Allegheny Power 2015 Annual Report Download - page 133



116
ThefollowingtablesummarizesthechangestotheARObalancesduring2015and2014:
AROReconciliation FirstEnergy FES
(Inmillions)
Balance,January1,2014 $ 1,678
$ 1,015
Liabilitiessettled (9) (7)
Accretion 113
66
Revisionsinestimatedcashflows (395) (233)
Balance,December31,2014 $ 1,387
$ 841
Liabilitiessettled (13) (8)
Accretion 92
55
Revisionsinestimatedcashflows (56) (57)
Balance,December31,2015 $ 1,410
$ 831

During2015,FEandFESreduceditsAROby$57million basedontheresultsofdecommissioningcoststudiesfortheDavisBesse
andPerrynucleargeneratingstations.

During2014,basedonstudiesbyathirdpartytoreassesstheestimatedcostsofdecommissioningcertainnucleargenerating
facilities,FEdecreaseditsAROby$395million($233millionatFES)ofwhich$133millionwascreditedagainstaregulatoryasset
associatedwithnucleardecommissioningandspentfueldisposalcostsforTMI2.ThedecreaseintheAROprimarilyresultedfrom
anextensioninthenumberofyearsinwhichdecommissioningactivitiesareestimatedtooccuratDavisBesse,Perry,TMI2and
BeaverValleyUnits1and2.
14.REGULATORYMATTERS

STATEREGULATION

EachoftheUtilities'retailrates,conditionsofservice,issuanceofsecuritiesandothermattersaresubjecttoregulationinthestates
inwhichitoperatesinMarylandbytheMDPSC,inOhiobythePUCO,inNewJerseybytheNJBPU,inPennsylvaniabythePPUC,
inWestVirginiabytheWVPSCandinNewYorkbytheNYPSC.ThetransmissionoperationsofPEinVirginiaaresubjecttocertain
regulationsoftheVSCC.Inaddition,underOhiolaw,municipalitiesmayregulateratesofapublicutility,subjecttoappealtothe
PUCOifnotacceptabletotheutility.

AscompetitiveretailelectricsuppliersservingretailcustomersprimarilyinOhio,Pennsylvania,Illinois,Michigan,NewJerseyand
Maryland,FESandAESupplyaresubjecttostatelawsapplicabletocompetitiveelectricsuppliersinthosestates,includingaffiliate
codesofconductthatapplytoFES,AESupplyandtheirpublicutilityaffiliates.Inaddition,ifanyoftheFirstEnergyaffiliateswereto
engageintheconstructionofsignificantnewtransmissionorgenerationfacilities,dependingonthestate,theymayberequiredto
obtainstateregulatoryauthorizationtosite,constructandoperatethenewtransmissionorgenerationfacility.

MARYLAND

PEprovidesSOSpursuanttoacombinationofsettlementagreements,MDPSCordersandregulations,andstatutoryprovisions.
SOSsupplyiscompetitivelyprocuredintheformofrollingcontractsofvaryinglengthsthroughperiodicauctionsthatareoverseenby
theMDPSCandathirdpartymonitor.AlthoughsettlementswithrespecttoSOSsupplyforPEcustomershaveexpired,service
continuesinthesamemanneruntilchangedbyorderoftheMDPSC. PErecoversitscostsplusareturnforprovidingSOS.

TheMarylandlegislatureadoptedastatutein2008codifyingtheEmPOWERMarylandgoalstoreduceelectricconsumptionby10%
andreduceelectricitydemandby15%,ineachcaseby2015,andrequiringeachelectricutilitytofileaplaneverythreeyears.PE's
currentplan,coveringthethreeyearperiod20152017,wasapprovedbytheMDPSConDecember23,2014.Thecostsofthe2015
2017plan areexpected tobe approximately$66 millionforthatthreeyearperiod,ofwhich$19 millionwas incurredthrough
December2015.OnJuly16,2015,theMDPSCissuedanordersettingnewincrementalenergysavingsgoalsfor2017andbeyond,
beginningwiththelevelofsavingsachievedunderPE'scurrentplanfor2016,andrampingup0.2%peryearthereaftertoreach2%.
PEcontinuestorecoverprogramcostssubjecttoafiveyearamortization.Marylandlawonlyallowsfortheutilitytorecoverlost
distributionrevenueattributabletoenergyefficiencyordemandreductionprogramsthroughabaseratecaseproceeding,andto
date,suchrecoveryhasnotbeensoughtorobtainedbyPE.OnJanuary28,2016,PEfiledarequesttoincreaseplanspendingby$2
millioninordertoreachthenewgoalsfor2017setintheJuly16,2015order.

OnFebruary27,2013,theMDPSCissuedanorder(theFebruary27Order)requiringtheMarylandelectricutilitiestosubmit
analysesrelatingtothecostsandbenefitsofmakingfurthersystemandstaffingenhancementsinordertoattempttoreducestorm
outagedurations.TheorderfurtherrequiredtheStaffoftheMDPSCtoreportonpossibleperformancebasedratestructuresandto
proposeadditionalrulesrelatingtofeederperformancestandards,outagecommunicationandreporting,andsharingofspecialneeds
customerinformation.PE'sresponsivefilingsdiscussedthestepsneededtohardentheutility'ssysteminordertoattempttoachieve


117
variouslevelsofstormresponsespeeddescribedintheFebruary27Order,andprojectedthatitwouldrequireapproximately$2.7
billionininfrastructureinvestmentsover15yearstoattempttoachievethequickestlevelofresponseforthelargeststormprojected
intheFebruary27Order.OnJuly1,2014,theStaffoftheMDPSCissuedasetofreportsthatrecommendedtheimpositionof
extensiveadditionalrequirementsintheareasofstormresponse,feederperformance,estimatesofrestorationtimes,andregulatory
reporting.TheStaffoftheMDPSCalsorecommendedtheimpositionofpenalties,includingcustomerrebates,forautility'sfailureor
inabilitytocomplywiththeescalatingstandardsofstormrestorationspeedproposedbytheStaffoftheMDPSC.Inaddition,theStaff
oftheMDPSCproposedthattheutilitiesberequiredtodevelopandimplementsystemhardeningplans,uptoarateimpactcapon
cost.TheMDPSCconductedahearingSeptember1518,2014,toconsidercertainofthesematters,andhasnotyetissuedaruling
onanyofthosematters.

OnMarch3,2014,pursuanttotheMDPSC'sregulations,PEfileditsrecommendationsforSAIDIandSAIFIstandardstoapplyduring
theperiod20162019.TheMDPSCdirectedtheStaffoftheMDPSCtofileananalysisandrecommendationswithrespecttothe
proposed20162019SAIDIandSAIFIstandardsandanyrelatedrulechangeswhichtheStaffoftheMDPSCrecommended.The
Staff oftheMDPSCmade itsfiling onJuly10, 2015, andrecommendedthat PE berequiredto improveits SAIDI resultsby
approximately20%by2019.TheMDPSCheldahearingontheStaff'sanalysisandrecommendationsonSeptember12,2015,and
approvedPE'srevisedproposalforanimprovementof8.6%initsSAIDIstandardby2019andmaintaineditsSAIFIstandardat2015
levels.TheproposedregulationsincorporatingthenewSAIDIandSAIFIstandardswereapprovedasfinalinDecember2015.

OnApril1,2015,PEfileditsannualreportonitsperformancerelativetovariousservicereliabilitystandardssetforthintheMDPSC’s
regulations.TheMDPSCconductedhearingsonthereportsfiledbyPEandtheotherelectricutilitiesinMarylandonAugust24,2015
andsubsequentlyclosedits2014servicereliabilityreview.

NEWJERSEY

JCP&LcurrentlyprovidesBGSforretailcustomerswhodonotchooseathirdpartyEGSandforcustomersofthirdpartyEGSsthat
failtoprovidethecontractedservice.ThesupplyforBGSiscomprisedoftwocomponents,procuredthroughseparate,annuallyheld
descendingclockauctions,theresultsofwhichareapprovedbytheNJBPU.OneBGScomponentreflectshourlyrealtimeenergy
pricesandisavailableforlargercommercialandindustrialcustomers.ThesecondBGScomponentprovidesafixedpriceservice
and is intended for smaller commercial and residential customers.All New Jersey EDCs participate in this competitive BGS
procurementprocessandrecoverBGScostsdirectlyfromcustomersasachargeseparatefrombaserates.

OnMarch26,2015,theNJBPUenteredfinalorderswhichtogetherprovidedanoverallreductioninJCP&L'sannualrevenuesof
approximately$34million,effectiveApril1,2015.ThefinalorderinJCP&L'sbaseratecaseproceedingdirectedanannualbaserate
revenuereductionofapproximately$115million,includingrecoveryof2011stormcostsandtheapplicationoftheNJBPU'smodified
CTA policy approved in the generic CTA proceeding referred to below.Additionally, the final order in the generic proceeding
establishedtoreviewJCP&L'smajorstormeventsof2011and2012approvedtherecoveryof2012stormcostsof$580million
resultinginanincreaseinannualrevenuesofapproximately$81million.JCP&Lisrequiredtofileanotherbaseratecasenolater
thanApril1,2017.TheNJBPUalsodirectedthatcertainstudiesbecompleted.OnJuly22,2015,theNJBPUapprovedtheNJBPU
staff'srecommendationtoimplementsuchstudies,whichwillincludeoperationalandfinancialcomponentsandisexpectedtotake
approximatelyoneyeartocomplete.

InanOrderissuedOctober22,2014,inagenericproceedingtoreviewitspolicieswithrespecttotheuseofaCTAinbaserate
cases(GenericCTAproceeding),theNJBPUstatedthatitwouldcontinuetoapplyitscurrentCTApolicyinbaseratecases,subject
toincorporatingthefollowingmodifications:(i)calculatingsavingsusinga fiveyearlookbackfromthebeginningofthetestyear(ii)
allocatingsavingswith75%retainedbythecompanyand25%allocatedtoratepayersand(iii)excludingtransmissionassetsof
electricdistributioncompaniesinthesavingscalculation.OnNovember5,2014,theDivisionofRateCounselappealedtheNJBPU
OrderregardingtheGenericCTAproceedingtotheNewJerseySuperiorCourtandJCP&Lhasfiledtoparticipateasarespondentin
thatproceeding.Briefinghasbeencompleted,andoralargumenthasnotyetbeenscheduled.

OnJune19,2015,JCP&L,alongwithPN,ME,FETandMAITmadefilingswithFERC,theNJBPU,andthePPUCrequesting
authorizationforJCP&L,PNandMEtocontributetheirtransmissionassetstoMAIT,anewtransmissiononlysubsidiaryofFET.On
January8,2016,theNJBPUPresidentissuedanOrdergrantingRateCounsel’sMotiononthelegalissueofwhetherMAITcanbe
designatedasapublicutility.Theproceduralschedulehasbeensuspendeduntiladecisionismadeonthisissue.SeeTransferof
TransmissionAssetstoMAITinFERCMattersbelowforfurtherdiscussionofthistransaction.

OHIO

TheOhioCompaniesoperateundertheirESP3planwhichexpiresonMay31,2016.ThematerialtermsofESP3include:
•AbasedistributionratefreezethroughMay31,2016
•Collectionoflostdistributionrevenuesassociatedwithenergyefficiencyandpeakdemandreductionprograms
•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)
•Arequirementtoprovidepowertononshoppingcustomersatamarketbasedpricesetthroughanauctionprocess