FirstEnergy's (FE) Unit Potomac Edison Gets PSC Approval
FirstEnergy Corp.’s FE subsidiary, Potomac Edison, recently received The Maryland Public Service Commission’s (“PSC”) approval to buy out its contract with AES' Warrior Run generating station roughly seven years early. This may save customers close to $80 million.
The agreement with AES Warrior Run was signed in 2000 as a provision of the Public Utility Regulatory Policies Act (PURPA), a law approved by Congress in 1978. It relates to the coal-fired power plant near Cumberland, MD.
Maryland customers of Potomac are currently subject to a Cogeneration PURPA Project Surcharge on their electricity bills, determined by the price at which the company can resell the power it acquired from Warrior Run. Due to changes in the competitive market, the surcharge amount has changed significantly from year to year.
Potomac’s Customer Benefits
According to the Maryland PSC's directive, customers would continue to see the PURPA surcharge on their bills during the buyout period. However, Potomac’s customers are expected to save a sizable sum of money throughout the buyout time. Additionally, the elimination of charges based on a volatile market will help to stabilize their costs as a result of this arrangement. There is a 90% chance that ending the Warrior Run contract early will result in cost savings for the consumers for the remaining period of the contract.
Other Customer-Friendly Initiatives
In order to help reduce potential weather-related outages and increase reliability for customers this summer, Potomac has taken various initiatives across its Maryland service territory.
Equipment inspections have been proactively undertaken. Over 590 miles of transmission lines in the Maryland service area have been inspected by helicopter crews to locate hardware issues that are not readily apparent from the ground. The ground workers assessed about 80 substations and made the necessary repairs before the summer. Additionally, they carried out detailed inspections of nearby power lines and concentrated on more than 450 line capacitors, which maintain proper electric voltage.
Also, to minimize tree-related damages during severe weather and improve the reliability of the electric service, the company plans to clear vegetation along 1,100 miles of power lines in 2023, of which 500 miles have already been covered.
Price Performance
Over the past year, shares of FE have gained 6.8% against the industry’s 8.5% decline.
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Zacks Rank & Key Picks
FirstEnergy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked utilities in the same industry are PPL Corp. PPL, Avista Corp. AVA and NiSource Inc. NI, each carrying a Zacks Rank #2 (Buy) at present.
PPL’s long-term (three- to five-year) earnings growth rate is pegged at 7.4%. The Zacks Consensus Estimate for 2023 earnings per share (EPS) indicates an increase of 12.8%.
Avista’s long-term earnings growth rate is pegged at 6.3%. The Zacks Consensus Estimate for 2023 EPS indicates an increase of 9.4%.
NiSource’s long-term earnings growth rate is pegged at 6.9%. The Zacks Consensus Estimate for 2023 EPS indicates an increase of 7.5%.
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