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8
STRATEGYANDOUTLOOK
FirstEnergyownsalargeanddiversemixofassetsmanagedinanintegratedmodel,featuringanelectricdistributionservicearea
andtransmissionfootprintthatareamongthelargestinthenation,aswellasacompetitiveoperationssegmentthatownsorcontrols
over13,000MWsofgenerationwithadiversemixofnonemittingnuclear,scrubbedcoal,naturalgas,hydroelectricandother
renewables. FirstEnergy continues to focus on developing its transmission business, strengthening its regulated utilities, and
managingoverallriskandconservativelyoperatingitscompetitivebusiness.
FirstEnergycontinuestofocusoninvestmentopportunitiesinitsRegulatedTransmissionandRegulatedDistributionsegments.This
investmentstrategyisfocusedondeliveringenhancedcustomerserviceandreliability,strengtheninggridandcybersecurity,and
addingresiliencyandoperatingflexibilityto itstransmissionand distributioninfrastructure. FirstEnergyexpectstofund these
investmentsthroughacombinationofcashfromoperations,debt,and,dependingontheregulatedoperatingcompany,capital
contributionsfromitsparent.Inthefuture,FirstEnergymayconsideradditionalequitytofundcapitalrequirementsinitsregulated
operations.
FirstEnergy'slongertermstrategicoutlookforitsregulatedandcompetitivebusinesseswillbedeterminedfollowingresolutionofthe
OhioCompanies'ESPIV,includingtheproposedPPAbetween FES andthe OhioCompanies.Oncethe ESPIVisfinalized,
FirstEnergyexpectstobeinapositiontomorefullyunderstandthelongertermoutlookofitscompetitivebusinessesandthelonger
termgrowthrateofitsregulatedbusinesses,includingplannedcapitalinvestmentsandanyadditionalequitytofundgrowthinits
regulatedbusinesses.
FirstEnergyisfocusedonimprovingitsbalancesheetandmaintaininginvestmentgradecreditmetricsateachbusinessunit,while
improvingmetricsatFirstEnergyCorp.overtime.Aspartofanongoingefforttomanagecosts,FirstEnergyidentifiedbothimmediate
andlongtermsavingsopportunitiesthroughitscashflowimprovementplan.Thecashflowimprovementplanidentifiedtargetedcash
savingsofapproximately$58millionin2015,$155millionin2016and$240millionannuallyby2017,withreductionsinoperating
expensesrepresentingapproximately65%ofthesavingsoverthethreeyearperiod.
RegulatedTransmission
Asnotedabove,thecenterpieceofFirstEnergy’sgrowthstrategyisa$4.2billioninvestmentintheEnergizingtheFutureprogram
from2014through2017.Through2015,FirstEnergy'scapitalexpendituresunderthisplanwere$2.4billionandin2016capital
expendituresunderthisplanarecurrentlyprojectedtobeapproximately$1billion.Thisprogramisfocusedonalargenumberof
smallprojectswithinthecompany’s24,000mileserviceterritorythatimproveservicetocustomers.Theprojectswithintheprogram
areeitherregulatoryrequiredorsupportreliabilityenhancement.RegulatoryrequiredprojectsincludethoserequestedbyPJMto
supportgridreliability,generatordeactivations,orshalegasexpansionactivities.Thesecondcategoryofprojects,thosethatsupport
reliabilityenhancement,focusonreplacingagingequipmentincreasingautomation,communication,andsecuritywithinthesystem
andincreasingloadservingcapability.Intheinitialyearsoftheprogram,themajorityoftheprojectsarelocatedwithintheATSI
system,withexpectationstomoveeastacrossFirstEnergy'sserviceterritoryovertime.Anadditional$15billionintransmission
investmentopportunitieshave beenidentified acrossthe systembeyond the20142017period,makingthisa continuingand
sustainableplatformforinvestment.
In2016,FirstEnergyexpectstoreceiveapprovaltotransfertransmissionassetsofJCP&L,MetEdandPenelectoMAIT,anew
standalonetransmissionsubsidiary.
RegulatedDistribution
ThefivestateserviceterritoryservedbyFirstEnergy’sRegulatedDistributionsegmentalsoofferssubstantialopportunitiesforfuture
investmentstoimproveservicetomorethan6millioncustomers.In2015,FirstEnergycompletedmajorratecasesinWestVirginia,
PennsylvaniaandNewJersey.InPennsylvania,afilingforaninfrastructureimprovementplanthatincludesaninvestmentof$245
millionthrough2020wasapprovedbythePPUConFebruary11,2016,andinOhio,acomprehensivesettlementintheESPIVis
pendingPUCOapproval.TheESPIVsettlementcontainsadditionalopportunitiesforinvestmentintheOhioCompanies,including
gridmodernizationandenergyefficiencyaswellascontinuationofRiderDCRwithrevenuecapsincreasing$180millionoverthe
termoftheESPIV.ThesettlementalsoincludesaFERCjurisdictionalPPAwheretheOhioCompanieswouldpurchasetheoutput
fromFES’DavisBessenuclearplant,SammiscoalplantandentitlementtoOVECgenerationoutput,atotalof3,244MW,foran
eightyeartermbeginningJune1,2016.
FirstEnergyalsocontinuestocloselymonitorsalestrendsacrossitsutilityfootprint.WithinitsRegulatedDistributionsegment,
FirstEnergycontinuestobeimpactedbylowercustomerusageasaresultofenergyefficiencymandatesandproducts.During2015,
electric distribution deliveries on a weatheradjusted basis declined 1.6% in the residential customer class and 0.6% in the
commercialcustomerclassascomparedto2014.Furthermore,intheindustrialsector,increasesintheshalegassectorweremore
thanoffsetwithlowerusageinthesteelandminingsectors,resultinginanoveralldecreaseintheindustrialsectorof2.0%.
9
CES
FirstEnergycontinuestofocusonmaintainingthevalueofitscompetitivebusinessandcontinuestoadvocateforreformsthatensure
thecompetitivewholesalemarketsadequatelyvaluebaseloadgeneration,whichisessentialformaintaininggridreliability.Whileit
cannotpredictiforwhenapowerpricerecoverymayoccur,FirstEnergybelievesithastakenappropriateactionoverthelastseveral
yearstorepositionthisbusinessforsucharecovery.CESusesaconservativehedgingstrategy,andexpectstosellitsannual
generationresourcesofapproximately7580millionMWHsthroughacombinationofretailandwholesalesales,maintaining1020
million MWHs to mitigate risk in the event of unplanned outages or extreme weather or to take advantage of market upside
opportunitiesthroughthewholesalespotmarket.