Pa. PUC Denies Reconsideration Of Increase In FirstEnergy Solutions' Security Requirement

The Pennsylvania PUC denied a request for reconsideration from FirstEnergy Solutions (FES) which had sought reconsideration of a Secretarial Letter issued on April 18, 2018, by the Commission’s Bureau of Technical Utility Services (TUS or Staff), which had raised FES's financial security level from 5% to 10% for the period from June 10, 2018, through June 10, 2019, by denying an extension of the prior reduction to 5%.

"We find that TUS’ decision to increase FES’ security bond level from 5% to 10% is justified on the basis stated in TUS’ April 18 Letter and consistent with Section 2809 of the Public Utility Code, 66 Pa. C.S. § 2809," the PUC said in denying the request for reconsideration

In denying reconsideration, the PUC stated, "FES’ Petition for Reconsideration relies upon a showing that FES satisfied the prerequisite criteria for seeking a renewal of a reduced bond requirement outlined in our April 8, 2016 Secretarial Letter providing Guidance on Electric Generation Supplier Licensee Financial Security, Docket No. M-2013-2393141. FES asserts that its petition for renewal included all the specified eligibility criteria which had previously been relied upon by TUS in granting FES’ reduced bond requirement."

However, the PUC noted that its guidance, specifying certain documentation that should be provided to request renewal at the lower security limit, explicitly stated that establishing eligibility, "may not be limited to," the specified documentation.

"FES’ ability to satisfy the specified criteria in the Commission’s guidance for seeking renewal of a reduced bond level does not equate to eligibility for a reduced bond level. By specifying certain relevant criteria, the Commission’s guidance does not limit the Commission’s authority to consider other relevant financial information when necessary in determining eligibility for a reduced bond requirement under the Public Utility Code," the PUC said in denying reconsideration

"TUS’ denial of FES’ 2018 Renewal Petition was based upon other relevant financial information, i.e., the material change in FES’ business operations via filing Chapter 11 Bankruptcy and the subsequent Moody’s downgrade of FES’s rating outlook. April 18 Letter at 1. As TUS noted, the Moody’s downgrade of FES’ rating outlook was sufficient to create substantial uncertainty regarding FES’ continued ability to meet its financial obligations under the Section 2809 of the Code," the PUC said in denying reconsideration

"Under Section 2809 of the Public Utility Code, 66 Pa. C.S. § 2809, the Commission is granted discretion to set the level of the bond requirement to 'ensure the safety and reliability of the generation of electricity.' Therefore, the underlying financial stability and credit worthiness of an EGS’ business operation remains relevant to TUS’ consideration whether to discount a bond amount intended as financial security to ensure the financial stability of the EGS and the supply of electricity at retail," the PUC said in denying reconsideration

"Although FES has provided financial data which supports its assertion of a stable financial position, the filing of Chapter 11 bankruptcy is, itself, a measure of financial uncertainty. Further, a Moody’s 'rating outlook' is an opinion issued by Moody’s Investor Services regarding the likely direction of a company’s credit rating over the medium term. Therefore, the Moody’s downgrade of FES’ rating outlook indicates uncertainty as to FES’ financial stability during the period covered by the bond requirement," the PUC said in denying reconsideration

"FES’ filing of Chapter 11 and FES’ Moody’s rating outlook downgrade, together, are sufficient justification for TUS’ uncertainty regarding FES’ ability to meet its financial obligations related to gross receipts taxes, Alternative Energy Portfolio Standards and the Commissions Annual Fee levied on EGS. In view of TUS’ justified uncertainty regarding FES’ financial stability going forward, TUS’ requirement that FES raise its bond level to 10% was reasonable to achieve the purpose outlined in Section 2809, in ensuring the safety and reliability of the generation of electricity. 66 Pa. C.S. § 2809 (c)(1)(i),"the PUC said in denying reconsideration

The PUC directed FirstEnergy Solutions Corporation to file a rider or amendment to increase its security bond to a 10% level within thirty (30) days.

Docket A-110078