Friday, December 14, 2018

FirstEnergy to Spin off its Last Utility-Managed Tx Assets

By Suzanne Herel

FirstEnergy would spin off the transmission assets of Jersey Central Power & Light, Metropolitan Edison and Pennsylvania Electric into a new subsidiary under a plan it has submitted to regulators, saying the move would allow it to more cheaply and efficiently upgrade its grid (EC15-157).

With the formation of the new company, Mid-Atlantic Interstate Transmission (MAIT), all 24,000 miles of the Akron, Ohio-based company’s system would be managed by transmission affiliates.

The plan must be approved by New Jersey and Pennsylvania regulators and the Federal Energy Regulatory Commission. The company made no formal announcement of the proposal except for a June 19 filing with the Securities and Exchange Commission.

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“When you have a separate transmission-only company, typically it carries a more favorable credit rating, so it can borrow money for less, and that results in lower costs for customers,” FirstEnergy spokesman Doug Colafella said. “It’s an arrangement that really allows a company to make the significant investments in transmission that we’re looking at. It also allows our separate utilities to stay focused on the distribution system and respond quickly to customer needs.”

FirstEnergy already operates American Transmission Systems (ATSI) in Ohio and northwest Pennsylvania and Trans-Allegheny Interstate Line Co. (TrAILCo) in western Pennsylvania.

The spinoff falls in line with FirstEnergy’s “Energizing the Future” initiative, announced in 2012, to enhance its high-voltage transmission system.

FirstEnergy expects to invest $2.5 billion to $3 billion over the next five to 10 years on upgrades in the JCP&L, Met-Ed and Penelec zones, Colafella said.

The company estimates that streamlining the projects through one company with a higher credit rating will save $135 million in interest over the 30-year life of $1.5 billion in projects, according to FirstEnergy’s filing with the New Jersey Board of Public Utilities.

“Consolidating all of the operating companies’ transmission assets in a stand-alone transmission company can reduce investors’ perception of financial risk, strengthen the credit profile of the transmission function and, in that way, provide improved access to capital and reasonable rates,” it said.

Ron Morano, a spokesman for JCP&L, said that being relieved of the task of operating its transmission system will allow the company to better focus on customers’ needs.

“For Jersey Central, it enables a more timely investment on new transmission projects,” he said.

Under the plan, MAIT would own and operate all transmission assets of the three utilities, which would lease to the transmission subsidiary their real estate and real property rights.

Colafella said the spinoff would not affect transmission-related jobs at the utilities.

“It won’t have any impact on employees day-to-day,” he said. “It’s more of an accounting arrangement.”

It is, however, expected to lead to the creation of about 200 FirstEnergy jobs in New Jersey and Pennsylvania, he said, and the projects should provide work for roughly 600 engineering, project management and construction jobs in those states.

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