Customers of FirstEnergy's Ohio utilities - Ohio Edison, The Cleveland Electric Illuminating Co. and Toledo Edison - would benefit from $320 million in savings if proposals to accelerate recovery of deferred costs are approved by the Public Utilities Commission of Ohio (PUCO). The proposals, one covering residential customer deferrals and the other for commercial and industrial customers, were filed July 27 with the PUCO. The residential proposal is supported by the Ohio Consumer and Environmental Advocates, including the Office of Consumers' Counsel. If approved, the accelerated recovery would provide significant financial benefits to customers with no increase in the current price they pay for electricity.
"Much like reducing the length of a home mortgage saves on interest costs, these proposals would save customers $320 million in carrying costs while providing our utilities with full recovery of their investments," said FirstEnergy President and Chief Executive Officer Anthony J. Alexander. "The accelerated recovery would significantly reduce costs to customers, while keeping current rates stable and avoiding future increases that otherwise would have been implemented."
Under the company's Electric Security Plan (ESP), FirstEnergy's Ohio utilities received approval to collect, over a period of up to 25 years beginning in 2011, previously deferred costs incurred in 2006 through 2008, primarily for distribution investments. The total cost, including carrying charges, would have totaled approximately $636 million. Under the proposals filed today, total recovery would be reduced to approximately $316 million and collected between September 2009 and May 2011. To ensure that customer rates remain stable, recovery would take place only in non-summer months, when rates are lower, with no cost recovery June through August 2010. While the accelerated recovery would mean slightly higher electricity prices than customers otherwise would have paid during the winter months, they still would see modest decreases compared with summer electricity costs.
"With electric generation prices at the lowest levels in several years, we have a unique opportunity to accelerate the recovery of past costs while keeping electricity rates stable," said Alexander. "And, we are able to enhance the company's cash flow, helping reduce the need to borrow at today's higher cost of capital."
The utilities also committed to contribute an additional $2.5 million over three years to a fund established under the ESP to provide payment assistance to low income customers. The fund originally committed $6 million in customer support.
In addition, the utilities filed a revision to their proposed Ohio Residential Renewable Energy Credit Program. Under this program, the companies would purchase renewable energy credits (RECs) from utility customers with net metering arrangements who generate electricity from renewable sources such as solar and wind. The revised plan would extend the term of the purchase agreement to 15 years, which provides a significant incentive for customers to invest in solar, wind and other renewable energy projects. The original filing proposed purchasing RECs through May 2011. RECs purchased by the utility companies would be used to help comply with Ohio's new renewable energy standards.