Workshop J. FirstEnergy Pennsylvania - Met-Ed, Penelec, Penn Power, West Penn Power: Electric Rates & Tariffs. 1:45 p.m. to 2:45 p.m.

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1 Workshop J FirstEnergy Pennsylvania - Met-Ed, Penelec, Penn Power, West Penn Power: Electric Rates & Tariffs 1:45 p.m. to 2:45 p.m.

2 Biographical Information Charles V. Fullem, Director Rates & Regulatory Affairs/Pennsylvania FirstEnergy Service Co.,Box 16001, 2800 Pottsville Pike, Reading PA Fax: Charles V. Fullem is Director- Rates & Regulatory Affairs/Pennsylvania, a position he was appointed to on January 22, In that capacity, he is responsible for developing the default service plans of Metropolitan Edison Company, Pennsylvania Electric Company, Pennsylvania Power Company and West Penn Power Company, as well as all retail tariff filings and financial reports to the Pennsylvania Public Utility Commission ( PaPUC ) and the New York State Public Service Commission. He has over 35 years of experience in the energy industry, with a background in rates and regulation, marketing, unregulated retail pricing and regulated tariffs, contract development and negotiations of both wholesale and retail electric service contracts. From December 2000 through January 2006, he served in various positions, including Director of Energy Consulting Operations for The E Group, the energy consulting subsidiary of FirstEnergy Corporation ( FirstEnergy ). As Director, he managed technical staff teams and was responsible for delivering all aspects of The E Group s client services for an over one-billion-dollar client energy spend, including energy management, bill and rate analysis, development of energy procurement strategies, preparation of requests for proposal, evaluation of bids, contract development and implementation, open market analysis, and negotiations with suppliers and utilities and utility bill payment. From November 1999 through December 2000, Mr. Fullem was Director, Pricing and Regulatory Affairs, in FirstEnergy s rate department, where he was responsible for tariff administration and pricing programs serving over 2.2 million customers in Ohio and Pennsylvania. In this capacity, Mr. Fullem developed and implemented the unbundled tariffs designed to implement Customer Choice in Ohio, coordinated the development of FirstEnergy s Supplier Tariff and Net Metering Rider, and participated in the Operational Support Plan (OSP) workgroups. The OSP workgroups were collaborative working groups charged with establishing the various rules and policies of retail choice in Ohio. From December 1994 through November 1999, Mr. Fullem served in various roles in FirstEnergy s marketing department, including Director, Planning and Strategy, and Director of Centerior Energy s Competitive Analysis Department, where he developed and implemented successful marketing programs targeted to commercial and industrial customers and mass market customers in both competitive generation markets and traditional areas of competition between fully integrated electric utility providers. From 1982 through December 1994, Mr. Fullem served in various roles in rates and regulation at Centerior Energy and Cleveland Electric Illuminating Company, including the roles of Director, Planning & Strategy, and Director of Rates & Contracts. In these roles, Mr. Fullem managed and performed cost of service studies, load research, customer requirements analyses, designed rates and tariffs, participated in the development of revenue requirements, and performed financial analyses. Mr. Fullem holds his Bachelor of Science degree in Mineral Economics from the Pennsylvania State University. Mr. Fullem is a Certified Energy Procurement Professional by the Association of Energy Engineers. He has provided expert testimony before the Public Utilities Commission of Ohio ( PUCO ), the PaPUC, The New York State Public Service Commission and the Federal Energy Regulatory Commission ( FERC ), as well as the Pennsylvania Senate Consumer Protection and Professional Licensure Committee and the Pennsylvania House Consumer Affairs Committee.

3 Chuck Fullem, Director, Rates and Regulatory Affairs Northern Ohio/Western Pennsylvania Energy Management Institute September 25, 2018

4 Disclaimer The information contained in this presentation material is intended to provide generally descriptive and summary information. Any conflict between the information contained in this material, or conveyed orally during the presentation, and the information provided in any of the Companies public filings, as part of Pa Public Utilities Commission Entries or Orders, or the Companies tariffs, or Pa Statutes and Rules, is unintentional and the docketed material controls. The information contained herein is subject to change during the regulatory process. Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

5 Agenda Electric Rate Background Generation Transmission Distribution Other Topics Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

6 Rate Schedules Met-Ed and Penelec The Companies generally have 5 Distribution rates available to Commercial and Industrial Customers * Rates Effective January Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

7 Rate Schedules West Penn and Penn Power Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

8 Generation Generation Service Provided as part of Price to Compare Default Service Rate Rider (Rider H & I) Power for all Default Service customers is procured through a competitive bidding process by Class. Rider H changes quarterly available to customers on GS Small, GS Medium. Rider I Hourly Priced Default Service Rider Prices change Hourly available to customer on GS Large, GP and TP/LP customers - prices based on bid price, plus real-time Locational Marginal Price ("LMP"), plus a uncollectible charge and an administrative charge. Beginning in June of 2019 Rider I will be the only DEFAULT SERVICE RATE FOR CUSTOMERS GREATER THAN OR EQUAL TO 100 KW Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

9 Met-Ed, Penelec, Penn Power & West Penn June 2017-May 2019 DSP IV Auction Schedule COMMERCIAL Auction Month Percent Load Tranches Months to Delivery 6/1/17 to 8/31/17 9/1/17 to 11/30/17 12/1/17 to 2/28/18 3/1/18 to 5/31/18 6/1/18 to 8/31/18 9/1/18 to 11/30/18 12/1/18 to 2/28/19 3/1/19 to 5/31/19 October % TBD 8 12-Months 14.00% TBD 8 24-Months January % TBD 5 12-Months 16.00% TBD 5 24-Months April % TBD 2 3-Months 6.00% TBD 2 12-Months 6.00% TBD 2 24-Months June % TBD 3 3-Months October % TBD 2 3-Months 12.00% TBD 8 12-Months January % TBD 2 3-Months 12.00% TBD 5 12-Months April % TBD 2 3-Months 12.00% TBD 2 12-Months June % TBD 3 3-Months October % TBD 2 3-Months 14.00% TBD % TBD 8 January % TBD 2 3-Months * Final percentage may vary in total and by company based upon actual peak load contribution. Final schedule will be designed to be as close as possible to the presented values. Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

Met-Ed, Penelec, Penn Power & West Penn June 2019 - May 2023 DSP V Auction Schedule * Final percentage may vary in total and by company based upon actual peak load

10 Met-Ed, Penelec, Penn Power & West Penn June May 2023 DSP V Auction Schedule * Final percentage may vary in total and by company based upon actual peak load contribution. Final schedule will be designed to be as close as possible to the presented values. Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

11 Generation Shopping Update * The MWh percentage is based on a MWh from December 21, 2017 through August 29, Source: Data provided to Pa Public Utilities Commission, Pa Power switch Web-Site Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

Generation Shopping Update * The MWh percentage is based on a MWh from December 21, 2017 through August 23, 2018.

12 Generation Shopping Update * The MWh percentage is based on a MWh from December 21, 2017 through August 23, Source: Data provided to Pa Public Utilities Commission, Pa Power switch Web-Site Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

13 What does a change to hourly default service mean to customers? More customers will likely consider procuring competitive supply in lieu of hourly priced default service. Such customers will likely need to identify resources to assist them with procurement methods and strategy. PA Power Switch ( Competitive procurement will also entail knowledge of electricity markets and unique nature of supply contracts. Hourly priced customers need to watch the market and have a plan to reduce usage when market prices spike. Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

14 Impact on Pa EDCs of FirstEnergy Solutions Financial Restructuring Thus far, FES has performed under all existing Wholesale default service contracts with FE Pa EDC s As a retail customer of FES thus far FES has performed under my residential retail contract FES has asked for permission from bankruptcy judge to sell its retail book. As of today, it appears Constellation may be purchasing its retail book. As of Sept 11 Pa Power switch has 116 offers from 47 suppliers in West Penn s territory FES has not participated in Pa Auctions for Default Service Supply while in bankruptcy The Pa companies have had only one auction since FES declared bankruptcy The April auction was robust with ample suppliers participating Independent Evaluator and the Pa Commission found the results to be competitive October will be our next major auction. Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

15 Transmission Certain Non-Marketed Based ("NMB") Transmission Costs are recovered through Default Service Support Rider Rider J Includes charges incurred from PJM such as PJM Regional Transmission Expansion Plan charges, PJM Expansion Cost Recovery, PJM charges for Reliability Must Run generating unit declarations and charges, historical tie line, generation and retail customer meter adjustments, Unaccounted for Energy. Majority of charges recovered under Rider NMB are allocated and billed on a NSPL basis GSL, GP,TP Rider J is updated annually on June 1 Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

16 Transmission Included in Default Service Transmission Costs considered Market Based and included in the Price to Compare Default Service Rate Riders. Today, these Costs include NITs, Congestion Costs, Marginal Transmission Losses. Congestion & Marginal Transmission losses are Market Based Charges that change hourly NITs rates are set to recover the Companies' transmission-related costs West Penn has what is known as a fixed (i.e., "stated") transmission rate Penn Power is provided transmission service by ATSI which uses a forward-looking formula-based transmission rate Met-Ed and Penelec are provided transmission service by MAIT which uses a forward-looking formula-based transmission rate. Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

17 Differences between Stated and Formula rates for NITS Stated Rate Traditional rate making Fixed $/MW charge based on test year of costs and plant balances Charge is static and only changes with a new rate filing Formula Rate Transmission rate calculated utilizing a specific formula template approved by FERC Historical or projected costs and plant balances input into a formula each year result in an annual revenue requirement True up adjustments between actual and projected values Transmission rate is updated each year Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

18 What does a formula rate for NITs mean for customers in Pa? Transmission rate will vary each year. Based on Companies' anticipated transmission investments, transmission rates are expected to increase over time. Transmission rate changes may impact procurement strategy and supply agreements. Important to know if Transmission Rate is a pass through If fixed price includes Transmission is there a significant premium in the price for potential price changes Rates can go up or down annually Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

Energizing the Future Launched in 2014 to modernize transmission system across its 10 operating companies, ensuring customers benefit from smarter, stronger, more secure power grid in years ahead

19 Energizing the Future Launched in 2014 to modernize transmission system across its 10 operating companies, ensuring customers benefit from smarter, stronger, more secure power grid in years ahead From 2014 through 2017, invested $4.4 billion on grid improvement projects, completing 600 to 700 projects per year primarily in Ohio and Penn Power in PA Rebuilt or replaced more than 1,200 miles of aging transmission lines Plan to invest more than $1 billion/year to modernize aging infrastructure from 2018 through 2021 to enhance reliability Investments resulted in 37% reduction in equipment-related transmission outages in ATSI zone from Expecting similar results as we expand the program eastward into Met-Ed and Penelec service areas Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

digital analytics, and cyber/physical security to harden the system Add redundancy and system features that allow system operators to

20 Energizing the Future Key Areas of Investment Upgrade Aging Infrastructure Enhance System Performance Add Operating Flexibility Rebuild older lines and equipment to make facilities more resilient and reduce future maintenance costs Expand network communication, digital analytics, and cyber/physical security to harden the system Add redundancy and system features that allow system operators to more swiftly react to changing conditions on the grid Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

21 Distribution No base distribution rate case filed before January 2019 Effectively, rates are frozen until Oct/Nov 2019 For Commercial and Industrial Customers charges based on monthly peak demand Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

22 Commission Orders on TCJA Commission Orders were issued on May 17, 2018 A generic order that stated how each utility should handle the TCJA Company specific orders setting forth the surcharge amount as calculated by the Company and filed on March 9, 2018 with the Commission Each company filed a reconcilable tariff rider to credit customers for the difference in taxes between 35% and 21% Surcharge credit is on a bills rendered basis Rates will be changed each January 1 and will be fully reconcilable Each Company will also deal with tax savings incurred from January through June 2018 In their next base rate case or in a separate proceeding in 3 years, whichever comes first Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

23 Potential Impact of Closure of Coal and Nuclear Plants Jobs and Economic Impact According to a Report produced by Brattle premature closure of Ohio & Pa Nuclear plants could add $285 million per year to Pa consumers electric bills and $1.5 billion annually across PJM. Potential Loss of Major Source of Clean Emission Free Electric Power Per Senate Resolution 227 Nuclear provides 93% of Pa s emission free generation Potentially less secure power supply More eggs in one basket Potential for fuel supply disruptions Pa Senate Resolution 227 of 2017 by a vote of 42 8 recognized the following The nation's and this Commonwealth's economy, environment and security depend on a reliable, resilient electric grid powered by an "all of the above" mix of energy generation resources, including traditional baseload generation that is produced from long-term fuel sources located onsite; The 2014 polar vortex exposed problems with the resiliency of the electric grid when PJM Interconnection struggled to meet demand for electricity because a significant amount of generation was not available to run due to weather related outages; Pennsylvania's fuel-secure baseload generation plants employ thousands of workers in high-paying jobs and contribute significantly to State and local economies Pennsylvania's coal industry, including coal power plants, is a vital contributor to the State's economy, providing support through direct, indirect and induced impacts, including approximately 36,100 full and part-time jobs, and $4.1 billion in total value added to the Commonwealth's economy; It is in the public interest that fuel-secure baseload generation resources be properly compensated for providing these positive attributes and under the current design of the wholesale electric markets, prices are set in a manner that undervalues fuel-secure generation resources; Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

24 Other Developments Distributions Improvement Charge ( DSIC ) Long-Term Infrastructure Investment Plan ( LTIIP ) Act 11 of 2018 Legislation on Nuclear Subsidies Legislation on Microgrid and Energy Storage Program Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

25 Northern Ohio/Western Pennsylvania Energy Management Institute September 25,

FirstEnergy s Pennsylvania utilities

FirstEnergy s Pennsylvania utilities September 2016 1 September 2016 2 FirstEnergy Profile Fortune 200 company based in Akron, Ohio Among the largest investor-owned electric systems in U.S. 6 million customers served in Midwest and Mid-Atlantic