The emergence of Microgrids for power generation could threaten the dominance of the age-old power distribution system in the U.S. Microgrids have evolved from simple power backup systems to small smart grids. The swift and cost effective installation of Micro grids could help distribute electricity among the masses. These rooftop solar systems meet the energy needs of the customers. In addition, the customers are allowed to sell excess power back to the utilities.
A report from American Society of Civil Engineers estimated that utilities need to spend $763 billion by 2040 to properly modernize and harden the existing grids against natural disasters. We believe that rather than going for a very costly maintenance, it will be economical to develop these Microgrids, which could lend support to the existing system.

A microgrid is a localized grouping of electricity generation, energy storage, and loads that normally operates connected to a traditional centralized grid (macrogrid). This single point of common coupling with the macrogrid can be disconnected. The microgrid can then function autonomously. Generation and loads in a microgrid are usually interconnected at low voltage. From the point of view of the grid operator, a connected microgrid can be controlled as if it were one entity.
Microgrid generation resources can include fuel cells, wind, solar, or other energy sources. The multiple dispersed generation sources and ability to isolate the microgrid from a larger network would provide highly reliable electric power. Produced heat from generation sources such as microturbines could be used for local process heating or space heating, allowing flexible trade off between the needs for heat and electric power.

The two major storms were the largest impact cause of the disruption to obtaining scheduled meter reads. That conclusion is supported by  the experience of sister company, West Penn Power, which experienced all the same  integration issues (system integration,  renumbering, meter reading restructuring) as the Companies experienced, but did not  experience the same level of damage and  widespread outages from these two super  storms. Consequently, West Penn has not had the level of customer complaint and billing  issues that the Companies and their customers experienced.

UWUA brings this complaint in its capacity as the representative of meter readers and other Penelec employees who are being directed by Penelec to continually and willfully violate the Commission's meter reading regulations and the provisions of Penelec's own tariff.

UWUA states on information and belief that Penelec routinely estimates bills for thousands of residential customers three, four, or even five consecutive months when there are no exigent circumstances and no problems with utility personnel gaining access to the customer's meter.

UWUA states on information and belief that Penelec fails to read meters as required because it has failed to fill vacant meter-reading positions and has otherwise failed to properly staff its meter reading function. That is, Penelec has made a business decision to save the expense of hiring additional meter readers and instead issue numerous consecutive estimated bills to residential customers in violation of the Commission's regulations.

"FERC transmission regulation provides forward-looking formula rates, true-up mechanisms and premium authorized returns on equity. Transmission owners face limited revenue risk, owing to strong counterparty relationships with the operating utilities and the regional transmission organization," Moody's said.

Lynn Pugh opened her AEP bill this month to see just how much the cold January had set her back, but she found something in her bill that she normally doesn’t see.

“I’ve never seen the consumer rate relief charge,” said AEP customer Lynn Pugh.

Starting in December of 2013, AEP began adding the consumer rate relief charge to customer bills. According to the company, the new charge is a way to help them account for the spike in the price of coal in 2008-2009.

“It’s actually a reflection of a settlement we had with the PSC to recover the cost of coal,” said AEP spokesman Phillip Moye.

Normally AEP pays around $50 per ton for coal, but in ’08 and ’09 they were paying over $100 per ton because of a coal shortage.

The Public Service Commission signed off on the charge and has allowed AEP to keep it on your bill for the next 15 years. Pugh was shocked to learn that the charge would be on her bill for the next 15 years.

Moye said the AEP opted to go with the additional charge rather than increasing the rate on the price of power.

“The impact on the rate would have been tremendous,” Moye said. “30 to 40 percent increase, and that obviously is more than what customers can bare.”   [bear!!  although maybe customers will tear off their clothes and run naked through the legislature in protest?]

Pugh said she understands why she is paying the additional charge, but doesn’t think it should be on there for the next 15 years.

“I can’t imagine that they paid that much extra for coal that every AEP customer is going to have to pay this.”

The charge is based on how much your bill costs. Pugh’s charge was almost 11 dollars.

Tony Alexander - President and Chief Executive Officer
Kit, I think it's important to recognize we haven't had rate cases for quite some time now. And we've been a part of - in recognition of what's been happening in from a customer standpoint in terms of the depressed economic conditions we've tried our best to hold off. As we move more towards regulation in terms of - we also anticipate having more rate applications. For example, some time this year, going into '15 or '16, the Pennsylvania and West Virginia decisions will be made. The New Jersey decision will be made. Those will all set baselines and new baselines for going forward.

So as we transition more towards a rate case model in terms of improving service to customers and getting them reset at new baselines, there will be a lot of things changing. For example, over the last several years and in part because of the major emphasis on reliability that we've had and because of our desire not to have interim rate cases, we have shifted a lot of our capital, particularly our vegetation management to a lot of our expense to capital, I should say, particularly our vegetation management. We are now about closed in many areas. We're not done yet, but we are about closed in many areas. That doesn't get rid of veg management, but it does move it from capital to expense. And that will happen naturally as we're moving towards these rate case applications in the various jurisdictions that we will have.

Kit Konolige - BGC
Just a final question to follow on that. Can you address at all what we should expect the growth rate to be in earnings in the distribution segment? Obviously you've addressed that in transmission.

Tony Alexander - President and Chief Executive Officer
That's going to depend primarily on our effectiveness as we move through the rate case process. And I think at this point, it's a little early to begin to try to address that.

This matter began when Rate Counsel filed a Motion in September, 2011 alleging
that Jersey Central Power & Light (“JCP&L” or “the Company”) was over-earning and
asking the Board of Public Utilities (“Board” or “BPU”) to require the Company to file a
base rate case to protect ratepayers from continued excessive rates. The record that has
been developed since then shows clearly that Rate Counsel’s concerns were well-founded.
While the Company has sought an increase in rates, the record demonstrates that the
Company has been over-earning and that ratepayers are entitled to a rate reduction of
over $200 million. The record also supports a reduction in the Company’s overall rate of
return.
Rate Counsel recognizes that a rate reduction of this magnitude is extraordinary.
Yet the evidence is clear and Your Honor and the Board must fulfill the statutory
obligation to establish rates that are just and reasonable based on the evidence in the
record. Unfortunately for JCP&L’s ratepayers, however, the story does not end there.
While this matter was pending, the State suffered several severe storms that led to
extensive and long outages throughout New Jersey. JCP&L’s territory was hit
particularly hard and customers suffered through outages of extraordinary scope and
duration. In many ways, the pendency of the rate case was fortuitous, as it led to an
opportunity to examine the Company’s reliability spending and practices as well as its
earnings.
What that examination has shown is of great concern. While JCP&L was granted
additional funds in the second phase of its last base rate case in 2005 to address ongoing
reliability concerns, it substantially decreased spending on reliability once the initial work mandated by the BPU was completed. Between 2008-2010 the Company’s reliability spending was reduced and its tree-trimming budget was cut back significantly. During this same period, JCP&L was sending a whopping 170% of its earnings to its sole shareholder and parent corporation, FirstEnergy.
While the money paid by New Jersey’s ratepayers was being sent off to Ohio,
insufficient funds were being invested in JCP&L’s infrastructure in New Jersey. While some of that spending has now been increased as a result of the storms, ratepayers need the protection of their regulators to ensure not only that the Company’s rates are just and reasonable, but that ratepayers’ investment in this Company is spent for their benefit.
Ratepayers are entitled to better reliability and for this reason Rate Counsel seeks relief in
this case that would require more rigorous reliability reporting and standards as well as
consequences if the Company fails to provide that reporting or meet those standards.
The record also demonstrates that while JCP&L steered its extensive earnings to its parent, the credit rating of FirstEnergy has negatively impacted the credit worthiness of JCP&L. It is fundamentally unfair for the ratepayers to pay more than enough to maintain the stability of the utility and then potentially pay more because of the negative impact of JCP&L’s parent on the utility’s cost to borrow money. For this reason Rate Counsel is also asking the Board to order the Company to conduct a study to determine ring-fencing measures to protect JCP&L’s credit worthiness and thus protect New Jersey ratepayers.
As is evident by the way it started, this is not a standard rate case. It is an opportunity for the Board to reinforce its mandate to ensure safe, adequate and proper service for New Jersey’s ratepayers at just and reasonable rates. It is an opportunity to rein in JCP&L’s persistent reliability problems, to ensure appropriate and continued investment in New Jersey’s infrastructure, and the financial health of a local utility.

While JCP&L enjoys cost savings by deferring projects, a substantial amount of revenue are being collected from ratepayers that has not been invested in JCP&L’s infrastructure. At that same time JCP&L was giving its parent FirstEnergy a generous dividend. Over 70 percent of JCP&L’s profits during 2009 to 2011 were paid out in dividends to its parent  FirstEnergy instead of reinvesting its profits in its New Jersey electric distribution utility. The Company claims that “necessary” right of way vegetation management was deferred due to an off right of way vegetation management program called the Corridor Widening  Initiative. However, in light of the millions of dollars sent to Ohio in dividends, it appears that the Company collected sufficient ratepayer funds to maintain its vegetation management spending and still complete the Corridor Widening Initiative.

First, a merger acquisition premium should not be considered to be part of the cost of providing utility delivery service, since this is a cost that shareholders should be required to bear. The Company did not cite a single instance of another utility commission or electric utility rate case where inclusion of goodwill in capital structure was sanctioned. Goodwill does not represent actual utility assets or investor-supplied funds, which Mr. Kahal found adversely affects the quality of JCP&L’s balance sheet and the Company’s credit agency ratings.  Mr. Kahal concluded that this goodwill is “an accounting adjustment to the Company’s balance sheet that occurred in conjunction with the GPU/FirstEnergy  merger approximately a decade ago.”

The Company’s manipulation of its cash working capital requirement for federal
income taxes is especially bothersome when one considers the fact that JCP&L is a
member of the FirstEnergy consolidated tax group and, therefore, is making these
quarterly tax payments, not to the IRS, but to its parent corporation, FirstEnergy. And, in
fact, in 2011, parent corporation FirstEnergy paid no income taxes to the IRS.
JCP&L is therefore not only charging ratepayers for income taxes that were never
paid to the IRS, it also seeks to charge ratepayers for a phantom cash working capital
requirement on those phantom taxes. This is unfair and should not be allowed. Properly
measuring the expense lead days associated with the payment of federal income taxes
reduces JCP&L’s claimed CWC requirement by approximately $10.5 million.

FirstEnergy’s incentive compensation programs are heavily weighted toward the achievement of certain financial objectives, with no payout being made unless certain financial goals are met. Incentive plans that are based largely on earnings criteria are not sufficiently related to the provision of safe and reliable utility service to justify passing this cost onto ratepayers. If incentive   compensation programs are tied to increased corporate and shareholder earnings, then the corporate shareholders, not ratepayers, should pay for them. To do otherwise violates all sense of fairness to the ratepayers of the regulated entity. Accordingly, Rate Counsel recommends that JCP&L’s proposed incentive compensation expenses of $8.4 million be disallowed for rate making purposes in this case.

As these miscellaneous expenses are not  related to the provision of safe, adequate
and reliable service, they are not appropriate for inclusion in rates set for utility service.
Certainly the Company has not demonstrated how funding of retiree clubs and parties will have a positive impact on the provision of electric service. Moreover, it is long standing Board policy in this state that institution and goodwill advertising shall be paid by shareholders, not ratepayers.
The Company has failed to demonstrate that these various expenses provide any “measurable benefit to its ratepayers” and therefore “the mandate of Title 48 for just and
reasonable rates precludes the captive ratepayer from subsidizing those costs.”
Accordingly, Your Honor and the Board should reject the Company’s proposal to include
the above listed $79,258 in miscellaneous expenses in claimed operating expenses.