FirstEnergy Corporation’s (FE) business wings, Mon Power and Potomac Edison, submitted additional rate information to West Virginia’s Public Service Commission (“PSC”) regarding its proposed scheme to offer consistent, reliable and low-cost power to the state’s customers.
The plan involves Mon Power buying the remaining 80% interest in the Harrison Power Station. Mon Power already has a 20% stake in the power station. Located in Haywood, WV, the Harrison unit is a 1,984 megawatt coal-fired plant which is equipped with next generation emission control features.
The Harrison buyout represents investments of roughly $1 billion by Mon Power. Besides the consent from the PSC, FirstEnergy needs sanctions from the Federal Energy Regulatory Commission.
Effective Jan 1, 2013, the electricity rates are $94.31 per month, reflecting a 5% decline, as the benefits of lower fuel costs are passed on to consumers. If new rates are approved, household customers of Mon Power and Potomac Edison consuming 1,000 kilowatt-hours per month will witness an 87 cent increase in their monthly bills from the 2012 rate.
The rate increase would be accounted as a temporary surcharge for now until the next base rate cases of both Mon Power and Potomac are concluded. FirstEnergy is expected to file a base rate any time after the completion of the Harrison purchase.
Previously, the two business segments had filed an application with the PSC which entailed plans relating to ensuring stable rates and diminishing the spot power market sensitivities to safeguard customers. The idea behind the plan was to fulfill customer usage growth of 1.4% per year by optimally utilizing the adequate resources at the company’s disposal.
A rate base sanction would definitely boost the company’s top line. Meanwhile pending approvals from regulatory bodies will continue to be an overhang on the stock.
On the brighter side, FirstEnergy’s transmission investment and development of natural gas prospect in Ohio will sit well with its broad growth objectives. Currently, the company retains a Zacks Rank #3 (Hold).
Headquartered in Akron, OH, FirstEnergy Corp. together with its subsidiaries engages in the generation, transmission, and distribution of electricity. With a market capitalization of $16.98 billion, the company has 20,000 total employees.
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