FirstEnergy to spinoff West Penn Power transmission business; allows for faster rate hikes

FirstEnergy Corp. spun off its West Penn Power Co. transmission business to a new shell company, a move the state’s top consumer advocate says will allow the Ohio-based utility a faster path to recover costs by raising rates on 720,000 West Penn customers.

Keystone Appalachian Transmission Co. was formed to take certain unnamed transmission assets from two of its electric distribution companies — Greensburg-based West Penn Power and Potomac Edison, which operates in West Virginia and Maryland — and placing them into the newly formed firm, FirstEnergy officials said Monday in a call with analysts. Akron-based FirstEnergy filed with the Federal Energy Regulatory Commission for what the company said were “forward-looking formula rates” that reflect the current cost of serving customers plus the projected cost of projects in the upcoming year.

The transfer is scheduled to take effect in January 2022.

By FirstEnergy creating the spinoff company under the auspices of federal regulators, Tanya McCloskey, Pennsylvania’s acting consumer advocate, said the formula rate cases for recovering transmission costs “are faster rate cases than the PUC,” referring to the Pennsylvania Public Utility Commission.

The state’s consumer advocate has the right to challenge any rate cases affecting Pennsylvania consumers that Keystone Appalachian Transmission would file before the federal regulators, McCloskey said.

FirstEnergy still has to file documents with the PUC to separate West Penn Power’s transmission business and the consumer advocate can review that filing, McCloskey said.

The commission will “thoroughly review and carefully evaluate any filing from FirstEnergy,” said Nils Hagen-Frederiksen, a PUC spokesman.

The utility company, however, said its customers will benefit “by supporting necessary improvements in the transmission system that enhance reliability and resilience.” The formula rate also ensures customers only pay for costs incurred to provide safe and reliable transmission service.

At this time, it is too early to determine the impact on customers’ electric bills, said Brittay Al Dawood, a FirstEnergy spokeswoman, but there will be no changes in daily operations or responsibilities for West Penn Power employees.

Travis Beck, president of the Utility Workers Union of America Local 102, which represents about 400 West Penn Power employees, said it was too early to determine the impact of FirstEnergy’s spinoff on his members, but they will monitor the situation.

It was a FirstEnergy spinoff, bankrupt FirstEnergy Solutions, that was renamed Energy Harbor, which has the utility company embroiled in an alleged $60 million bribery scandal over a $1.3 billion Ohio bailout of FirstEnergy’s two failing former nuclear power plants division. The effort that resulted in the passage of a bill in Ohio to subsidize the nuclear power plants has resulted in federal bribery charges filed against that state’s former Speaker of the House Larry Householder and two associates for their alleged involvement.

After two of Householder’s associates pleaded guilty last week to racketeering charges in the scandal, FirstEnergy’s board fired CEO Chuck Jones and two senior executives on Oct. 29, for what Christopher Pappas, board executive director, said was a violation of the company’s code of conduct. Pappas did not explain the specific violations. Jones this summer denied any wrongdoing.

Pappas said he could not comment on investigations by the Department of Justice and the U.S. Securities Exchange Commission, nor could he say whether any more changes may result from those probes.

FirstEnergy officials said the company was coming off a strong quarter that ended Sept. 30, with earnings of $454 million, or 84 cents per share, on $3 billion in revenue. Jon Taylor, FirstEnergy chief financial officer, said the earnings beat expectations by 1 cent a share. The stock closed at $29.93 a share, up 21 cents, or an increase of less than 1%.