PSC outlines conditions for Allegheny Energy/FirstEnergy merger

January 22, 2011

In approving the Allegheny Energy/FirstEnergy merger, the Maryland Public Service Commission called on the utilities to "meet certain conditions that track (and, in certain instances, build upon) commitments the applicants offered to make in the course of this case."

"These conditions will ensure that Potomac Edison's ratepayers share in the synergies and savings expected to result from the transaction, that Potomac Edison is protected appropriately against the potential new risks of being part of this new, bigger company, and that our state share in the economic development and renewable energy opportunities the applicants have promised," the PSC said in its order dated Jan. 18.

The PSC, in the document, said "because our conditions differ in some respects from those contained in the Joint Petition for Approval of Settlement," the applicants must decide whether to proceed on these terms. The utilities have 30 days from the date of the order to decide if they want to proceed with the merger.

Following are the conditions to which the PSC referred:

  • Within three months of consummation of the merger, the applicants must pay a lump-sum rate credit totaling $6.5 million to Potomac Edison's Maryland residential customers. This will be about $29 for each residential customer and be funded by FirstEnergy, not Potomac Edison.
  • Within the first year of consummation of the merger, the applicants shall contribute $600,000 to the Electric Universal Service Program, "for use in retiring arrearages of qualified residential customers in Potomac Edison's Maryland service territory." This amount is not to be recovered from ratepayers. The service program helps eligible low-income electric customers pay their electric bills, according to the Maryland Department of Human Resources website.
  • Within the first year after completion of the merger, the applicants shall apply $750,000 against costs already incurred for Potomac Edison's EmPower Maryland programs. This amount is not to be recovered from ratepayers. Customer bills include an EmPower surcharge, and this reduces those costs, Allegheny Energy spokesman David Neurohr said. The surcharge pays for energy efficiency and conservation programs that Allegheny developed to comply with a state requirement, according to an Allegheny Power fact sheet on the surcharge.
  • The applicants must locate a regional headquarters within Potomac Edison's Maryland service territory and staff that office with a regional president and senior, accountable staff.
  • Through FirstEnergy Solutions Corp. (FES) the applicants shall assist in the development of one or more new Tier 1 renewable energy projects of at least an annual average of 13,000 megawatt hours or its megawatt equivalent in Maryland. First Energy must apply for applicable permits within 24 months of consummation of the merger and the facility or facilities in-service date must be on or before 45 months after the merger is consummated.
  • From the date of this order for a period of two years after consummation of the merger, the applicants shall ensure there are no net job losses in utility operations in Maryland due to involuntary attrition as a result of the merger-integration process.
  • During the three-year period after closing, the applicants shall provide community development and charitable contributions to Allegheny's utility service areas "at least at levels consistent with Allegheny's current levels, and thereafter consistent with FirstEnergy's levels of contributions within its current utilities' service areas."
  • Potomac Edison shall not pay dividends to FirstEnergy if Potomac Edison equity-to-total capitalization ratio ... falls below 45 percent or if payment or dividends would cause Potomac Edison's equity-to-capitalization ratio to fall below 45 percent. PE also shall not pay dividends "if, enduring such time, any of the three major credit rating agencies (Moody's Standard & Poor's or Fitch) reports a credit rating for PE below investment grade level."

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