Disputing First Energy’s RTO Expense Surcharge

by Carolyn Blake, Esq

This month, many FirstEnergy Solutions (FES) customers noticed a new line item on their electric bills: the Regional Transmission Organization (RTO) Expense Surcharge. After reviewing their FES generation agreements, many of these customers concluded this charge was unwarranted. However, navigating the bill dispute process can be tricky.

What is the RTO Expense Surcharge?

Due to extremely cold weather our RTO, PJM Interconnection, experienced higher than normal prices for reserve generation in January. PJM is the regional transmission organization that serves Ohio, 12 other states and the District of Columbia. PJM coordinates wholesale electricity to maintain reliability of the grid.

PJM passed the high, reserve-generation prices along to generation suppliers, including FES. In turn, FES is passing these charges along to its commercial and industrial customers as a one-time fee it is calling the “RTO Expense Surcharge.”
Although FES initially indicated that all of its customers would be assessed the RTO Expense Surcharge, it subsequently announced that it was waiving the charge for residential customers.

But my FES contract is for a fixed rate!

Electric generation contains three components: energy, capacity and ancillary services. Ancillary services include costs from PJM to maintain reliability of the grid. Most FES customers have contracted for a product that has at least energy and ancillary services fixed.

So if ancillary service costs are fixed, then how can FES justify charging customers the RTO Expense Surcharge?

FES characterized the high costs from PJM due to extreme weather as a “pass-through event” pursuant to customers’ generation agreements. FES’s standard agreement includes a section labeled “effect of regulatory action” that allows it to pass through additional costs to the customer if “any regional transmission organization,” such as PJM, “imposes upon [FES] new or additional charges … relating to the Electricity Supply.” According to FES, the high costs from PJM are “new or additional.”

How can I dispute the RTO Expense Surcharge?

Many FES customers believe that the charges from PJM do not qualify as a pass-through event. They believe that January’s ancillary service costs were not “new or additional” — they were merely high. As such, these customers have chosen to dispute the surcharge.

If you determine that you are not contractually obligated to pay the RTO Expense Surcharge, your agreement with FES will dictate the dispute procedure. Check your agreement for exact terms.

FES’s standard agreement allows the customer to withhold payment for the disputed amount, and requires the customer and FES to attempt to resolve the dispute in good faith. Many customers that decided to dispute the charge started the process by promptly contacting FES after receiving the charge on their bills.

Won’t I be charged late fees?

If you are an FES customer, you may wonder if you will be charged late fees if you pay your bill in full, less the RTO
Expense Surcharge. The answer to this question depends on how you are billed.

Customers can be billed in two ways: dual billing or consolidated billing. Dual billing customers receive two separate bills each month: one for generation from FES, and one for distribution from their local distribution utility, such as the Illuminating Company. Consolidated billing customers receive one bill from their distribution utility that includes both distribution charges and FES generation charges.

For dual billing customers, the terms of your generation agreement govern. If your agreement allows you to withhold payment for disputed amounts, then FES should not assess a late fee while the dispute is pending. Since payment for generation services is not collected by the distribution utility, there is no concern for late fees on your distribution bill.

If you are a consolidated billing customer, you face an additional hurdle because your dispute is with FES, but you are billed by the distribution utility. As such, the distribution utility will not necessarily know why you are partially paying the consolidated bill absent notification.

Therefore, in addition to notifying FES that you wish to dispute the RTO Expense Surcharge, consolidated billing customers may want to contact their electric distribution utility. FirstEnergy customers may wish to contact its Supplier Services department at 76 S. Main St., Akron, Ohio 44308. The email address is supplierprogram@firstenergycorp.com.

Public Utilities Commission of Ohio rules address partial payment for consolidated billing customers. According to Ohio Administrative Code 4901:1-10-33(H)(2)(a), “Payments in full of the undisputed amount related to a bona fide dispute do not constitute partial payments.” Therefore, so long as your dispute of the RTO Expense Surcharge is “bona fide,” the distribution utility should consider the payment of all undisputed charges payment in full and not assess a late fee while the dispute is pending.

Conclusion

As customers begin to receive bills containing FES’s RTO Expense Surcharge, it is important that these customers review the facts surrounding the charge and the terms of their generation agreements. Consolidated billing customers should also review PUCO rules that govern billing disputes. While there are hurdles to disputing the charge, customers that understand the rules should be able to clear them.