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Pennsylvania PUC Denies FirstEnergy Solutions Corp. Latest Request For Reduced Financial Security Level

April 15, 2019

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Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The Pennsylvania PUC denied a request from FirstEnergy Solutions Corp. (FES), filed on March 18, for a reduction in FES's electric generation supplier financial security level from 10% to 5% of its most recent four quarters of revenue.

The PUC via a secretarial letter said that, "On April 2, 2018, FES filed notice with the Commission of its, March 31, 2018, voluntary petition in the United States Court for the Northern District of Ohio for relief pursuant to Chapter 11 of Title 11 of the United States Code (Bankruptcy Proceeding). Subsequently, the Moody’s Investors Service (Moody) downgraded FES’s rating outlook from stable to negative."

"On March 18, 2019, FES filed notice with the Commission that its Bankruptcy Proceeding is still ongoing, and its Moody rating outlook remains downgraded," the secretarial letter said

"The financial security is designed 'to ensure the financial responsibility of the electricity generation supplier and the supply of electricity at retail in accordance with contracts, agreements or arrangements.' Because FES’s Moody rating outlook remains downgraded, we continue to find considerable uncertainty regarding FES’s ability to fulfil [sic] its future annual obligations under Section 2809. In particular, we continue to have concerns regarding FES’s ability to fulfil [sic] its obligations related to gross receipts taxes, Alternate Energy Portfolio Standards (AEPS) and the Commission’s Annual Fee levied on EGSs. Because of these uncertainties, we believe that it is still prudent to require FES to maintain a financial security level of 10% of its most recent four quarters of revenue," the secretarial letter said

In accordance with 52 Pa. Code 5.44, the PUC Staff action under the secretarial letter will be deemed to be the final action of the Commission unless a petition of reconsideration is filed with the Secretary of the Commission within 20 days

In its petition for a lower security amount, FES had said that the risks intended to be covered by the bond (gross receipts tax, AEPS compliance, risk of not supplying electricity to contracted customers, and the PUC's regulatory assessment), "are more than secured at a 5% of gross receipts bonding level," for the 2019 period.

FES had said that for the 2019 period it prepaid its estimated gross receipts tax for 2019 and provided further financial information which FES said, "demonstrates that (i) the Company can meet its gross receipts tax obligations during the 2019 Bond Period; (ii) the Company can meet its AEPS obligations during the 2019 Bond Period; (Hi) the Company can meet its annual Commission assessment obligation; and (iv) the Company has already provided security through PJM and other EDCs to ensure the supply of electricity at retail consistent with its commitments to its customers."

FES had said that, "a 10% security level is excessive in relation to the risk intended to be secured, and, if not granted, will require the Company to incur unnecessary costs which could present a potential competitive disadvantage in the market place."

FES had said that, "Moreover, as the Commission has acknowledged, if approved at the 5% level, this security requirement would still be more stringent than other restructured states. Accordingly, the Company’s request to reduce its security level to 5% should be granted."

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