The Tribune Democrat, Johnstown, PA

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May 4, 2014

Polar vortex charge gets icy response

— An attempt to add fees for electricity being sold under fixed-price contracts has charged up some businesses and their representatives.

The so-called polar vortex surcharge could add as much as 3 percent to the annual cost for electricity for customers who selected FirstEnergy Solutions as their energy supplier.

“Our customers believed they signed up for a fixed-price contract,” said Lee McCracken, president and CEO of Grove City-based energy consultants Premier Power Solutions LLC.

McCracken’s company is contacting its clients to organize a protest of the surcharge Premier Power’s attorneys believe are not included in add-ons described in FirstEnergy Solutions’ fixed-price contracts.

Based in Akron, Ohio, FirstEnergy says the charges are allowed under fixed-price contract language that allows “unforeseen and unprecedented” costs to be passed along to the customer, spokeswoman Diane Francis said.

January’s near-record cold had all generation plants working at full capacity, creating additional expenses for suppliers, she said.

KEYTEX Energies President Gregory T. Cammerata said his Greensburg-based consulting company also is looking at legal action, but first opened talks with FirstEnergy about what it sees as an unfair attempt to recoup high energy costs from January.

“We protested the change through official communication with the executive management,” he said. “That was followed up with two conference calls with the management team.

KEYTEX brokered Cambria Heights School District’s contract with FirstEnergy. The district could face up to $9,000 if the surcharge is enforced, said James Sheehan, business manager.

The clause FirstEnergy is using to justify the add-on is know as the regulatory surcharge because it’s supposed to apply to surprise new taxes or government fees, Cammerata said.

But FirstEnergy is pinning it on what are known as “ancillary charges” that power plant operators receive, based on the type of generation being operated.

“That clause was intended for new charges not contemplated at the time the contract was signed,” Cammerata said. “The ancillary charge is something that’s always been there.”

Ancillaries added up in January because all power plants were on line.

In fact, FirstEnergy Solutions had to pay more ancillary charges for January than it did for all of 2013, Francis said.

The ancillaries are set by the Regional Transmission Organization, which is responsible for reliability of the nation’s power grid. PJM Interconnection is the RTO that covers Pennsylvania, Ohio and all or parts of 11 other states and the District of Columbia.

“In January, there was higher demand than PJM anticipated,” Francis said. “When there was high demand and low supply, they had to initiate emergency operations.

“They incurred significant costs and those costs are then allocated to retail suppliers who are members of the RTO.”

Costs were higher than anticipated, but not unheard of, McCracken said.

“It’s a one-in-20-year event,” McCracken said. “Sometimes that happens. It’s a risk they are taking.”

Other electric suppliers are not adding the surcharge, he noted.

After numerous protests and a review by the Public Utilities Commission in Ohio, FirstEnergy announced late last month it would not imposed the surcharge on residential customers.

McCracken and Cammerata say the PUC may still have a say in the proposed charge for businesses.

Randy Griffith is a reporter for The Tribune-Democrat. Follow him on Twitter at twitter.com/photogriffer57.

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