The West Virginia PSC has approved the settlement reached by the parties to FirstEnergy's request to increase rates, and your rates will go up 8% overall on February 25. Yeah, rate increases suck, but I think the bigger question here is... Did you get a better deal in the settlement than you would have if this case had gone through the full evidentiary hearing and been decided by the Commissioners?
I'm thinking... yes. And here's why:
Actual base rate increase requested: $95.7M (9.3%).
Actual base rate increase granted: $15M (1.45%).
Vegetation Management Surcharge requested: $48.4M
Vegetation Management Surcharge granted: $47.5M HOWEVER, something good happened here that is not reflected in the number. For the first time, FirstEnergy will have to account for every dollar spent on vegetation management and file semi-annual reports that true up its actual expenditures to actual rates collected. The vegetation management expenses must be reviewed for prudence. In the past, the company was simply handed a certain amount annually for "vegetation management." The company never had to account for how (or if!) the amount was actually spent on vegetation management. What happened is that the company wasn't doing adequate vegetation management, resulting in more severe and frequent outages, but was using the money to bulk up its balance sheet and share dividends. Now all the money collected for vegetation management must be spent actually maintaining vegetation. This is a very good thing!
Depreciation rate change increase requested: $17M
Depreciation rate change granted: None.
Requested increase in monthly customer charge: $1 (up to $6 from the existing $5)
Monthly customer charge granted: $5 (no change).
Deferred expense for 2012 storm restoration: $45.8M. The companies wanted to collect this with an annual return calculated on the balance. Instead, they will collect this over 5 years ($9M/yr.) WITHOUT any return (interest) being paid.
The company wanted to collect $60M in expense it incurred in closing its Albright, Willow Island and Rivesville generating plants. Instead, it will collect zero. However, the companies are permitted to defer this expense (hold it on their balance sheet) for the time being, and may request recovery of it at a later date. At that later date, you bet the recovery request will include years of "interest" accrued during the deferral. This bears watching!
The companies had requested a surcharge to pay for the cost of upgrading their generators to comply with EPA regulations. They withdrew their request in the settlement, however, the settlement simply kicks that can down the road, allowing the companies to create a regulatory asset (deferral) for those costs and to collect them during its next base rate case. In the meantime, the accumulating costs will earn 8.19% return (interest), which will be payable at the next rate increase.
But, it looks like the apportionment of rates between customer classes was adjusted to lower rates of the industrial users, while residential rates were increased. Remember, industrial users were a party to this settlement.
Do you think you might have gotten a better deal from the PSC Commissioners? I doubt it. They're used to giving FirstEnergy everything it wants. The Commissioners aren't really fighting for you, but the staff of the PSC, and our Consumer Advocate WERE fighting for you here and I think they engineered the best deal possible. There was never any chance that the PSC would simply deny the rate increase in its entirety. It was all about "how much." And you kept the pressure on by filing comments and speaking at the public hearings. Get educated, stay engaged!
I'm thinking... yes. And here's why:
Actual base rate increase requested: $95.7M (9.3%).
Actual base rate increase granted: $15M (1.45%).
Vegetation Management Surcharge requested: $48.4M
Vegetation Management Surcharge granted: $47.5M HOWEVER, something good happened here that is not reflected in the number. For the first time, FirstEnergy will have to account for every dollar spent on vegetation management and file semi-annual reports that true up its actual expenditures to actual rates collected. The vegetation management expenses must be reviewed for prudence. In the past, the company was simply handed a certain amount annually for "vegetation management." The company never had to account for how (or if!) the amount was actually spent on vegetation management. What happened is that the company wasn't doing adequate vegetation management, resulting in more severe and frequent outages, but was using the money to bulk up its balance sheet and share dividends. Now all the money collected for vegetation management must be spent actually maintaining vegetation. This is a very good thing!
Depreciation rate change increase requested: $17M
Depreciation rate change granted: None.
Requested increase in monthly customer charge: $1 (up to $6 from the existing $5)
Monthly customer charge granted: $5 (no change).
Deferred expense for 2012 storm restoration: $45.8M. The companies wanted to collect this with an annual return calculated on the balance. Instead, they will collect this over 5 years ($9M/yr.) WITHOUT any return (interest) being paid.
The company wanted to collect $60M in expense it incurred in closing its Albright, Willow Island and Rivesville generating plants. Instead, it will collect zero. However, the companies are permitted to defer this expense (hold it on their balance sheet) for the time being, and may request recovery of it at a later date. At that later date, you bet the recovery request will include years of "interest" accrued during the deferral. This bears watching!
The companies had requested a surcharge to pay for the cost of upgrading their generators to comply with EPA regulations. They withdrew their request in the settlement, however, the settlement simply kicks that can down the road, allowing the companies to create a regulatory asset (deferral) for those costs and to collect them during its next base rate case. In the meantime, the accumulating costs will earn 8.19% return (interest), which will be payable at the next rate increase.
But, it looks like the apportionment of rates between customer classes was adjusted to lower rates of the industrial users, while residential rates were increased. Remember, industrial users were a party to this settlement.
Do you think you might have gotten a better deal from the PSC Commissioners? I doubt it. They're used to giving FirstEnergy everything it wants. The Commissioners aren't really fighting for you, but the staff of the PSC, and our Consumer Advocate WERE fighting for you here and I think they engineered the best deal possible. There was never any chance that the PSC would simply deny the rate increase in its entirety. It was all about "how much." And you kept the pressure on by filing comments and speaking at the public hearings. Get educated, stay engaged!
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