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2014ATSIFormulaRateFiling
OnOctober31,2014,ATSIfiledaproposalwithFERCtochange thestructureofitsformularatefroman“historicallooking”
approach,wheretransmissionratesreflectactualcostsfortheprioryear,toa“forwardlooking”approach,wheretransmissionrates
wouldbebasedontheestimatedcostsforthecomingyear,withanannualtrueup.OnDecember31,2014,FERCissuedanorder
acceptingATSI'sfilingeffectiveJanuary1,2015,subjecttorefundandtheoutcomeofhearingandsettlementproceedings.FERC
subsequentlyissuedanorderonOctober29,2015,acceptingasettlementagreementontheforwardlookingformularate,subjectto
minor compliance requirements.The settlement agreement provides for certain changes toATSI's formula rate template and
protocols,andalsochangesATSI'sROEfrom12.38%tothefollowingvalues:(i)12.38%fromJanuary1,2015throughJune30,
2015(ii)11.06%fromJuly1,2015throughDecember31,2015and(iii)10.38%fromJanuary1,2016,unlesschangedpursuantto
section205or206oftheFPA,providedtheeffectivedateforanychangecannotbeearlierthanJanuary1,2018.
TransferofTransmissionAssetstoMAIT
OnJune10,2015,MAIT,aDelawarelimitedliabilitycompany,wasformedasanewtransmissiononlysubsidiaryofFETforthe
purposesofowningandoperatingallFERCjurisdictionaltransmissionassetsofJCP&L,MEandPNfollowingthereceiptofall
necessarystateandfederalregulatoryapprovals.OnJune19,2015,JCP&L,PN,ME,FET,andMAITmadefilingswithFERC,the
NJBPU,andthePPUCrequestingauthorizationforJCP&L,PNandMEtocontributetheirtransmissionassetstoMAIT.Additionally,
thefilingsrequestedapprovalfromtheNJBPUandPPUC,asapplicable,of:(i)aleasetoMAITofrealpropertyandrightsofway
associatedwiththeutilities'transmissionassets(ii)aMutualAssistanceAgreement(iii)MAITbeingdeemedapublicutilityunder
state law (iv) MAIT's participation in FE's regulated companies' money pool and (v) certain affiliated interest agreements.If
approved,JCP&L,ME,andPNwillcontributetheirtransmissionassetsatnetbookvalueandanallocatedportionofgoodwillinatax
freeexchangetoMAIT,whichwilloperatesimilartoFET'stwoexistingstandalonetransmissionsubsidiaries,ATSIandTrAIL.MAIT's
transmissionfacilitieswillremainunderthefunctionalcontrolofPJM,andPJMwillprovidetransmissionserviceusingthesefacilities
underthePJMTariff.Duringthethirdquarterof2015,FirstEnergyrespondedtoFERCStaff'srequestforadditionalinformation
regardingtheapplication.FERCapprovalisexpectedduringthefirstquarterof2016withfinaldecisionsexpectedfromtheNJBPU
andPPUCbymid2016.FollowingFERCapprovalofthetransfer,MAITexpectstofileaSection204applicationwithFERC,and
othernecessaryfilingswiththePPUCandtheNJBPU,seekingauthorizationtoissueequitytoFET,JCP&L,PNandMEfortheir
respectivecontributions,andtoissuedebt.MAITwillalsomakeaSection205formularateapplicationwithFERCtoestablishits
transmissionrate.SeeNewJerseyandPennsylvaniainStateRegulationaboveforfurtherdiscussionofthistransaction.
CaliforniaClaimsMatters
InOctober2006,severalCaliforniagovernmentalandutilitypartiespresentedAESupplywithasettlementproposaltoresolve
allegedoverchargesforpowersalesbyAESupplytotheCaliforniaEnergyResourceSchedulingdivisionoftheCDWRduring2001.
ThesettlementproposalclaimsthatCDWRisowedapproximately$190millionfortheseallegedovercharges.Thisproposalwas
madeinthecontextofmediationeffortsbyFERCandtheNinthCircuitinseveralpendingproceedingstoresolvealloutstanding
refundandotherclaims,includingclaimsofallegedpricemanipulationintheCaliforniaenergymarketsduring2000and2001.The
NinthCircuithadpreviouslyremandedoneofthoseproceedingstoFERC,whichdismissedtheclaimsoftheCaliforniapartiesinMay
2011.TheCaliforniapartiesappealedFERC'sdecisionbacktotheNinthCircuit.AESupplyjoinedwithotherintervenorsinthecase
andfiledabriefinsupportofFERC'sdismissalofthecase.OnApril29,2015,theNinthCircuitremandedthecasetoFERCfor
furtherproceedings.OnNovember3,2015,FERCsetforhearingandsettlementprocedurestheremandedissueofwhetherany
individual public utility seller’s violation of FERC’s marketbased rate quarterly reporting requirement led to an unjust and
unreasonablerateforthatparticularsellerinCaliforniaduringthe20002001period.SettlementdiscussionsunderaFERCappointed
settlementjudgeareongoing.RequestsforrehearingorclarificationofFERC’sNovember3,2015orderbyvariousparties,including
AESupply,remainpending.
Inanotherproceeding,inMay2009,theCaliforniaAttorneyGeneral,onbehalfofcertainCaliforniaparties,filedacomplaintwith
FERCagainstvarioussellers,includingAESupply,againseekingrefundsfortransactionsintheCaliforniaenergymarketsduring
2000and2001.TheabovenotedtransactionswithCDWRarethebasisforincludingAESupplyinthiscomplaint.AESupplyand
otherpartiesfiledmotionstodismiss,whichFERCgranted.TheCaliforniaAttorneyGeneralappealedFERC'sdismissalofits
complainttotheNinthCircuit,whichhasconsolidatedthecasewithotherpendingappealsrelatedtoCaliforniarefundclaims,and
stayedtheproceedingspendingfurtherorder.
Theoutcomeofeitheroftheabovemattersorestimateoflossorrangeoflosscannotbepredictedatthistime.
PATHTransmissionProject
OnAugust24,2012,thePJMBoardofManagerscanceledthePATHproject,aproposedtransmissionlinefromWestVirginia
throughVirginiaandintoMarylandwhichPJMhadpreviouslysuspendedinFebruary2011.AsaresultofPJMcancelingtheproject,
approximately$62millionandapproximately$59millionincostsincurredbyPATHAlleghenyandPATHWV(anequitymethod
investmentforFE),respectively,werereclassifiedfromnetproperty,plantandequipmenttoaregulatoryassetforfuturerecovery.
PATHAlleghenyandPATHWVrequestedauthorizationfromFERCtorecoverthecostswithaproposedROEof10.9%(10.4%base
plus0.5%forRTOmembership)fromPJMcustomersoverfiveyears.FERCissuedanorderdenyingthe0.5%ROEadderforRTO
membershipandallowingthetariffchangesenablingrecoveryofthesecoststobecomeeffectiveonDecember1,2012,subjectto