FirstEnergy seeks approval in Ohio of settlement involving grid modernization

FirstEnergy on Nov. 9 said that its Ohio utilities – Ohio Edison, Cleveland Electric Illuminating Company, and Toledo Edison – have filed a stipulated agreement that would return $900m to customers as a result of the Tax Cuts and Jobs Act (TCJA) of 2017, and advances the Public Utilities Commission of Ohio’s PowerForward initiative.

The company noted that it has asked the commission to act on the settlement agreement by Dec. 31, and that upon approval, a typical residential customer using 1,000 kWh of electricity could expect to see an immediate $3.90 reduction in monthly bills, with the rest of the savings credited to customers over the next 25 years.

As noted in the filing, the signatory parties are: Ohio Edison, Toledo Edison, Cleveland Electric Illuminating Company, Direct Energy Services and Direct Energy Business, Environmental Defense Fund, commission staff, Ohio Energy Group, Industrial Energy Users-Ohio, Ohio Cable Telecommunications Association, Ohio Hospital Association, and Interstate Gas Supply.

The filing also noted that the stipulation provides for electric distribution grid modernization initiatives that would improve system reliability, enable faster restoration of service after outages, improve voltage conditions on the distribution system, allow customers to make more informed choices about energy usage, facilitate access to customer data by authorized competitive retail electric service providers, and better enable the companies to make future electric distribution grid modernization investments.

The stipulation is consistent with the PowerForward Roadmap, which resulted from the commission’s review of the latest in technological and regulatory innovation through three workshops that could serve to enhance the consumer electricity experience, FirstEnergy said in its filing.
FirstEnergy said that the companies filed their grid modernization business plan in Case No. 16-481-EL-UNC to start a process in which interested parties would have the opportunity to provide feedback and make suggestions on the development of a grid modernization strategy that would work best for the companies’ system to provide the greatest benefits to customers.

The companies subsequently proposed a distribution platform modernization (DPM) plan, filed in Case No. 17-2436-EL-UNC, as an effective complement to PowerForward and consistent with its objectives. FirstEnergy added that the DPM Plan proposed to begin modernizing the companies’ distribution system and “charting a path forward for future grid modernization projects” in the companies’ service territories. As a result, the companies’ first phase of the proposed grid modernization plan – Grid Mod I – includes attributes from the grid modernization business plan and the DPM Plan, and would provide customer benefits, while better positioning the companies to enable future grid modernization investments, FirstEnergy said.

In addition, the commission established a generic, industry wide proceeding in Case No. 18-47-AU-COI to address the impacts of the TCJA and to “determine the appropriate course of action to pass benefits resulting from the legislation on to ratepayers.” FirstEnergy added that the companies in January filed updated “Riders DMR and DCR,” which incorporated the TCJA’s lower federal corporate income tax rate. The companies also updated other riders impacted by the TCJA in accordance with their approved rider update and reconciliation process. FirstEnergy added that those updated riders resulted in annual customer savings of almost $40m.

The commission in October entered an order in Case No. 18-47-AU-COI, ordering that by Jan. 1, 2019, all Ohio rate-regulated utility companies, unless ordered otherwise, should file an application “not for an increase in rates” to reflect the TCJA’s impact on each specific utility’s current rates.

Discussing the terms and conditions agreed to by the signatory parties, FirstEnergy said that the companies agree to refund all tax savings associated with the TCJA, including riders, tax savings not reflected in riders, and the return over time of all of the normalized and non-normalized excess accumulated deferred income tax (EDIT) from Jan. 1, 2018.

The companies would credit tax savings through a new credit mechanism established for each company in an “ATA” proceeding filed simultaneously with the stipulation; the credit mechanism would be reconciled on an annual basis. FirstEnergy added that that treatment of tax savings not reflected in riders would begin effective Jan. 1, 2018, and continue until new base distribution rates become effective as a result of the companies’ next base distribution rate case.

Of grid modernization, FirstEnergy said that while the Grid Mod I plan described in the filing is in the aggregate, individual plans would be implemented for each operating company so that customers in all three service areas would benefit from grid modernization investments, including: advanced metering infrastructure (AMI), a meter data management system (MDMS) with associated systems and processes needed to enable advanced data access; distribution automation (DA); integrated volt/volt-ampere reactive (VAR) control (IVVC); and an advanced distribution management system (ADMS).

Rates specific to each operating company would be individually calculated based on the costs to, and benefits for, each operating company.

FirstEnergy also noted that the companies would be authorized to recover their actual capital costs up to $516m of Grid Mod I assets through Rider AMI. When appropriate, the companies should utilize competitive procurement methods to acquire Grid Mod I assets. Grid Mod I would be built over a three-year budget period, the company added. Capital costs associated with AMI investments, including advanced meters and supporting communications networks, would be recovered over a depreciable life of 15 years.

Incremental operation and maintenance (O&M) costs would be limited to only such costs that are actual, demonstrable, and truly incremental to the O&M costs collected in base rates. Further, FirstEnergy added, no incremental O&M costs associated with Grid Mod I are to be eligible for recovery over an aggregate of $139m for the first three years of deployment, which includes $72.2m for the retirement of non-AMI meters.

FirstEnergy said that the companies would install, as part of Grid Mod I, 700,000 advanced meters along with the necessary supporting communications infrastructure, and an MDMS, as well as associated systems and process.

In its statement, FirstEnergy noted that other key components of its grid modernization plan include:

  • Developing time-varying rates that give customers the opportunity to reduce their monthly electric bill by using energy during off-peak periods
  • Installing automated equipment on at least 200 distribution lines that can automatically isolate problems, prevent entire circuit lockouts, and quickly restore electric service to customers; FirstEnergy would work with commission staff to determine which circuits would be prioritized to maximize customer benefits
  • Installing voltage regulating equipment on at least 202 circuits to provide energy efficiency benefits by reducing excessive voltage levels on the distribution grid

"The agreement filed with the PUCO will deliver financial and service reliability benefits for our customers now and in the future," Samuel Belcher, senior vice president and president of FirstEnergy Utilities, said in the statement. "The grid modernization initiative is consistent with the technology supported by the PUCO and the initial deployment of smart meters for our Ohio utilities will ultimately help customers make more informed decisions about their energy usage."

Separately on Nov. 9, John Finnigan, senior counsel, Clean Energy, with the Environmental Defense Fund, said: “This step toward a more modern, cleaner energy system is a promising sign that FirstEnergy might finally be moving in the right direction. But if the company keeps trying to make Ohioans pay for its uneconomic power plants, and we expect it will, we will continue to block those bailouts.”

About Corina Rivera-Linares 3056 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.