Feds Approve Spinoff of JCP&L Transmission Assets into New Utility

Tom Johnson | February 19, 2016 | Energy & Environment
Consumer advocate argues move is contrary to state law, would reduce oversight of Board of Public Utilities

transmission tower high-speed transmission line
Jersey Central Power & Light’s transmission assets would be spun off into a new public utility under a plan that could be voted on by state regulators as early as next week.

FirstEnergy, the Akron-based energy conglomerate that owns the state’s second-largest electric company, won approval to create the new enterprise from the Federal Energy Regulatory Commission yesterday.

Next Wednesday, the New Jersey Board of Public Utilities is scheduled to vote on the proposal, unveiled last summer by FirstEnergy. The company said the creation of the new utility will make it easier to invest in projects to modernize its transmission system, a top priority given widespread power outages caused by extreme weather.

Not everyone likes the idea. A brief filed by the state Division of Rate Counsel argued that creating a new public utility strictly dealing with transmission assets should not be allowed, claiming it conflicts with a state law that restructured the electric industry.

“After restructuring, the Legislature redefined the term ‘public utility’ to only apply to owners of distribution systems,’’ according to the brief. The distribution system typically delivers electricity from power substations to homes and businesses.

More importantly, the rate counsel argued that the board cannot deem the new transmission entity a public utility under state law, and “that approval of this transaction will result in less oversight by the board, and that it may not be in the public interest.’’

[related]As it stands now, state regulators have very little jurisdiction over the transmission assets of utilities in New Jersey, limited to oversight of vegetation management along power lines.

The federal government establishes the rates utilities earn for sending power over their transmission lines. PJM Interconnection, the operator of the regional power grid, determines what transmission projects should move forward to enhance the reliability of that grid.

In the past few years, transmission assets have become a bigger portion of the customer’s utility bill, part of a nationwide effort to modernize the country’s electric grid. Utilities typically earn a higher rate of return on their investments in transmission projects, compared with what state regulators approve for their distribution systems.

A spokesman for JCP&L defended the proposed new utility, to be called Mid-Atlantic Interstate Transmission, LLC. Besides JCP&L’s transmission assets, it will include those of two utilities FirstEnergy owns in Pennsylvania. The transaction also enhances service reliability for customers, the company said.

“MAIT will benefit customers by facilitating timely investment in new transmission projects,’’ said Ron Morano, the company spokesman. “A separate transmission-only company typically carries a more favorable credit rating and can borrow money for less, which results in lower costs for customers.’’

While the three utilities will lose their transmission assets, they will earn money from leasing real estate and real property rights from the companies, according to FirstEnergy.