Utility seeks $32M rate increase to overhaul transmission infrastructure
By: Tom Johnson |
Jersey Central Power & Light has convinced state regulators not to worry, at least at this time, about the utility’s liquidity issues — despite its credit rating being downgraded by Wall Street.
Fitch Ratings lowered the scores of both JCP&L, the state’s second-largest electric company with about 1 million customers, and its parent, Akron-based FirstEnergy Corp., this past summer, citing numerous issues with the two outfits.
The problems ranged from lower power prices from its parent’s fleet of generating units, higher environmental compliance costs for its coal plants, and the uncertainty of the utility receiving any increase in a rate case pending before the state.
The downgrade triggered concerns at the New Jersey Board of Public Utilities, which worried that the increase in borrowing costs might affect the utility’s ability to buy electricity for customers who do not switch to other suppliers.
In a decision last week, however, the agency found no cause for quick action on the downgrade.
“The board finds no immediate concern with JCP&L’s liquidity position, the primary subject of this proceeding,’’ it said in an order it approved at its monthly meeting. “In the event that JCP&L’s bonds were to be downgraded below investment grade, FirstEnergy could infuse additional equity into JCP&L or reduce or eliminate JCP&L’s payment of dividends to its parent.’’
The BPU order noted that JCP&L has ample resources available to ensure continued payments to power suppliers that provide electricity to the utility’s customers.
As of late July, its parent had still available liquidity of nearly $3 billion, the utility told state regulators. It also has the ability borrow from an unregulated money pool held by FirstEnergy. The state agency said these sources of liquidity “provide ample support to ensure payments’’ to power suppliers.
However, the issue remains on the table as the JCP&L moves ahead with the rate case before the BPU.
“Obviously, the state will be keeping a close eye on JCP&L in the rate case,’’ said BPU President Bob Hanna. “Our job is to protect ratepayers.’’
In response to concerns raised by the state Division of Rate Counsel, the BPU agreed to conduct a “ring-fencing’’ study during the rate case to protect the utility’s credit rating. Ring-fencing generally refers to financially separating a regulated utility from a parent company involved in an unregulated business.
Rate Counsel also asked the BPU to review whether the utility is undercapitalized; the latter agreed to do during the ongoing base rate case.
In the current proceeding, the utility is seeking a $32.4 million increase in its revenues, which would only boost customers’ bills by 1.4 percent.
The utility has frequently been the subject of criticism from both customers and regulatory officials over its slow restoral of power during recent storms. The current rate case before the board was spurred by a petition from the New Jersey Division of Rate Counsel, which suggested the utility was not spending enough on its delivery infrastructure.
The state’s four electric utilities are under pressure from the BPU to upgrade their transmission systems to prevent the kind of widespread outages that occurred during Hurricane Sandy, which left more than 7 million customers without power.
During the superstorm this past October, 90 percent of JCP&L’s customers lost power at some point, some for two weeks or longer. The utility also was harshly criticized by local officials for failing to inform them in a timely manner when customers’ power would be restored.
In response, the BPU is conducting a wide-ranging proceeding to make the power grid more resilient and require utilities to communicate more effectively with both customers who lose power and local officials trying to deal with outages.
