FirstEnergy's Ohio Electric Companies File to Withdraw Electric Security Plan

Rhea-AI Summary

FirstEnergy Corp. (NYSE: FE) Ohio electric companies have filed to withdraw their current Electric Security Plan (ESP) 5 with the Public Utilities Commission of Ohio (PUCO). If approved, they would revert to their previous ESP4 plan, which was effective through May 31, 2024. The change would restore about $6 million in annual, nonrecoverable spending for energy efficiency programs, economic development funding, and low-income assistance. The reversion is expected to reduce bills by approximately $2.00 for typical non-shopping residential customers using 750-kWh monthly. The companies plan to propose enhancements to the auction process to ensure competitive pricing and increase supplier participation.

Positive

• Expected $2.00 monthly bill reduction for typical residential customers
• Restoration of $6 million annual spending for energy efficiency and assistance programs
• Proposed enhancements to auction process to increase supplier participation

Negative

• Regulatory uncertainty due to inability to resolve ESP5 issues through rehearing process
• Need for new PUCO approval process which could delay implementation

Insights

Utility Regulatory Expert

This regulatory filing represents a significant strategic shift for FirstEnergy's Ohio operations. The reversion to ESP4 from ESP5 carries several key implications:

• A modest but immediate consumer benefit with $2.00 monthly savings for typical residential customers
• Restoration of $6 million in annual non-recoverable spending for energy efficiency and community support programs
• Enhanced auction process modifications aimed at expanding supplier participation, which could potentially lead to more competitive electricity rates

The move appears defensive, triggered by legal uncertainties following an Ohio Supreme Court decision that rehearing options. While the immediate financial impact is relatively small, the long-term regulatory framework this establishes will be important for FirstEnergy's Ohio operations, affecting both their investment recovery mechanisms and customer rates.

Financial Analyst

The regulatory reset carries mixed financial implications for FirstEnergy. The $6 million in restored non-recoverable spending will create a minor earnings headwind, representing roughly 0.2% of the company's annual operating income. However, the proposed auction enhancements could potentially improve long-term market dynamics and reduce procurement risk. The $2 monthly customer savings, while positive for consumer relations, has minimal impact on company financials. The key focus should be on the upcoming new ESP filing, which will determine FirstEnergy's ability to recover infrastructure investments and maintain stable returns in Ohio, a important market representing approximately 40% of their distribution business.

If approved by PUCO, companies would revert to a previous rate plan

AKRON, Ohio, Oct. 29, 2024 /PRNewswire/ -- FirstEnergy Corp. (NYSE: FE) Ohio electric companies – Ohio Edison, The Illuminating Company, and Toledo Edison – have filed a notice with the Public Utilities Commission of Ohio (PUCO) to withdraw their current Electric Security Plan (ESP) 5, which took effect on June 1. If approved by the PUCO, the companies would revert to their prior ESP4, which was in effect through May 31, 2024.

Under the ESP4 framework, FirstEnergy's Ohio electric companies provided customers with reliable and affordable power for eight years. Reverting to the plan will help address uncertainties created in ESP5 that the companies had expected to resolve through the rehearing process. A recent Ohio Supreme Court decision unrelated to the ESP ended the potential for a rehearing and prevented the companies from obtaining certainty for themselves and their customers in ESP5. FirstEnergy's ESP4 would remain in effect until a new ESP is filed and approved.

Torrence Hinton, FirstEnergy's President of Ohio: "We believe there is an opportunity to design a new plan that supports our Ohio electric companies' ongoing investments in the electric system while continuing to maintain affordable rates for customers. We look forward to working with stakeholders to ensure we have a plan in place that supports the needs of customers and communities – including low-income customers – and delivers the reliable, affordable power our customers expect."

Utilities in Ohio are required to file Electric Security Plans to establish electric service for their non-shopping customers. FirstEnergy's ESP4 maintains an auction process to determine the pricing and supply of electricity for customers who rely on their company for all aspects of their electric service while preserving the option for customers to select their own energy supplier. Reverting to ESP4 would also restore about $6 million in annual, nonrecoverable spending by FirstEnergy in energy efficiency programs, as well as economic development funding and bill payment assistance for low-income customers and communities.

As part of reverting to ESP4, FirstEnergy's Ohio electric companies intend to propose some changes to the previously approved plan, including enhancements to the auction process that took effect under ESP5. These changes aim to help ensure competitively priced electricity for customers who do not shop by helping increase the number of suppliers participating in the auctions through supplier risk mitigation measures. The companies' return to ESP4, including any proposed changes, is subject to PUCO approval.

Returning to ESP4 is estimated to result in a bill reduction of about $2.00 for a typical FirstEnergy Ohio non-shopping residential customer using about 750-kilowatt hours (kWh) of electricity per month.

Ohio Edison serves more than one million customers across 34 Ohio counties. Follow Ohio Edison on X @OhioEdison, on Facebook at facebook.com/OhioEdison, and online at ohioedison.com.

The Illuminating Company serves approximately 755,000 customers across Ashtabula, Cuyahoga, Geauga, Lake and Lorain counties. Connect with The Illuminating Company at illuminatingcompany.com, on X @IlluminatingCo and on Facebook at facebook.com/IlluminatingCo.

Toledo Edison serves more than 315,000 customers in northwest Ohio. Follow Toledo Edison on X @ToledoEdison, on Facebook at facebook.com/ToledoEdison, and online at toledoedison.com.

FirstEnergy is dedicated to integrity, safety, reliability and operational excellence. Its electric distribution companies form one of the nation's largest investor-owned electric systems, serving customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. The company's transmission subsidiaries operate approximately 24,000 miles of transmission lines that connect the Midwest and Mid-Atlantic regions. Follow FirstEnergy online at www.firstenergycorp.com and on X @FirstEnergyCorp.

 

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SOURCE FirstEnergy Corp.

FAQ

What changes will FirstEnergy (FE) implement by reverting to ESP4?

FirstEnergy will restore $6 million in annual spending for energy efficiency programs, economic development funding, and low-income assistance, while maintaining the auction process for electricity pricing and supply.

How much will FirstEnergy (FE) customers save under ESP4?

Typical non-shopping residential customers using 750-kWh of electricity monthly will save approximately $2.00 on their bills.

Why is FirstEnergy (FE) withdrawing its ESP5 plan in October 2024?

FirstEnergy is withdrawing ESP5 due to uncertainties created in the plan that couldn't be resolved through the rehearing process following an unrelated Ohio Supreme Court decision.

What changes to ESP4 is FirstEnergy (FE) proposing?

FirstEnergy plans to enhance the auction process to increase supplier participation through risk mitigation measures, aiming to ensure competitively priced electricity for non-shopping customers.