2.5% 2.6% 2.5%
FES 3.1% 3.1% 3.1%
Jointly Owned Plants
FE, through its subsidiary, AGC, owns an undivided 40% interest (1,200 MWs) in a 3,003 MW pumped storage, hydroelectric station
in Bath County, Virginia, operated by the 60% owner, Virginia Electric and Power Company, a non-affiliated utility. Net Property,
plant and equipment includes $686 million representing AGC's share in this facility as of December 31, 2014. AGC is obligated to
pay its share of the costs of this jointly-owned facility in the same proportion as its ownership interest using its own financing. AGC's
share of direct expenses of the joint plant is included in FE's operating expenses on the Consolidated Statement of Income.
Asset Retirement Obligations
FE recognizes an ARO for the future decommissioning of its nuclear power plants and future remediation of other environmental
liabilities associated with all of its long-lived assets. The ARO liability represents an estimate of the fair value of FE's current obligation
related to nuclear decommissioning and the retirement or remediation of environmental liabilities of other assets. A fair value
measurement inherently involves uncertainty in the amount and timing of settlement of the liability. FE uses an expected cash flow
approach to measure the fair value of the nuclear decommissioning and environmental remediation ARO. This approach applies
probability weighting to discounted future cash flow scenarios that reflect a range of possible outcomes. The scenarios consider
settlement of the ARO at the expiration of the nuclear power plant's current license, settlement based on an extended license term
and expected remediation dates. The fair value of an ARO is recognized in the period in which it is incurred. The associated asset
retirement costs are capitalized as part of the carrying value of the long-lived asset and are depreciated over the life of the related
asset.
Conditional retirement obligations associated with tangible long-lived assets are recognized at fair value in the period in which they
are incurred if a reasonable estimate can be made, even though there may be uncertainty about timing or method of settlement.
When settlement is conditional on a future event occurring, it is reflected in the measurement of the liability, not the timing of the
liability recognition.
AROs as of December 31, 2014, are described further in Note 13, Asset Retirement Obligations.
ASSET IMPAIRMENTS
Long-lived Assets
FirstEnergy reviews long-lived assets, including regulatory assets, for impairment whenever events or changes in circumstances
indicate that the carrying value of such assets may not be recoverable. The recoverability of a long-lived asset is measured by
comparing its carrying value to the sum of undiscounted future cash flows expected to result from the use and eventual disposition
of the asset. If the carrying value is greater than the undiscounted cash flows, an impairment exists and a loss is recognized for
the amount by which the carrying value of the long-lived asset exceeds its estimated fair value. FirstEnergy utilizes the income
approach, based upon discounted cash flows to estimate fair value.