FirstEnergy Solutions Growth in Direct Retail Sales Continues

Continuing the pace seen in the second quarter of 2011, direct retail sales by FirstEnergy Solutions in the third quarter of 2011 increased by two-thirds versus the year-ago quarter, FirstEnergy Corp. disclosed yesterday in reporting earnings.

Total direct (non-aggregation, non-POLR) retail sales by FirstEnergy Solutions were 13,327 GWh for the quarter, versus 7,980 GWh a year ago.

The growth in direct retail sales by market and customer segment is below, as are totals for POLR and aggregation sales:

FirstEnergy Solutions Retail Sales (in GWh):

Note that the third quarter was the first such quarter for Illinois aggregation sales.

FirstEnergy said that FirstEnergy Solutions, "continues to successfully execute its retail strategy by gaining new customers in recently deregulated markets in Pennsylvania following the expiration of POLR obligations in December 2010." FirstEnergy Solutions retail sales, "also grew significantly in Ohio and continues to expand in other markets, including Illinois, Michigan, New Jersey, and Maryland," the parent reported.

FirstEnergy's Competitive Energy Services segment reported net income of $232 million for the third quarter, reversing a year-ago loss of $26 million, largely on the absence of a year-ago impairment charge.

Commodity margin improved by about $79 million, largely on increased capacity revenues associated with the move of certain FirstEnergy assets into PJM ($50 million) and lower fuel expenses due to a contract restructuring ($79 million), which such drivers partially offset by a variety of factors, including higher capacity costs from serving more load in PJM. Increased contributions to commodity margin from direct retail and aggregation sales were more than offset by the impact of reduced POLR sales.

FirstEnergy's quarterly report includes an aggregate switching percent for the third quarter for each of its distribution companies, listed on page 15 of its report to investors. Although the data reflects an average for the quarter (rather than end of quarter statistics), and is not broken out by customer class, the data is of some utility given that the most recent Ohio migration data from PUCO is as of the second quarter.

Discussing the cap on RPM-priced capacity in the contested AEP Ohio electric security plan stipulation, FirstEnergy executives said that, to the extent such caps inhibit planned Ohio aggregations to be served by FirstEnergy Solutions, FES will refocus its retail efforts to Met-Ed in part and will primarily "more aggressively" target sales at Penelec, West Penn Power, Duquesne Light and Northern Maryland, and perhaps Central Maryland.

Discussing the Duke Energy Ohio electric security plan settlement, FirstEnergy Corp. CEO Anthony Alexander said, "This is very similar to [the] FirstEnergy Ohio utilities' plans, and if the Commission approves the settlement, over 50% of Ohio's retail electric customers will have unlimited access to the benefits of competitive markets."

Although Alexander was contrasting the Duke Energy Ohio settlement to the AEP Ohio contested settlement, where market-priced capacity made available to retail suppliers would be capped (with Alexander emphasizing how the Duke settlement contains no restriction), we're not sure if, more generally, the FirstEnergy Ohio utilities can be said to offer "unlimited access" to the benefits of competitive markets given that residential customers at the FirstEnergy Ohio utilities have only three choices, two which only became available in the past month (despite the FirstEnergy utilities having had the same reputedly competition-incubating regulatory structure for nearly three years), and only two of which are competitive with the default service rate.

	3Q 2011	3Q 2010	Change
Direct: Large Commercial and Industrial
OH	6,360	4,875	1,485
PA	3,505	1,125	2,380
NJ	477	382	95
MI	538	438	100
IL	810	611	199
MD	168	81	87
Direct: Medium Commercial and Industrial
OH	573	298	275
PA	244	7	237
Direct: Mass Market
OH	224	137	87
PA	428	26	402
Total Direct, All Classes	13,327	7,980	5,347
Aggregation
OH	4,540	3,628	912
IL	3	- - -	3
POLR
OH	821	3,999	(3,178)
PA	1,696	5,374	(3,678)