FirstEnergy Utilities See Rate Case Approval, Shares Up - Analyst Blog

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On Feb 4, FirstEnergy Corp. ( FE ) declared that its two subsidiaries, Monongahela Power Company (Mon Power) and Potomac Edison Company, received a rate case approval from the Public Service Commission ("PSC") of West Virginia. Following the release, the share price of FirstEnergy increased 2.2%.

The rate case was filed to reimburse expenses in connection with environmental compliance investments at coal-fired power plants and enhancement of the distribution system, including extensive trimming of trees and repairs related to Derecho and Hurricane Sandy, which occurred in 2012.

The rate settlement will boost revenues by approximately $63 million. In order to help low-income customers to pay their electricity bills, the approved case obligates the subsidiaries to increase their shareholder contributions by $150,000 annually to the Dollar Energy Fund or a similar agency.

In addition, the PSC also sanctioned an order for an annual fuel rate adjustment case filed in Dec 2014. Consequently, monthly residential electric bills will be increased by 1% to recover the cost of coal and purchased power for generation plants.

As a result of the rate approvals, a typical Mon Power and Potomac Edison residential customer using 1,000 kilowatt hours per month is expected to see a rise in the bill from $92.38 to $100.49 monthly. The new rates will come into effect from Feb 25, 2015. Even so, the increased rates will still be 20% below the national average.

FirstEnergy's Mon Power subsidiary is undertaking large-scale expansion projects to cater to rising electric demand due to the boom in West Virginia's Marcellus Shale gas industry.

Last month FirstEnergy announced that it has spent $168 million and $198 million in the Potomac Edison and the Mon Power service areas respectively in 2014. These include investments in reliability infrastructure and expansion of new transmission lines.

Zacks Rank

FirstEnergy currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the electric utility space include Abengoa Yield plc ( ABY ), Enersis S.A. ( ENI ) and Huaneng Power International, Inc. ( HNP ). All these stocks currently sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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