By Rory D. Sweeney

In a move that elated New Jersey’s ratepayer advocates, FirstEnergy announced Thursday it is withdrawing its request for state public utility designation for its all-transmission spin-off.

FE said it made the decision because it was unlikely to win approval in time to meet the its Jan. 1 target to begin investing more than $2.5 billion in transmission infrastructure in eastern Pennsylvania and New Jersey.

“At this juncture, nearly 15 months after the original petition was filed, there appears to be no prospect of resolving this matter” in time to accommodate that schedule, the company said in a letter to Richard Mroz, president of the New Jersey Board of Public Utilities.

FE has already received approval from FERC and the Pennsylvania Public Utility Commission to create a new public utility — Mid-Atlantic Interstate Transmission (MAIT) — by spinning off the transmission assets of Metropolitan Edison and Pennsylvania Electric. The company needed approval from the BPU to do the same with Jersey Central Power & Light, but faced opposition from the state Division of Rate Counsel. (See FERC OKs FirstEnergy’s Tx Spin-off; NJ, Pa. Approval Still Needed.)

Rate Counsel Director Stefanie Brand dismissed FE’s claims that the consolidation would reduce project costs by $135 million as “speculative.” She pointed to testimony her office submitted that argued the reorganization benefited stockholders at the expense of ratepayers.

The Rate Counsel said there were more appropriate ways to achieve the improved credit ratings that were at the heart of FE’s pitch to the BPU. As a regulated utility, JCP&L could have an excellent credit rating but has been mismanaged, Brand said.

Additionally, her office contended the proposal drastically undervalued the assets to be transferred, meaning the ratepayers who paid for them wouldn’t receive fair compensation.

Bad Precedent

The request would have also given the all-transmission company the powers of eminent domain and local-zoning pre-emption. FE’s plan originally faltered because MAIT didn’t have any distribution customers, as required for public utilities in New Jersey. In a bid to meet that requirement, FE amended its plan to give the subsidiary five customers.

Brand said that would set a bad precedent. “You can see merchant transmission companies lining up saying, ‘Oh, give me five customers; I’ll take eminent domain authority,’” Brand said in an interview.

MAIT will still consolidate the transmission assets for Met-Ed and Penelec and move forward under that name for Pennsylvania projects, FE spokesman Doug Colafella said. JCP&L will continue operating under its current structure, he said.

“We’re disappointed, but New Jersey regulators determined that a transmission company can’t be a public utility in New Jersey,” he said.

Colafella said the company will move forward with its transmission investments as planned, which are expected over the next five to 10 years. The New Jersey projects will be pursued under JCP&L’s formula rates.

Colafella wasn’t sure how the decision impacted the financials FE had originally calculated for the asset transfer to MAIT.

Brand was particularly pleased with the decision because it saved the time and expense of going to trial.

The decision was also welcomed by U.S. Rep. Frank Pallone Jr. (D-N.J.), through whose 6th District FE’s planned 10-mile Monmouth County Reliability Project would run. Pallone had previously submitted comments to the BPU on the case, in which he expressed concern about “numerous unresolved questions about the consequences of this transfer” and potential “unforeseen impacts.”

“I appreciate the work of so many of my constituents and the state Rate Counsel who stood against this transfer and its potential to hurt the quality of life in our communities,” he said in a news release.