FirstEnergy received a FERC order approving a formula rate structure settlement for unit American Transmission Systems Inc. that will provide some certainty around the transmission business, FirstEnergy officials said Oct. 30 during a conference call on 3Q15 earnings.
The settlement calls for reduced levels of return on equity at ATSI in the coming years, but higher returns boosted revenue in 2015, including a higher rate base as some projects began service during 2015, James Pearson, executive vice president and CFO at FirstEnergy, said during the call. Although the settlement resolved issues in the proceeding, the forward-looking rate structure took effect in January of this year, Pearson said.
The settlement established ROE levels for ATSI at about 12.4 percent for the first six months of 2015, about 11.1 percent for the second half of 2015, and about 10.4 percent from Jan. 1, 2016, until at least Jan. 1, 2018.
“The settlement resolves all issues in dispute in this proceeding,” FERC said in the Oct. 29 order (Docket No. ER15-303). “The settlement appears to be fair, reasonable and in the public interest, and is hereby approved.”
While the reduced ROE level starting Jan. 1, 2016, may create some “headwinds” for the transmission business, the higher rate base from additional transmission investments will mitigate that impact, Pearson said.
In fact, FirstEnergy completed several projects during 3Q15 that will improve reliability and address the growing load around the Marcellus Shale development with oil and natural gas operations, said Charles Jones, president and CEO of FirstEnergy. Transmission enhancements at Mon Power included a new line and substation to improve operations in Harrison, Lewis and Gilmer counties, with the substation scheduled to be energized in December, Jones said.
FirstEnergy “remains on pace” to invest $970 million in 2015 as part of its Energizing the Future transmission initiative, with about 80 percent of that investment completed through the first nine months, Jones said.