Allegheny Power 2015 Annual Report Download - page 135

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•RiderDCRthatallowscontinuedinvestmentin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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.
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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oralargumentinthismatteroccurredonJanuary6,2016.
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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filedaStipulationandRecommendationonDecember22,2014,andsupplementalstipulationsand
recommendationsonMay28,2015,andJune4,2015.TheevidentiaryhearingontheESPIVcommencedonAugust31,2015and
concluded on October 29, 2015. On December 1, 2015, the Ohio Companies filed a Third Supplemental Stipulation and
Recommendation,whichincludedPUCOStaffasasignatorypartyinadditiontoothersignatories. ThePUCOcompletedahearing
ontheThirdSupplementalStipulationandRecommendationinJanuary2016.InitialbriefsaredueonFebruary16,2016andreply
briefsaredueonFebruary26,2016.AfinalPUCOdecisionisexpectedinMarch2016.
TheproposedESPIVsupportsFirstEnergy'sstrategicfocusonregulatedoperationsandbetterpositionstheOhioCompaniesto
deliverontheirongoingcommitmenttoupgrade,modernizeandmaintainreliableelectricserviceforcustomerswhilepreserving
electricsecurityinOhio.ThematerialtermsoftheproposedESPIV,asmodifiedbythestipulationsinclude:
Aneightyearterm(June1,2016May31,2024)
•ContemplatescontinuingabasedistributionratefreezethroughMay31,2024
•AnEconomicStabilityProgramthatflowsthroughchargesorcreditsthroughRiderRRSrepresentingthenetresultofthe
pricepaidtoFESthroughaproposedeightyearFERCjurisdictionalPPAfortheoutputoftheSammisandDavisBesse
plantsandFES’shareofOVECagainsttherevenuesreceivedfromsellingsuchoutputintothePJMmarketsoverthesame
period,subjecttothePUCO’sterminationofRiderRRScharges/creditsassociatedwithanyplantsorunitsthatmaybesold
ortransferred
•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fromJune1,2016throughMay
31,2019$20millionperyearfromJune1,2019throughMay31,2022and$15millionperyearfromJune1,2022through
May31,2024thatsupportscontinuedinvestmentrelatedtothedistributionsystemforthebenefitofcustomers
•Collectionoflostdistributionrevenuesassociatedwithenergyefficiencyandpeakdemandreductionprograms
•ArisksharingmechanismthatwouldprovideguaranteedcreditsunderRiderRRSinyearsfivethrougheighttocustomers
asfollows:$10millioninyearfive,$20millioninyearsix,$30millioninyearsevenand$40millioninyeareight
•A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suchcostsavoidedby
customersforcertaintypesofproductstotals$360million,includingsuchcostsfromMISOalongwithsuchcostsfromPJM,
subjecttotheoutcomeofcertainFERCproceedings
•Potentialprocurementof100MWofnewOhiowindorsolarresourcessubjecttoademonstratedneedtoprocurenew
renewableenergyresourcesaspartofastrategytofurtherdiversifyOhio'senergyportfolio
•AnagreementtofileacasewiththePUCObyApril3,2017,seekingtotransitiontodecoupledbaseratesforresidential
customers
•AnagreementtofilebyFebruary29,2016,aGridModernizationBusinessPlanforPUCOconsiderationandapproval
•Acontributionof$3millionperyear($24millionovertheeightyearterm)tofundenergyconservationprograms,
economicdevelopmentandjobretentionintheOhioCompaniesserviceterritory
•Contributionsof$2.4millionperyear($19millionovertheeightyearterm)tofundafuelfundineachoftheOhio
Companiesserviceterritoriestoassistlowincomecustomersand
•Acontributionof$1millionperyear($8millionovertheeightyearterm)toestablishaCustomaryAdvisoryCouncilto
ensurepreservationandgrowthofthecompetitivemarketinOhio.
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OnJanuary27,2016,certainpartiesfiledacomplaintatFERCagainstFES,OE,CEI,andTEthatrequestsFERCreviewoftheESP
IVPPAunderSection205oftheFPA.Inadditiontosuchproceeding,partieshaveexpressedanintentiontochallengeinthecourts
and/orbeforeFERC,thePPAorPUCOapprovaloftheESPIV,ifapproved.Managementintendstovigorouslydefendagainstsuch
challenges.
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UnderOhio'senergyefficiencystandards(SB221andSB310),andbasedontheOhioCompanies'amendedenergyefficiencyplans,
theOhioCompaniesarerequiredtoimplementenergyefficiencyprogramsthatachieveatotalannualenergysavingsequivalentof
2,266 GWHsin 2015 and 2,288 GWHs in 2016, and then begin to increase by 1% each year in 2017, subject to legislative
amendmentstotheenergyefficiencystandardsdiscussedbelow.TheOhioCompaniesarealsorequiredtoretainthe2014peak
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demandreductionlevelfor2015and2016andthenincreasethebenchmarkbyanadditional 0.75%thereafterthrough2020,subject
tolegislativeamendmentstothepeakdemandreductionstandardsdiscussedbelow.
OnSeptember30,2015,theEnergyMandatesStudyCommitteeissueditsreportrelatedtoenergyefficiencyandrenewableenergy
mandates,recommendingthatthecurrentlevelofmandatesremaininplaceindefinitely.Thereportalsorecommended:(i)an
expeditedprocess forreviewofutilityproposed energyefficiencyplans(ii) ensuringmaximumcreditforallofOhio's Energy
Initiatives(iii)aswitchfromenergymandatestoenergyincentivesand(iv)adeclarationbemadethattheGeneralAssemblymay
determineenergypolicyofthestate.Nolegislationhasyetbeenintroducedtochangethestandardsdescribedabove.
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OnMarch20,2013,thePUCOapprovedthethreeyearenergyefficiencyportfolioplansfor20132015,originallyestimatedtocost
theOhioCompaniesapproximately$250millionoverthethreeyearperiod,whichisexpectedtoberecoveredinrates.Actualcosts
maybelowerforanumberofreasonsincludingtheapprovaloftheamendedportfolioplanunderSB310.OnJuly17,2013,the
PUCOmodifiedtheplantoauthorize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.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2026,subjecttolegislativeamendmentsdiscussedabove,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certainpurchasesarisingfromoneauctionanddirected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.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timelyfiledtheirmeritbriefwiththe
SupremeCourtofOhioandthebriefingprocesshasconcluded.Thematterisnotyetscheduledfororalargument.
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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.OnNovember18,2015,thePUCOruledthatonagoingforwardbasis,passthrough
clausesmaynotbeincludedinfixedpricecontractsforallcustomerclasses.OnDecember18,2015,FESfiledanApplicationfor
Rehearingseekingtochangetherulingorhaveitonlyapplytoresidentialandsmallcommercialcustomers.
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PENNSYLVANIA
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The Pennsylvania Companies currently operate under DSPs that expire on May 31, 2017, 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spotmarketpurchases,quarterlydescendingclockauctionsfor3,12and24month
energycontracts,andoneRFPseeking2yearcontractstoserveSRECsforME,PNandPenn.
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OnNovember3,2015,thePennsylvaniaCompaniesfiledtheirproposedDSPsfortheJune1,2017throughMay31,2019delivery
period,whichwouldprovideforthecompetitiveprocurementofgenerationsupplyforcustomerswhodonotchooseanalternative
EGSorforcustomersofalternativeEGSsthatfailtoprovidethecontractedservice.Undertheproposedprograms,thesupplywould
beprovidedbywholesalesuppliersthoughamixof12and24monthenergycontracts,aswellasoneRFPfor2yearSREC
contractsforME,PNandPenn.Inaddition,theproposalincludesmodificationstothePennsylvaniaCompanies’existingPOR
programsinordertoreducethelevelofuncollectiblesthePennsylvaniaCompaniesexperienceassociatedwithalternativeEGS
charges.
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PursuanttoPennsylvania'sEE&Clegislation(Act129of2008)andPPUCorders,PennsylvaniaEDCsimplementenergyefficiency
andpeakdemandreductionprograms.ThePennsylvaniaCompanies'PhaseIIEE&CPlansareeffectivethroughMay31,2016.Total
costs of these plans are expected to beapproximately $234 million and recoverable through the Pennsylvania Companies'