CITIZEN POWER

Public Policy Research Education and Advocacy

F O R I M M E D I A T E R E L E A S E Contact: David Hughes

January 11, 2007 412/421-6072 Ext. 213

PUC Decision a Mixed Bag for FirstEnergy Ratepayers says Citizen Power

PITTSBURGH, January 11/PRNewswire—According to a press release issued today by the Pennsylvania Public Utility Commission, the PUC denied FirstEnergy’s request to break the electricity generation rate caps. “This was the second attempt by FirstEnergy to thwart Pennsylvania’s electricity deregulation law,” said David Hughes, executive director of Citizen Power, a regional energy watchdog organization. The Company claims that it is losing money because the price of wholesale electricity is going up but the price it can charge Met-Ed and Penelec customers is frozen.

Citizen Power’s attorney, John E. McCaffrey of Stinson Morrison Hecker LLP, observed

that denial of FirstEnergy’s request to break the generation rate caps was clearly consistent with Pennsylvania law, “In 2002, the Commonwealth Court agreed with Citizen Power and other parties that Met-Ed and Penelec could not break the rate caps simply because their corporate decisions had exposed them to higher power costs. The Commission apparently found that Met-Ed and Penelec failed to show that they are any more entitled to relief today than they were when the Commonwealth Court previously ruled on the issue. That is the right decision.”

On the other hand, the PUC refused to require FirstEnergy to share the $140 million in savings that resulted from its acquisition of GPU. Citizen Power opposed the FirstEnergy-GPU merger because it believed the Company had failed to show that it was in the public interest. In 2002 the Commonwealth Court upheld the PUC’s approval of the merger but agreed with Citizen Power that the PUC must “determine the amount of merger savings and the allocation of those savings.” Citizen Power had argued that all $140 million of merger savings should go to customers, while the administrative law judges who heard the case recommended that customers and FirstEnergy be allowed to split the savings.

In denying customers any share of savings, the PUC apparently accepted FirstEnergy’s argument that the merger benefited customers because FirstEnergy provided power to Met-Ed and Penelec at the generation rate cap price, which in recent years has been lower than market prices.

“The fundamental problem with this position,” McCaffrey explained, “is that because Met-Ed and Penelec were subject to a rate cap, customers were already protected from market prices in excess of the generation rate cap. The Commission’s ruling denies customers any share of the merger savings by giving Met-Ed and Penelec credit for providing service under a rate cap – something they were already legally obligated to do.” McCaffrey noted that the administrative law judges that heard the case and Vice-Chairman Cawley, who dissented from the PUC’s ruling on the merger savings issue, agreed with Citizen Power on this point.

“It’s really unfair that the PUC let this merger savings issue drag on for several years and

now decides that customers are not entitled to any of the promised savings,” said Hughes. “Met-Ed and Penelec ratepayers just lost out on a $140 million refund that they deserve. When it comes to mergers, management and shareholders usually benefit, but ratepayers are an afterthought,” Hughes concluded.

Citizen Power also is very disappointed that the PUC has decided not to continue supporting development of alternative energy and energy-efficiency technologies by its decision to stop funding for the Met-Ed and Penelec Sustainable Energy Funds.

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