FirstEnergy-Allegheny File Non-Unanimous Stipulation in Maryland Merger Proceeding

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December 2, 2010

FirstEnergy Corp., Allegheny Energy, and several intervenors have filed a non-unanimous stipulation in Maryland that would provide for the approval of the merger of FirstEnergy and Allegheny with several conditions (Case 9133).

Notably absent from the stipulation are PSC Staff and the Office of People's Counsel.  No retail supply parties are signatories either.  Signatories include the two merging companies, the State of Maryland, the Maryland Energy Administration, and the Maryland Industrial Customers, plus additional parties.

The main provision of the settlement is that the companies would provide Potomac Edison residential distribution customers a total of $6.5 million in nonbypassable rate credits over a four-year period.  The companies would also contribute $600,000 to retire arrearages in the Electric Universal Service Program, and reduce Potomac Edison's EmPower Maryland costs recovered from customers by $750,000.

FirstEnergy Solutions would also commit to assist in the development of Tier I renewable energy projects located in Maryland with an average annual output of 13,000 megawatt-hours.  Such assistance could be direct ownership or financial support (such as through long-term PPAs).

Nothing in the stipulation apparently addresses Staff's concerns regarding a reduction in retail competition under the merger, or an increase in wholesale market power (see 10/5).  Additionally, no provision apparently addresses the Office of People's Counsel concern that the regulated Allegheny and FirstEnergy utilities are, in effect, "cross-subsidizing the debt costs of the non-regulated entities," because the utility companies are not being compensated by the non-regulated affiliates for the support the utility companies provide in obtaining a higher bond rating for the non-regulated affiliates.

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