FirstEnergy Corp. is a step closer to consolidating its four Pennsylvania utilities into a single entity, but it has assured customers that nothing will change in the short term.
FirstEnergy also intends to consolidate its Ohio utilities.
The Akron, Ohio-based company operates U as well as certain transmission subsidiaries in the Keystone State. Each has its own rate structure, and West Penn’s customers in southwestern Pennsylvania have the lowest average monthly bills of the four companies.
That is likely to change when FirstEnergy purses a single unified rate across the four service areas, but, according to a settlement announced last week with large customers and consumer advocates, the company won’t ask for that for another five to 10 years, at the earliest.
That doesn’t mean rates won’t rise until then. FirstEnergy Pennsylvania Electric Co., as the new utility will be called, expects to file a rate request next year, but will treat its current four utilities as separate rate districts, each with its own rate structure, once the consolidation is complete.
A rate case is a litigated request by the utility to change rates — usually upward — and typically takes the better part of a year to complete.
The merger will mean one electric distribution utility will be responsible for much of Pennsylvania, with more than 2 million customers, and the entire western half of the state, except for Duquesne Light territory in portions of Allegheny and Beaver counties. FirstEnergy has asked the Pennsylvania Public Utility Commission to approve the settlement and its merger application by December.
The company contends that by folding its four Pennsylvania utilities into one, it could run more efficiently, cut down on duplicative reporting and business functions, and get better access to capital and sweeter financing terms as a bigger entity.
All those benefits — and savings — should be passed on to ratepayers, FirstEnergy said.
To that end, the settlement agreement requires the company to keep track of those savings and return them to customers in future rate cases.
FirstEnergy has also agreed to maintain its Pennsylvania call center, in Reading, and maintain current staffing levels at its universal service program, which helps low-income customers, through at least 2028.
The settlement also calls for FirstEnergy to make increased contributions to its hardship fund, which assists customers with utility bills if they are struggling to make ends meet. The company will put an extra $650,000 into this fund over the next five years.
While consumer protections for the most vulnerable utility customers were a subject of negotiations during the settlement talks, a lot of the emphasis was put on when FirstEnergy plans to unify its rates.
“Rate consolidation matters can produce winners and losers,” FirstEnergy’s industrial consumers warned in a filing. Utility rate design is, by definition, a formula for spreading the cost of service to different customers equitably among the entire rate class. Varying the size of that rate class and incorporating new costs must be done with caution, argued the groups that intervened in FirstEnergy’s consolidation case.
The Office of Consumer Advocate and a group of FirstEnergy’s industrial customers had wanted FirstEnergy to commit to going three years without filing for a rate case, but the utility refused.
Instead, FirstEnergy agreed that it won’t ask for a unified rate for all of its Pennsylvania customers for the earlier of 10 years or during the next three rate cases filed beginning in 2025. That means for each rate case the company files after January 2025 and before 2033, it will have to calculate separate rates for each district.
“The settlement recognizes the need for gradualism with respect to this concern,” the industrial customers wrote.
Some southwestern Pennsylvania residents will recall a similarly gradual process of rebranding and rate restructuring when Peoples Natural Gas bought Equitable Gas in 2013. Customers in the former Equitable territory were still paying different rates than the rest of Peoples’ customers until regulators approved a unified rate in 2019.
