Dive Brief:
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FirstEnergy expects its rate base will grow by about 7% a year in 2024 and 2025, with its capital investments increasing to $4.1 billion in 2025 from $3.4 billion this year, company officials said Tuesday during an earnings conference call.
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The Akron, Ohio-based company believes it can boost its rate base without undue strain on its customers, partly because its utilities’ electricity rates are lower than its peers, Jon Taylor, FirstEnergy chief financial officer, said.
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At the direction of state regulators, FirstEnergy is exploring buying the 1,300-MW coal-fired Pleasants power plant in West Virginia with an initial assessment expected to be released in late March, John Somerhalder II, board chair and interim president and CEO, said. The West Virginia Senate passed a resolution Monday urging Monongahela Power, a FirstEnergy subsidiary, to buy the power plant.
Dive Insight:
FirstEnergy expects spending on its distribution system will grow to $2.2 billion in 2025 from $1.7 billion this year. Transmission investment is set to jump to $1.9 billion in 2025 from $1.7 billion this year. Capital expenditures for five years starting in 2021 are anticipated to total about $18 billion.
The Akron, Ohio-based utility company anticipates its rate base will continue growing at roughly the same pace in the second half of this decade at its utilities in Maryland, New Jersey, Ohio, Pennsylvania and West Virginia.
“I do see the need for significant capital investments post-2025 to really support resiliency [and] reliability, to support the electrification of different industries, [and] continuation of our transmission CapEx program,” Taylor said. “I do see that level and more increasing through the back half of the decade.”
FirstEnergy expects some of its utilities will seek rate hikes next year, which could increase the weighted average return on equity from the current 7.7% across the five states where it operates, according to Taylor.
The residential rates at FirstEnergy’s utilities are 10% to 40% below their peers in the states the utilities serve, according to Taylor.
“It does give us the ability to invest, and as everyone knows, we've underinvested in some of our jurisdictions, and so there's a need to invest for reliability and other things that really benefit the customers,” Somerhalder said.
FirstEnergy expects its load will grow 5% to about 152 million MWh in 2025 from 145 million MWh in 2021, according to a company presentation.
FirstEnergy doesn’t expect significant electric vehicle penetration in its service territory through 2025.
Later this year, FirstEnergy plans to seek permission to consolidate its four Pennsylvania utilities: Metropolitan Edison, Pennsylvania Electric, Pennsylvania Power and West Penn Power.
“This is an important step to align with our new state operating model, simplify our legal entity structure and increase the flexibility and efficiency of our financing strategy,” Taylor said.
The consolidation won't affect current electric rates, which will be combined over time through future rate cases, he said.
On the financial front, FirstEnergy’s net income plunged to $406 million last year from $1.28 billion in 2021, partly due to a one-time charge related to its plan to sell a share of its transmission assets to Brookfield Super-Core Infrastructure Partners.
FirstEnergy’s revenue increased to $12.5 billion last year from $11.1 billion in 2021. Weather-adjusted electricity sales increased 0.6% to 146.3 million MWh in 2022 from 145.5 million MWh in the previous year.
