FirstEnergy Corp now will be able to recover administrative fees incurred when it finds energy efficiency savings at existing customer-sited projects, following the Public Utilities Commission of Ohio's (PUCO) reversal of one of its own decisions. After denying FirstEnergy's attempt to collect those fees in a December 2, 2009, order, the PUCO reversed itself in an order filed February 11, 2010. The decision is significant for all electric utilities that want to recover such fees as they attempt to satisfy the energy efficiency benchmarks required by Ohio Senate Bill 221 (S.B.221).

Under S.B. 221, as codified in Ohio Revised Code § 4928.66, electric utilities must implement energy efficiency programs that create at least a 22 percent energy-use reduction by 2025. To achieve that benchmark, the statute allows the savings created by existing or new energy efficiency measures that mercantile customers install on-site to be used by utilities in their energy efficiency calculations. In its December 2 order, the PUCO concluded that it would be unreasonable for FirstEnergy to recover the administrative fees -- through a rider on customer bills -- incurred when searching for energy efficiency savings from existing measures.

According to that order, "[t]he applications submitted . . . did not demonstrate to the Commission that it would be reasonable for FirstEnergy to recover compensation paid to an administrator based directly on the results of the administrator's energy savings calculations." As for future projects, the PUCO noted that it would be "reasonable to permit FirstEnergy to recover compensation paid [to administrators] because such compensation would facilitate the achievement of new energy savings as contemplated by [O.R.C. § 4928.66]."

After the decision, a number of groups -- including The Ohio Manufacturers' Association and Industrial Energy Users-Ohio -- filed applications for rehearing. During oral arguments, the parties seeking rehearing explained that for all projects completed before 2009, FirstEnergy and mercantile customers "would seek specific approval from the Commission of the mercantile customer's projects and that the compensation paid will not be paid unless" the PUCO approves the projects. Following oral arguments, the PUCO reversed itself, concluding that the "opportunity for further review of the projects, and the fact that compensation will be paid to administrators only if the projects are approved by the Commission, fully addresses the concerns raised by the Commission in" its December 2, 2009, order. The order suggests that if other electric utilities follow the same procedure when seeking recovery of administrative fees incurred when examining existing energy efficiency projects, the PUCO will allow the recovery.

The PUCO, however, did not provide FirstEnergy with an indefinite period to recover such fees, noting that it was still "concerned that payment of the same compensation for existing mercantile customer programs as for new mercantile customer programs does not encourage new investments in energy efficiency as contemplated by" S.B. 221. Therefore, the PUCO concluded that it would limit its approval to existing programs that are filed with the Commission prior to its issuance of a final, appealable order in FirstEnergy's energy efficiency and peak demand program portfolio plan proceeding, which is still pending before the Commission in Case No. 09-1947-EL-POR. After this time, the PUCO likely will require FirstEnergy to adhere to a different administrative fee structure for existing mercantile customer programs.