FirstEnergy seeks reduced rate hike for West Penn Power, other PA utilities
Six months after FirstEnergy first filed for what then were rate increases that would boost the average West Penn Power residential bill by 9.64 percent, the Public Utility Commission is mulling over a reduced request that still would average out to be a 7.2 percent hike.
“The four FirstEnergy companies … have filed a joint petition for a partial settlement, which is being reviewed by (the PUC’s Office of Administrative Law Judge),” commission Press Secretary Nils Hagen-Frederiksen said Monday. “(A) final decision on the rate case is due by Jan. 27, 2017.”
In Pennsylvania, FirstEnergy utilities include West Penn Power, Penn Power, Pennsylvania Electric (Penelec) and Metropolitan Edison (Met-Ed), serving more than 2 million customers including Greensburg-based West Penn’s 720,000 customers in central and southwestern Pennsylvania.
On Oct. 14 the four FirstEnergy utilities filed a petition that reflects settlement agreements with the state offices of Consumer Advocate and Small Business Advocate and Bureau of Investigation and Enforcement, the West Penn Power Industrial Intervenors and similar agencies focused on Penelec and Met-Ed, Pennsylvania State University, the Coalition for Affordable Utility Services and Energy Efficiency in Pennsylvania, Wal-Mart Stores East LP, Sam’s (Club) East, Inc., North America Hoganas Holdings Inc. in Hollsopple and AK Steel Corporation.
Originally, West Penn Power requested an increase of $98 million, or approximately 5.7 percent over current rates. However, for an average residential customer using 1,000 kilowatt-hours per month that would have translated into a 9.64 percent increase, or $10.89, for a new monthly total bill of $123.88.
However, according to a FirstEnergy spokesman, under the proposed settlement filed three weeks ago, West Penn Power customers would see an average increase of 7.2 percent, or $8.09, for a total bill of $121.08, including an increase in the customer service charge from $5.81 to $7.44. Overall, West Penn Power would receive an increase of $65.6 million.
Provisions of those agreements include $95.3 million annually in continued assistance to low-income customers.
In a “consolidated report to the financial community” that accompanied FirstEnergy’s third quarter earnings statement as issued on Friday, the company said the agreements “include an annual rate increase totaling approximately $291 million across the four companies and reflect the inclusion of charges for smart meters as well as the Distribution System Improvement Charge which would otherwise be recovered under previously approved riders.”
In all, the company said the agreements are expected to result in $203 million in annual pre-tax earnings including $40 million for West Penn Power.
As proposed in April, FirstEnergy officials said the original rate plan would benefit customers by continuing FirstEnergy’s service reliability enhancement efforts in the Keystone State. As filed on Oct. 14, FirstEnergy officials still expected to provide such efforts including circuit and substation upgrades, pole replacements, additional vegetation management, and equipment inspections.
As revised, pending PUC approval, Penelec customers would see an average increase of 12.8 percent, or $17.62, for a total bill of $155.51, including an increase in the monthly customer service charge from $9.99 to $11.25.
Penn Power customers would see an average increase of 10.4 percent, or $13.51, for a total bill of $143.57, including an increase in the monthly customer service charge from $10.85 to $11.00.
Met-Ed customers would see an average increase of 10.7 percent, or $13.91, for a total bill of $143.73, including an increase in the monthly customer service charge from $10.25 to $11.25.
As announced Friday, using what it called “generally accepted accounting principles” or GAAP, FirstEnergy said its 10 utilities earned $380 million in the three-month period ending Sept. 30, or 89 cents per basic and diluted share of common stock, on $3.9 billion in revenue.
That’s down from $395 million, or 94 cents per basic share of common stock, on revenue of $4.1 billion in the same quarter a year ago. Operating or non-GAAP earnings for the third quarter of 2016 were 90 cents per basic share of common stock, compared to 98 cents per share for the same quarter in 2015.
Still, in a news release accompanying those figures, FirstEnergy CEO Charles E. Jones said, “Our results for the third quarter exceeded our expectations due to the impact of record summer temperatures on our distribution business, as well as solid operations across each of our business segments. We also continue to make solid progress on our regulated growth strategies that are designed to provide predictable and customer-service oriented growth.”
For all of 2016, FirstEnergy expects a GAAP loss of 90 cents to $1.30 per basic share, up from a previous expectation that the stock price would drop by 55 to 75 cents per share. The Akron-based utility operator said that loss primarily would reflect asset impairment and plant exit costs recognized in the second quarter of 2016 and an estimated charge of 45 to 75 cents per basic share associated with the company’s annual pension and OPEB mark-to-market adjustment.
Still, FirstEnergy expects a higher operating or non-GAAP earning of $2.60 to $2.70 per share for the entire year, up from $2.40 to $2.60 per share as previously estimated.
FirstEnergy is anticipating up to $500 million in additional equity by year’s end. One reason is West Penn Power Company’s retirement of $145 million worth of first mortgage bonds or FMBs at maturity with an interest rate of 5.875 percent.
FirstEnergy said West Penn Power Company priced $475 million worth of FMBs on Sept. 23, including $100 million with an interest rate of 3.84 percent due in 2046, $100 million with an 4.09 percent rate due in 2047 and $275 million with a 4.14 percent rate due in 2047. The company expects those first-mortgage bond issues to fund and close respectively in December of this year and September and December of next year, with proceeds to be used to repay short-term borrowings, fund capital expenditures and serve other general corporate purposes.