Workshop B. FirstEnergy: Significant Developments Impacting Electric Rates. Tuesday, February 19, :45 a.m. to Noon

Transcription

1 Workshop B FirstEnergy: Significant Developments Impacting Electric Rates Tuesday, February 19, :45 a.m. to Noon

2 Biographical Information Richard L. Jackson, Executive Vice President, Operations, ASHTA Chemicals Inc., 3509 Middle Rd., PO Box 858 (44005), Ashtabula, OH (440) Fax (440) Mr. Jackson has been the EVP Operations, since 1998 and responsible for all manufacturing, maintenance, EHS, quality, and engineering. Since 2000, he has managed all aspects of power for the facility, including contract negotiations including a historic special arrangement, thirdparty generation contracts, demand response contracts, and interconnect agreements for distributed supply. ASHTA Chemical is a Chlor-Alkali manufacturer specializing in potassium based chemicals. Chlor-alkali process uses an electrolytic chemical process which is very energy intensive. The single facility in Ashtabula, OH has historically been one of CEI s top customers. Matthew R. Pritchard, Attorney, McNees Wallace & Nurick LLC 21 East State Street, 17th Floor, Columbus, OH (614) (Direct Dial) / (614) (Fax) mpritchard@mwncmh.com Matt is a graduate of The Ohio State University and Capital University Law School, where he graduated magna cum laude in Upon graduation, Matt joined McNees Wallace & Nurick LLC as an associate in its Energy and Environment practice group where he focuses on representing large consumers of energy in regulatory litigation before the Public Utilities Commission of Ohio (PUCO) and in appeals of the PUCO s decisions at the Ohio Supreme Court. Matt currently serves as chair of the Columbus Bar Association Energy Law Committee. Sonny Fanelli, Director, Rates & Regulatory Affairs FirstEnergy Corp., 76 S. Main Street, Akron, OH sfanelli@firstenergycorp.com Throughout his professional career at FirstEnergy, Sonny has worked in several areas across the organization. Upon joining FirstEnergy Service Company he spent time early in his career in Rates and Regulatory Affairs, the Controller s Department, Internal Auditing, Treasury, Investor Relations, and Customer Support. The majority of Sonny s career has been spent in Rates and Regulatory Affairs, working in both Akron and Morristown, NJ, and he has taken on increased responsibilities over the years. In Sonny s current role, he is responsible for analyzing financial data of Ohio Edison Company, The Cleveland Electric Illuminating Company, and The Toledo Edison Company for various projects, preparing state regulatory filings and associated rate case materials, and working with the Staff of the Public Utilities Commission of Ohio. Sonny has experience in a number of matters that have come before the Commission, including base rate cases, Electric Security Plans, Market Rate Offers, SEET filings, and numerous rider cases and audits. He also provides support to the Companies customer service representatives on issues related to the Companies rates and tariffs.

3 Santino Fanelli Director, Rates and Regulatory Affairs Ohio Energy Management Conference February 19-20, 2019

4 Disclaimer The information contained in this presentation material is intended to provide generally descriptive and summary information. Any conflict between the information contained in this material, or conveyed orally during the presentation, and the information provided in any of the Companies public filings, as part of Public Utilities Commission of Ohio Entries or Orders, or the Companies tariffs, or Ohio Statutes and Rules, is unintentional and the docketed material controls. The information contained herein is subject to change during the regulatory process. Ohio Energy Management Conference February 19-20,

5 Agenda Generation Transmission Distribution Federal Income Tax Reform Grid Modernization Energy Efficiency Ohio Energy Management Conference February 19-20,

6 Generation Generation Service Rider (Rider GEN) Power for SSO customers procured through a competitive bidding process Seasonally differentiated rider that recovers generation costs from nonshopping customers Summer months: June-August Winter months: September-May Ohio Energy Management Conference February 19-20,

7 Generation Auction Schedule Ohio Energy Management Conference February 19-20,

8 Generation Auction Clearing Prices Blended Competitive Bid Price is the result of the weighted average of the Companies SSO auctions Capacity pricing is established through an annual competitive auction conducted by PJM Ohio Energy Management Conference February 19-20,

9 Generation Shopping Update Shopping has increased from 15% of kwh to 88% since 2008 FirstEnergy Ohio Operating Companies continue to have highest shopping levels in the state The savings Commercial and Industrial customers achieve through shopping could be invested into the economy Source: Public Utilities Commission of Ohio website. Ohio Energy Management Conference February 19-20,

10 Generation Time-of-Use Time-of-Use Pricing Options for Non-Shopping Customers Generation Service Rider (Rider GEN) Time-of-Day Option Experimental Critical-Peak Pricing Rider (Rider CPP) Experimental Real-Time Pricing Rider (Rider RTP) Opportunity to shift load from higher-price to lower-price periods or add new load during lower-price periods Ohio Energy Management Conference February 19-20,

11 Transmission Non-Market Based Transmission Costs are recovered through non-bypassable Rider NMB Includes charges incurred from PJM such as NITS Majority of charges are allocated by PJM using NSPL Rider updated annually on March 1 Ohio Energy Management Conference February 19-20,

12 Transmission Rider NMB Pilot Introduced in June 2016 as a result of ESP IV Case Allows eligible customers to shop for the services they would have normally obtained through Rider NMB Pilot participants must take both their NMB service and generation service from a Retail Supplier participating in the Pilot Participation in the Pilot does not guarantee that a customer will save Ohio Energy Management Conference February 19-20,

13 Distribution Base distribution rate freeze through May 2024 Continuation of Delivery Capital Recovery Rider (Rider DCR) Non-residential charges based on monthly peak demand Electric Demand Hour Ohio Energy Management Conference February 19-20,

14 Federal Income Tax Reform Applicable riders updated in 2018 to incorporate lower tax rate Approximately $40 million in annual savings Stipulation pending to address impacts of federal income tax reform and grid modernization Original Stipulation Filed November 9, 2018 Supplemental Stipulation filed January 25, 2019 Under the pending Stipulation, Companies would return to customers all tax savings from January 1, 2018 Total estimated savings of ~$900M Rate design: energy credit by rate schedule Ohio Energy Management Conference February 19-20,

15 Grid Modernization Under the same pending Stipulation, Companies would make investments in phase one of grid modernization Projects: 700,000 Smart Meters, 200 Distribution Automation Circuits, 202 Integrated Volt Var Circuits, Advanced Distribution Management System (ADMS), Additional Platform Work (circuit ties, reconductoring, reclosers) Customer benefits: fewer and shorter power outages, improved storm restoration; customers participate in time-varying rates; EE and peak demand reductions; carbon reduction, operational savings Robust review/audit of costs Collaborative process for stakeholders Rate design: customer charge Ohio Energy Management Conference February 19-20,

16 PowerForward PowerForward is PUCO s review of the latest in technological and regulatory innovation that could serve to enhance the consumer electricity experience. Through this series, we intend to chart a clear path forward for future grid modernization projects, innovative regulations and forwardthinking policies. On Aug. 30, 2018, the PUCO issued its PowerForward Roadmap: EDUs file grid architecture status reports EDUs file current state distribution system planning assessment EDUs file cybersecurity plans PowerForward collaborative and workgroups Ohio Energy Management Conference February 19-20,

17 Energy Efficiency Portfolio Portfolio Plan for Companies EE Portfolio offers incentives on a range of Residential, Commercial & Industrial equipment and end uses, such as: Residential Appliance Turn-in Audits Efficient Consumer Products Efficient Lighting Energy Conservation Kits HVAC Equipment Low-Income Efficiency Assistance Commercial & Industrial Agricultural Audits Commercial Electronics Custom Buildings Custom Equipment Data Centers Efficient Lighting HVAC Equipment Retro-Commissioning Costs recovered through Rider DSE Further information, including program incentives and eligibility, can be found at Ohio Energy Management Conference February 19-20,

18 Ohio Energy Management Conference February 19-20,

19 FirstEnergy: Significant Developments Impacting Electric Rates Workshop B Manufacturers Education Council 23 rd Annual Ohio Energy Management Conference Columbus, Ohio February 19, 2019 Matt Pritchard Attorney, McNees Wallace & Nurick LLC

20 Presentation Topics Electric Security Plan ( ESP ) IV Update Distribution Modernization Rider ( DMR ) Distribution Charges Rate GT Phase Out Settlement of Tax & Distribution Modernization Plan Issues Transmission Costs Capacity and Transmission Peaks FirstEnergy Solutions ( FES ) Bankruptcy Potential Legislation 18

21 ESP IV Update 19

22 ESP IV Update DMR Rider Figures in millions $900 $800 $700 $600 $500 $400 $300 $200 $100 $- $204 $168 $168 $ Year Total $168 Potential 2020 $168 Potential 2021 $876 5-Year Total Cumulative Annual Authorized to collect $131M/year grossed up for taxes for 3 years with potential 2 year extension (the level of revenue for years 4 and 5, if eventually authorized, has not been established) Tax savings on DMR ~ $36M/year as a result of the Tax Cuts and Jobs Act of 2017 ( TCJA ) DMR authorized because PUCO found that FirstEnergy faced a serious risk of credit downgrade that would result in adverse effects on the companies and their customers PUCO determined that the rider would assist the companies in accessing capital markets to make investments in distribution system, including grid modernization initiatives Current rates in Appendix 20

23 ESP IV Update Delivery Capital Recovery Rider ( Rider DCR ) Rider DCR recovers incremental capital distribution investment subject to the following annual revenue caps: o June 1, 2016 May 31, 2017: $240M o June 1, 2017 May 31, 2018: $270M o June 1, 2018 May 31, 2019: $300M o June 1, 2019 May 31, 2020: $320M o June 1, 2020 May 31, 2021: $340M o June 1, 2021 May 31, 2022: $360M o June 1, 2022 May 31, 2023: $375M o June 1, 2023 May 31, 2024: $390M Current rates in Appendix 21

24 ESP IV Update Rate GT High Load Factor Credit Charges June 1, 2016 May 31, 2017: $8.00/kVa June 1, 2017 May 31, 2018: $6.00/kVa June 1, 2018 May 31, 2019: $4.00/kVa Demand charges returned through energy credit 22

25 Settlement of Tax & Distribution Modernization Plan Issues 23

26 Settlement of Tax & Distribution Modernization Plan Issues Settlement Tax Savings Approximately $900M in savings Customers have been saving ~$40M/year since 1/1/18 through rider adjustments Excess accumulated deferred income taxes ( EDIT ) Normalized EDIT: $483M credited to customers over ~25 years Non normalized Property EDIT: $194M credited to customers over 10 years Non normalized Non Property EDIT: $93.5M offset to above credits and amortized over 5 years Current federal income tax expense savings: $35M credited annually Projected TCJA credit mechanism rates for 2019 are below (2019 projected credit pick up 2018 portion of credit. Credit for 2020 and will be less): 24

27 Settlement of Tax & Distribution Modernization Plan Issues Settlement Distribution Modernization Plan Investments Advanced metering infrastructure ( AMI ) (700,000 advanced meters) Meter data management system ( MDMS ), with associated systems and processes to enable advanced data access Distribution automation ( DA ) (200 circuits) Integrated volt/var ampere reactive control ( IVVC ) (202 circuits) Advanced distribution management system Plan Costs Can recover up to $516M in capital costs Incremental operations and maintenance ( O&M ) costs limited to $139M over years 1 3 O&M costs must be incremental to O&M costs recovered in base distribution rates O&M capped at $15.2M in year 4, at $10.3M in year 5, and $10.5M in year 6 Costs recovered through Rider AMI Rate GT customers do not pay Rider AMI O&M Savings to be Credited $0.05M in year 1, $0.90M in year 2, $3.28M in year 3, $8.58M in year 4, $9.68M in year 5, $9.82M in year 6 Residential customers will receive an additional $1M in O&M savings for years

28 Transmission Costs 26

29 Transmission Costs Non Market Based Transmission Services ( Rider NMB ) Rider Revenue Requirement $74M $60M $58.3M $95.5M $164.6M 7/1/14 $244M 7/1/15 $408M 3/1/16 $504M 3/1/17 $562M 3/1/18 $622M 3/1/2018 $696M Annual Increase 27

30 Capacity & Transmission Peaks 28

31 Capacity & Transmission Peaks 2018 Peak Days PJM System Peaks Capacity Obligation 8/28/18 HE ,454 9/4/18 HE ,285 6/18/18 HE ,169 9/5/18 HE ,621 8/27/18 HE ,508 Projected 2018 Peak 152,108 Peaks that establish customer s PLC and NSPL ATSI Zone Transmission Obligation 9/5/18 HE ,824 8/28/18 HE ,717 6/18/18 HE ,624 9/4/18 HE ,395 7/16/18 HE ,377 8/27/18 HE ,376 8/29/18 HE ,374 Projected 2018 Peak 12,952 * HE: Hour Ending ** PLC: Peak load contribution, i.e. capacity billing tag *** NSPL: Network service peak load, i.e. transmission billing tag 29

32 Capacity & Transmission Peaks 2017 Peak Days Capacity Obligation 5 CPs PJM System Peaks Capacity Obligation 7/19/2017 HE ,331 7/20/2017 HE ,097 7/21/2017 HE ,003 6/12/2017 HE ,660 6/13/2017 HE ,365 ATSI Zone Transmission Obligation 7/19/2017 HE ,052 6/13/2017 HE ,037 7/21/2017 HE ,469 8/21/2017 HE ,894 7/20/2017 HE ,834 Transmission Obligation 5 CPs 2016 Peak Days Capacity Obligation 5 CPs PJM System Peaks Capacity Obligation 8/11/2016 HE ,945 7/25/2016 HE ,931 8/12/2016 HE ,889 7/27/2016 HE ,543 8/10/2016 HE ,357 ATSI Zone Transmission Obligation 8/11/2016 HE ,752 8/25/2016 HE ,701 9/7/2016 HE ,627 8/12/2016 HE ,578 7/13/2016 HE ,539 Transmission Obligation 5 CPs 30

33 FES Bankruptcy 31

34 FES Bankruptcy Exelon had agreed to purchase retail contracts for $140M Subsequently, FES terminated the agreement with Exelon Increasingly likely that FES will emerge from bankruptcy and continue to act as a competitive supplier 32

35 FES Bankruptcy Excerpt of press release 33

36 FES Bankruptcy Generation Deactivations (7,971 MW) Davis Besse (896 MW): 5/31/2020 Perry (1,247 MW): 5/31/2021 Eastlake 6 (24 MW), June 1, 2021 Bruce Mansfield Units 1-3 (2,490 MW), June 1, 2021 FES also seeks to reject wind PPAs Beaver Valley 1 (909 MW): 5/31/2021 Beaver Valley 2 (902 MW): 10/31/2021 W.H. Sammis Diesel (13 MW), June 1, 2021 W.H. Sammis Units 5-7 (1,490 MW), June 1, 2022 Pleasants Power Station to be transferred to creditors Seeks to reject PPA with Forked River (86MW) 34

37 Significant Court & Legislative Developments

38 Potential Legislation Energy Mandate Reform kwh Tax Clarification Zero Emissions Nuclear ( ZEN ) Credit Submetering Biennial State Budget 36

39 Questions? 37

40 Contact Information Matt Pritchard McNees Wallace & Nurick LLC 21 East State Street, 17th Floor Columbus, OH Direct Telephone: Fax: *The information in this presentation represents the personal views of Mr. Pritchard and are not necessarily the views of his firm, colleagues, or clients 38

41 Appendix 39

42 40 Rider DMR Rates Rider DMR Rates Ohio Edison ( OE ) Cleveland Electric Illuminating ( CEI ) Toledo Edison ( TE ) RS (all kwhs, per kwh) GS (per kw of Billing Demand) $ GS (all kwhs, per kwh) GP (per kw of Billing Demand) $ GP (all kwhs, per kwh) GSU (per kva of Billing Demand) $ GSU (all kwhs, per kwh) GT (per kva of Billing Demand) $ GT (all kwhs, per kwh) RS (all kwhs, per kwh) GS (per kw of Billing Demand) $ GS (all kwhs, per kwh) GP (per kw of Billing Demand) $ GP (all kwhs, per kwh) GSU (per kw of Billing Demand) $ GSU (all kwhs, per kwh) GT (per kva of Billing Demand) $ GT (all kwhs, per kwh) Rates effective 1/1/19

43 Rider NMB Rates OE CEI TE RS (all kwhs, per kwh) GS* (per kw of Billing Demand) $ GP* (per kw of Billing Demand) $ GSU (per kva of Billing Demand) $ GT (per kva of Billing Demand) $ RS (all kwhs, per kwh) GS* (per kw of Billing Demand) $ GP* (per kw of Billing Demand) $ GSU (per kw of Billing Demand) $ GT (per kva of Billing Demand) $ RS (all kwhs, per kwh) GS* (per kw of Billing Demand) $ GP* (per kw of Billing Demand) $ GSU (per kva of Billing Demand) $ GT (per kva of Billing Demand) $ Rates effective 4/1/18 41

44 Rider DCR Rates OE TE CEI RS (all kwhs, per kwh) GS (per kw of Billing Demand) $ GP (per kw of Billing Demand) $ GSU (per kva of Billing Demand) $ RS (all kwhs, per kwh) GS (per kw of Billing Demand) $ GP (per kw of Billing Demand) $ GSU (per kva of Billing Demand) $ RS (all kwhs, per kwh) GS (per kw of Billing Demand) $ GP (per kw of Billing Demand) $ GSU (per kw of Billing Demand) $ Rates effective 12/1/18 42