Jersey Central Power & Light’s parent company is spinning off the utility’s transmission assets into a new enterprise.
FirstEnergy, the Akron-based energy conglomerate, earlier this month filed applications with federal and state regulators to transfer its transmission assets from the state’s second-largest electric utility, as well as two other utilities it owns in Pennsylvania.
If approved, the company said it will make it easier to invest in an existing program to modernize its transmission system. In 2018, FirstEnergy identified $15 billion in incremental opportunities to enhance reliability across its 24,000-mile transmission system, an investment it said will modernize equipment, increase system performance, and improve operational flexibility.
That comes on top of $4.2 billion it plans to spend between 2014 and 2017, mostly on investments in its transmission system.
Transmission assets have become an increasing lucrative component of utilities, in part because the Federal Energy Regulatory Commission typically awards higher rates of return than state regulators for projects to upgrade utilities’ distribution systems. FirstEnergy’s utilities collectively had about $900 million in rate base at the end of last year.
FirstEnergy, in an a letter to investors, said the proposal will enhance service quality and reliability; create 200 jobs in New Jersey and Pennsylvania; and reduce competition for capital among the company’s utilities.
That last issue is likely to draw the focus of the New Jersey Board of Public Utilities and state Division of Rate Counsel, which often have been critical of JCP&L for“The sole focus is operating and maintaining the transmission system,’’ said Ron Morano, a spokesman for JCP&L. “We believe there is a lot of long-term reliability benefits and cost savings.’’ to prevent widespread power outages during extreme storms.
The lower costs that could be passed on to ratepayers will result from more favorable bond ratings from the new transmission company, which will be called Mid-Atlantic Transmission LLC, Morano said. That will reduce borrowing costs for investments, which should end up in lower costs to customers.
JCP&L also ison the power grid, planning to spend $267 million this year, up from the $250 million it invested in the previous year.
While the three utilities will lose their transmission assets, they will earn money from leasing real estate and real-property rights from the transfer, according to FirstEnergy.
JCP&L, which saw its rates reduced by $115 million in a rate case earlier this year, is stillover its operations from the BPU. In the spring, the agency directed its staff to look at the utility’s operations, its finances, and customer service.