Ohio utilities of
) have received approval to extend their Electric Rate Plan for two
more years that was set to expire on May 31, 2014. As a result of
the approval, FirstEnergy Ohio utilities - Ohio Edison, Cleveland
Electric Illuminating and Toledo Edison - can now establish
electricity prices for their customers through May 31, 2016.
In December 2009, the Ohio Companies had filed their three-year
portfolio plan to meet the energy efficiency and peak demand
reduction requirements for the 2010-2012 period. Under the
provisions of Senate Bill 221, the Ohio Companies had to implement
energy efficiency programs that will achieve a total annual energy
savings equivalent of approximately 470,000 MWH in 2012 and 530,000
MWH in 2013, with additional savings required through 2025.
The terms of the electric security plan include generation supplied
through a Competitive Bidding Process ("CBP") commencing June 1,
2011, a load cap of not less than 80% so that no single supplier is
awarded more than 80.0% of the tranches, a 6.0% generation discount
to certain low income customers provided by the Ohio Companies
through a bilateral wholesale contract with First Energy Solutions,
no increase in base distribution rates through May 31, 2014, and, a
new distribution rider, Rider Delivery Capital Recovery ("DCR"), to
recover a return of, and on, capital investments in the delivery
The company had filed for the extension of the current successful
plan in the first quarter of 2012. The extension will benefit 19
signatories that include parties that represent residential,
low-income, commercial and industrial customers, as well as
competitive retail electric suppliers, schools and hospitals.
The benefits these parties would get include continuing to
provide economic development and assistance to low-income customers
for the two-year extension period at levels established in the
existing Electric Security Plan ("ESP"), providing Percentage of
Income Payment Plan ("PIPP") customers with a 6% generation rate
discount, freezing the current base distribution rates through May
31, 2016, and providing capacity to shopping and non-shopping
customers at a market-based price set through an auction process.
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Also, it will allow conducting additional power auctions to secure
generation supply over a longer duration of time for non-shopping
customers which will protect them from potential price volatility.
Other important benefits include continuing Rider Delivery Capital
Recovery that allows continued investment in the distribution
system for the benefit of customers, securing generation supply
over a longer period of time to mitigate any potential price spikes
for FirstEnergy Ohio utility customers who do not switch to a
competitive generation supplier; and extending the recovery period
for costs associated with purchasing renewable energy credits
through the end of the new ESP period which will reduce the monthly
renewable energy charge for all FirstEnergy Ohio utility customers.
The company wanted to extend the current plan as it has led to
price certainty and has helped in generating more than $10 million
in annual economic development funding for Ohio communities and
low-income assistance to utility customers.
FirstEnergy focuses on enhanced customer service, reliability and
operational flexibility. This approval will allow Ohio customers to
continue to benefit from affordable electric rates that reflect
competitive market prices. The company will be able to take more
benefits from the existing plan and leverage additional
opportunities and provide long-term stability to its customers.
However, regulatory obstacles, a rise in fuel input costs and
demand volatility arising out of weather irregularities are matters
of concern. The company presently retains a short-term Zacks #2
Rank (Buy). We have a long-term Neutral recommendation on the
Based in Akron, Ohio, FirstEnergy Corporation is a diversified
energy company. Through its subsidiaries and affiliates, the
company engages in the generation, transmission and distribution of
electricity, as well as energy management and other energy-related
services. Following its recent merger with Allegheny Energy Inc.,
FirstEnergy operates in seven states, including Ohio, Pennsylvania,
New Jersey, New York, Virginia, Maryland and West Virginia.
The company mainly competes with
NextEra Energy, Inc.