METROPOLITAN EDISON COMPANY - Pennsylvania Public Utility ...
METROPOLITAN EDISON COMPANY - Pennsylvania Public Utility ...
METROPOLITAN EDISON COMPANY - Pennsylvania Public Utility ...
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BWG recommended that a detailed, written justification should be provided to theCommission for dividend payouts exceeding 85% of net income against other potentialuses for cash within the utilities, such as correcting electric reliability problems. TheCommission has broad authority to require public utilities to provide information to theCommission.FirstEnergy rejected this recommendation, stating that the determination of adividend is a management decision. FirstEnergy stated that net income, cashgeneration, capital structures, and regulatory restrictions on borrowings for eachCompany are reviewed prior to a dividend recommendation being made and that such adecision is entirely within management’s discretion in the context of its fiduciaryresponsibilities. FirstEnergy also stated that the recommendation is directly contrary tolong-standing <strong>Pennsylvania</strong> precedent that the PUC may not operate as a “super boardof directors”.Follow-up Finding and Conclusion No. III-2 - In certain years, Met-Ed, Penelec,and Penn Power have made dividend payouts that exceeded 85% of their netincome, but have never provided the Commission with a detailed, writtenjustification why such payouts were appropriate.The FE-PA Companies rejected this recommendation when they submitted theirImplementation Plan in response to BWG’s audit report, nonetheless the Audit Staffdeemed it appropriate to follow-up on the status based upon the Commission havingbroad authority to require public utilities to provide information to the Commission.Under 66 Pa. C.S. § 504, the Commission can require public utilities to file periodicalreports, “at such times, and in such form, and of such content, as the commission mayprescribe, and special reports concerning any matter whatsoever about which thecommission is authorized to inquire...” In addition, under 66 Pa. C.S. § 505, theCommission can require public utilities to furnish information to the Commission in aid ofinspection, examination, inquiry, investigation or hearing by the Commission. Lastly,under 66 Pa. C.S. § 506, the Commission has authority to make any inspection, inquiryor investigation of all of a public utility’s facilities and records.The FE-PA Companies’ net income, dividends paid to FirstEnergy, and thepercentage of net income paid in dividends from 2006 to 2009 is summarized on ExhibitIII-1. The annual dividends payments which exceeded the 75%-85% range arehighlighted in red shading and were as follows:• In 2006, Met-Ed paid dividends of $25 million despite a net loss of $240.2million.• In 2008, Penelec paid dividends of $90 million from net income of $88.2million (i.e., 102% of net income was paid as dividends).• In 2009, Penelec paid dividends of $85 million from net income of $65.4million (i.e., 130% of net income was paid as dividends).• In 2009, Penn Power paid dividends of $50 million from net income of $20.1million (i.e., 249% of net income was paid as dividends).- 22 -