FirstEnergy will spin off remaining transmission assets, form new subsidiary
- FirstEnergy has submitted a proposal to Pennsylvania regulators to spin off the transmission assets of three of its utilities and form a new subsidiary, RTO Insider reports.
- The decision to move the transmission assets of Jersey Central Power & Light, Metropolitan Edison and Pennsylvania Electric into a new company would lead to all the assets being managed more efficiently, the company said. If the restructuring is approved, all of FirstEnergy's system would be run by transmission affiliates.
- FirstEnergy says the transmission-only subsidiaries would have a better credit rating than the company overall, which can help them finance investment projects at lower cost.
FirstEnergy made no formal announcement of its spinoff decision. RTO Insider dug up the the move from a June 19 filing with the Securities and Exchange Commission
But despite the lack of hubbub, the decision could have significant consequences for the company and the customers on its grid. The spinoff is expected to help the company realize the goals of its Energizing the Future initiative, which looks to replace existing grid equipment with the latedst technologies, meet load growth driven by the shale gas industry in Pennsylvania, and reinforce the system to help the utility handle power plant retirements.
The company plans to spend $2.5 billion to $3 billion on transmission upgrades in the service areas of the three spun-off transmission companies, and doing so through a transmission-only subsidiary "can reduce investors’ perception of financial risk, strengthen the credit profile of the transmission function and, in that way, provide improved access to capital and reasonable rates," the utility argued in its filing.
The boom in shale gas drilling has already pushed FirstEnergy to invest more in gas-heavy areas. In February, it announced it would spend nearly $35 million on transmission projects to support extraction operations from the Marcellus Shale in western Pennsylvania.
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