Allegheny Power 2015 Annual Report Download - page 62

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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.
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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
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
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plan.Severalapplicationsforrehearingwerefiled,andthePUCOgrantedthoseapplicationsforfurtherconsiderationofthematters
specifiedinthoseapplications.
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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.
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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'
reconcilableEE&Criders.OnJune19,2015,thePPUCissuedaPhaseIIIFinalImplementationOrdersetting:demandreduction
targets,relativetoeachPennsylvaniaCompanies'20072008peakdemand(inMW),at1.8%forME,1.7%forPenn,1.8%forWP,
and0%forPNandenergyconsumptionreductiontargets,asapercentageofeachPennsylvaniaCompanies’historic2010forecasts
(inMWH),at4.0%forME,3.9%forPN,3.3%forPenn,and2.6%forWP.ThePennsylvaniaCompaniesfiledtheirPhaseIIIEE&C
plansfortheJune2016throughMay2021periodonNovember23,2015,whicharedesignedtoachievethetargetsestablishedin
thePPUC'sPhaseIIIFinalImplementationOrder.EDCsarepermittedtorecovercostsforimplementingtheirEE&Cplans.On
February10, 2016,the PennsylvaniaCompaniesandthepartiesintervening inthe PPUC'sPhaseIII proceedingfiled a joint
settlementthatresolvesallissuesintheproceedingandissubjecttoPPUCapproval.
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PursuanttoAct11of2012,PennsylvaniaEDCsmayestablishaDSICtorecovercostsofinfrastructureimprovementsandcosts
relatedtohighwayrelocationprojectswithPPUCapproval.PennsylvaniaEDCsmustfileLTIIPsoutlininginfrastructureimprovement
plansforPPUCreviewandapprovalpriortoapprovalofaDSIC.OnOctober19,2015,eachofthePennsylvaniaCompaniesfiled
LTIIPswiththePPUCforinfrastructureimprovementoverthefiveyearperiodof2016to2020forthefollowingcosts:WP$88.34
millionPN$56.74millionPenn$56.35millionandME$43.44million.Theseamountsincludeallqualifyingdistributioncapital
additionsidentifiedintherevisedimplementationplanfortherecentfocusedmanagementandoperationsauditofthePennsylvania
Companiesasdiscussedbelow.OnFebruary11,2016,thePPUCapprovedthePennsylvaniaCompanies'LTIIPs.OnFebruary16,
2016,thePennsylvaniaCompaniesfiledDSICridersforPPUCapprovalforquarterlycostrecoveryassociatedwiththecapital
projectsapprovedintheLTIIPs.TheDSICridersareexpectedtobeeffectiveJuly1,2016.
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