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Non-Unanimous Settlement Filed in Pennsylvania FirstEnergy-Allegheny Merger Proceeding

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October 26, 2010

FirstEnergy Corp., Allegheny Energy, and a total of 18 parties have filed a non-unanimous stipulation that would resolve the companies' merger proceeding before the Pennsylvania PUC (A-2010-2176520). Signatories include the Office of Trial Staff, Office of Consumer Advocate, three industrial consumer groups, Constellation NewEnergy, and PennFuture, among others.

Non-signatories include the Office of Small Business Advocate, Direct Energy, and the Retail Energy Supply Association.

The stipulation provides that within three months of the integration of West Penn Power into FirstEnergy's computer enterprise system, West Penn Power's Purchase of Receivables program shall be modified such that West Penn Power will not discount POR payments to suppliers any earlier than the next base distribution rate case. Payments to suppliers will be made based on the current charges applicable for the current month of service that is billed to and owed by customers, and will be paid 40 days after invoicing the customer.

POR shall be mandatory for suppliers serving residential and small commercial customers on utility consolidated billing.

Receivables shall only be associated with basic electricity supply, which is defined to be energy (including renewable energy) and renewable energy or alternative energy credits (RECs/AECs) purchased by a retail supplier, provided that the RECs/AECs are bundled with the associated delivered energy. For residential customers, basic electricity supply does not include early contract cancellation fees, late fees, or security deposits imposed by a supplier.

West Penn Power would only purchase receivables for service rendered on or after the effective date of the POR program. Receivables for service rendered before the effective date of the POR program cannot be used for termination purposes.

For customers on POR, West Penn Power shall offer both rate ready and bill ready utility consolidated billing. Suppliers electing rate ready billing will initially be limited to a flat rate per kWh, and a percentage off of Price to Compare pricing options.

West Penn Power will commit to program new supplier rate codes for "Standard Rates" within 14 days. Standard Rates include fixed cents per kWh rates starting from $0.0500 through $0.1199 per kWh in $0.0001 increments, up to four decimal place precision. A standard “percent off” rate will be created from 1% through 50% off the Price to Compare in one-half percent increments. Suppliers shall not submit more than 200 discrete rates for implementation during each calendar quarter.

After consummation of the merger, West Penn Power will discontinue billing retail suppliers for a Commission-approved supplier administrative charge that is applied on a dollar per MW-month basis to all suppliers serving load in the West Penn Power territory.

Any Price to Compare included on customer bills for the post-merger FirstEnergy distribution companies, "will be calculated as a customer specific PTC for the current month of service."

West Penn Power shall mail a letter to residential and small commercial customers listing offers from competitive electric suppliers twice during the period after merger consummation and prior to June 1, 2013. Administrative costs shall be recovered from participating suppliers.

Within three months following the integration of West Penn Power into FirstEnergy's computer system, West Penn Power will post updated customer eligibility lists and supplier-specific sync lists on its supplier website. The customer list shall be updated quarterly.

Within three months of such system integration, West Penn Power will provide interval and non-interval consumption information via EDI 867 transactions without charge after receiving written customer authorization from the requesting supplier or written certification by the supplier that is has such customer authorization.

Suppliers will have the ability to elect to receive either interval data or summary data at the time that the supplier submits its data request and at the time of customer enrollment.

West Penn Power shall investigate implementing the EDI 814 ND (Notice of Drop) transaction as well.

West Penn Power shall appoint a retail choice ombudsman within 60 days of merger consummation.

Within three months following the integration of West Penn Power into FirstEnergy's computer enterprise system, West Penn Power will offer budget billing to customers for a supplier's charges if the supplier is using utility consolidated billing. The distribution company will calculate the budget amount to appear on the consolidated bill, and will pay the supplier for the actual, current charges and not the budgeted amount.

Any harmonization of default service plans among the four distribution companies will not occur prior to May 31, 2013.

Though market power concerns were raised by several parties, the settlement contains few provisions addressing this concern outside of additional monitoring and reporting.

The four distribution companies will file with the PUC annually from 2011-2015 a report addressing wholesale market prices and price trends in the PJM markets in which they participate.

Trial Staff, OSBA and OCA will be provided detailed information regarding default service solicitations for the period after June 1, 2013, and a period three years thereafter.

The settlement includes certain commitments regarding employee levels in Pennsylvania, as well as certain distribution rate stay-out provisions. Distribution rates may be adjusted for changes in law or regulation, while storm-related charges, above certain thresholds, may be deferred for future recovery.

The stipulation also includes nearly $11 million in nonbypassable rate credits to all West Penn Power distribution customers.

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