An Ignoble Experiment

2. FirstEnergy first to securitize deferred costs under HB 364

None of Philadelphia's infrastructure, from public transportation to a viable airport to the region's economy as whole, could be sustained without viable water and wastewater systems, according to Aqua America Chairman and CEO Nicholas DeBenedictis, speaking at the Pennsylvania Economy League's conference in Greater Philadelphia.

"Water and wastewater service are basic needs required by everyone and that is why it is so important that our water distribution and wastewater collection systems and treatment plants be sustained. There is an opportunity for private industry to play a key role in funding these infrastructure improvements," said DeBenedictis, who is also DeBenedictis is also chairman of the Pennsylvania Convention and Visitors Bureau.

DeBenedictis points to the Clean Water Act as an example.

"When you consider private industry has made much of the investment that has led to improvements in improving our source waters, it begs the question of whether tax-supported grant programs are still needed," he said. "The recent success of the Clean Water Act could be an example that we can afford the true cost of service for our goods and services and do not require taxes to support government entities to do for us what the private sector can economically accomplish."

Aqua America is another example. Aqua America's utility companies have collectively invested more than $300 million annually over the past several years to upgrade water and wastewater infrastructure in the nine states in which they operate.

"Our customers pay for those improvements with their rates, which are still less than other utility services despite the fact that water and wastewater remain the most capital-intensive of all utilities, investing more capital for every dollar of revenue earned than any other utility," said DeBenedictis.

Approximately 70 percent of the planned capital spending maintains or replaces aging water and sewer mains, water services and meters, hydrants, and sewer lift stations to assure continued, reliable service for customers. Treatment plant improvements account for 14 percent of the spending for continued compliance with state and federal regulations and quality water. Customer service expenditures amount to 12 percent of the spending to maintain and improve Aqua's field and office equipment and processes. Miscellaneous equipment and improvements comprise the remaining 4 percent of the planned spending.

The investments are critical to ensuring that Aqua complies with state and federal water quality regulations, improve the reliability of water and wastewater service to customer, protect public health, and provide public safety professionals with fire protection resources in the event of an emergency.

For more:
- see this report

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Innovation sustains NJ water infrastructure

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By Barbara Vergetis Lundin

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3. Community wind popularity increasing in the Heartland

In the first use of the recently enacted Securitization Act created by House Bill 364, the Public Utilities Commission of Ohio (PUCO) has approved an application by FirstEnergy to securitize approximately $555 million in previously approved deferred costs.

In 2012, PUCO approved FirstEnergy's request to securitize deferred costs that were already being recovered from customers under certain approved recovery riders associated with deferred generation and fuel costs, as well as discounts for certain residential customers. The securitization transaction resulted in the issuance of approximately $445 million of securities known as pass-through trust certificates.

HB 364 allows Ohio's electric distribution utilities to issue low-interest; long-term bonds to replace certain types of deferred costs that otherwise would have higher carrying costs. By securitizing deferred costs, FirstEnergy can take advantage of lower interest rates available through the bond market and pass the savings on to ratepayers, ultimately leading to long-term savings.

FirstEnergy Corp's Ohio utilities -- Ohio Edison, Cleveland Electric Illuminating and Toledo Edison -- are the first to take advantage of Ohio's new securitization legislation by financing deferred costs using AAA-rated, long-term securitization financing.

"Securitization is a powerful tool for reducing costs for customers as well as supporting the financial health of our state's electric utilities," said Leila Vespoli, executive vice president and general counsel of FirstEnergy. "We anticipate that our customers will collectively save about $106 million (through 2035) when compared to the originally approved recovery riders."

For more:
- see the case record

By Barbara Vergetis Lundin

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4. Consumers Energy to double renewables by 2015

The small wind power industry has been around for 30 years, but is just now reaching a critical juncture with numerous bankruptcies and acquisitions over the last 18 months. Still, the opportunity for small wind power remains strong across a variety of applications in both developed and developing countries. In fact, the worldwide market for small wind systems will reach $723 million by 2018, with $3.3 billion in cumulative sales from 2013 through 2018, according to Navigant Research.

"Small wind is growing primarily as a result of state and national incentives, including a burgeoning market in the United Kingdom," said Dexter Gauntlett, research analyst with Navigant Research. "The question is: Can the small wind turbine industry grow to more than just a niche market, and attract the investment required to drive down costs? Given the precipitous price declines for solar photovoltaic modules, distributed solar PV is increasingly competitive with small wind."

Community wind, in which a group of local people (usually farmers and business people, but sometimes a municipality) own wind generation assets in the form of a limited liability company that, in turn, enters into a power purchase agreement with the local utility, are growing in popularity. Originally most common in parts of Europe, community wind is now emerging in rural areas of the United States -- particularly Minnesota and Iowa -- as a vehicle for economic development, according to Navigant.

For more:
- see this report

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By Barbara Vergetis Lundin

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5. Energy efficiency reduces CO2 emissions for Constellation customers

Consumers Energy is adding 62 wind turbines to its Cross Winds Energy Park in Tuscola County, Michigan as part of its Balanced Energy Initiative, a comprehensive 20-year plan to meet the needs of its 1.8 million electric customers with a balanced energy portfolio, including energy efficiency, renewable energy and customer demand management. The units each have a capacity of 1.7 MW for a total installed capacity of 105.4 MW.

Credit: Wikimedia Commons/London Rachel, U.S. Fish and Wildlife Service

Michigan's 2008 energy law requires that 10 percent of the electricity that Consumers Energy provides its 1.8 million customers comes from renewable sources such as wind, solar, biomass and hydro by 2015. Under its Michigan Public Service Commission approved renewable energy plan, completion of Cross Winds will help enable Consumers Energy to meet that goal. The Cross Winds Energy Park is Consumers Energy's second wind park and is expected to be operational in late 2014.

Consumers Energy currently supplies 4 percent of its electricity to customers through renewable sources, including wind. It expects to more than double that amount by 2015.

To meet state renewable energy standards, Consumers Energy must add more than 900 MW of renewable generating capacity. Consumers Energy plans to build and own half of this new capacity and buy the remaining half from third-party suppliers with the goal of supplying customers with about 3.6 million megawatt-hours of electricity a year from renewables by 2015.

For more:
- see this report

By Barbara Vergetis Lundin

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