A proposal from Akron-based FirstEnergy styled as an electric security plan was modified by Ohio's Public Utilities Commission to a fraction of what the company submitted, and now the utility is mulling over other steps it might take.
The Electric Security Plan was originally approved by state regulators in March after months of deliberations and opposition that included well-funded media campaigns from other competing utilities.
The FirstEnergy proposal originally sought an eight-year approval to generate $558 million dollars per year in what is termed a "Distribution Modernization Rider," or DMR, which would provide the utility with capital to modernize it's electric distribution system. Under the modifications approved by the PUCO released today, that DMR was instead set at $132 million dollars annually over a three-year period with an additional two-year extension possible.
PUCO Chairman Asim Z. Haque said "We expect that these future endeavors will advance the electric industry in FirstEnergy's service territory and benefit Ohio's consumers and businesses."
The bottom line for most customers, FirstEnergy said in a news release, is an average increase of $3 monthly for the average customer using 750 kilowatt-hours per month. FirstEnergy says the overall monthly bills will still be lower than over the past year but CEO Charles E. Jones called the decision "disappointing" and said it would leave the company short in what was needed to cover necessary investments.
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(PUCO)The Public Utilities Commission of Ohio (PUCO) today rejected FirstEnergy's modified Retail Rate Stability (RRS) rider or "virtual PPA" proposal. The Commission ordered FirstEnergy's Ohio utilities to establish PUCO staff's recommended Distribution Modernization Rider (DMR) instead, and to eliminate the existing RRS rider.
In its application for rehearing, FirstEnergy proposed to modify rider RRS such that it would continue as a financial hedge, but would not be tied to the physical operation of generation in the state. The Commission rejected FirstEnergy's proposal because it lacked important benefits related to reliability, resource diversity and economic development.
Rider DMR, set at $132.5 million per year (to be grossed up for taxes annually), will provide FirstEnergy with an infusion of capital so that it will be financially healthy enough to make future investments in grid modernization. The Commission limited Rider DMR to three years, with the possibility of a two-year extension, subject to Commission approval. FirstEnergy requested that Rider DMR be granted in the amount of $558 million per year for eight years.
During the term of rider DMR, FirstEnergy will maintain its headquarters in Akron, Ohio, and make sufficient progress in grid modernization initiatives ordered by the Commission, including its deployment of smart grid technology in the companies' service territories.
"The DMR's primary purpose is to ensure that FirstEnergy retains a certain level of financial health and creditworthiness so that it can invest in future distribution modernization endeavors," stated Chairman Asim Z. Haque. "We expect that these future endeavors will advance the electric industry in FirstEnergy's service territory and benefit Ohio's consumers and businesses."
In May, FirstEnergy and other interested parties filed applications for rehearing following the PUCO's March 31, 2016 opinion and order establishing an electric security plan. An evidentiary hearing was held at the PUCO in July and August 2016 in order for interested parties to provide testimony on the rehearing applications.
A copy of the PUCO order can be read here.
Response from FirstEnergy
(FirstEnergy Corporation)FirstEnergy Corp.'s (NYSE: FE) Ohio utilities – Ohio Edison, Cleveland Electric Illuminating and Toledo Edison – today announced that the Public Utilities Commission of Ohio (PUCO) has approved modifications to Powering Ohio's Progress, the companies' comprehensive Electric Security Plan (ESP) originally approved in March.
The PUCO order authorizes the companies to collect approximately $204 million per year over a three-year term. The charge is expected to result in a $3 increase on monthly bills, or about three percent, for a typical residential customer using 750 kilowatt-hours per month. With the new charge, total monthly bills for FirstEnergy's residential customers are expected to be lower than they were a year ago and remain among the lowest in the state.
"Today's decision is disappointing for our customers," said Charles E. Jones, FirstEnergy President and Chief Executive Officer. "While we clearly demonstrated to the PUCO what is essential to ensure reliability for customers in the future, the amount granted is insufficient to cover the necessary and costly investments. The decision also fails to recognize the significant challenges that threaten Ohio utilities' ability to effectively operate."
The company is evaluating the Commission's order and considering next steps.