FirstEnergy of Ohio is said to be prepping a $500 million securitization of deferred energy costs.

The deal, explained one source at an advisory firm, securitizes costs that the utility paid up front at a higher price.  To avoid the possible rate shock of building the costs straight back into rates, First Energy was allowed by the Public Utilities Commission of Ohio, the Ohio state utilities regulator, to recover  the costs over time and earn an additional return on the recovery because they didn't receive payment right away.  "Now they are trying to accelerate that payment through securitization," said the source.

In December 2011 Ohio passed legislation allowing Ohio became the twentieth state to pass legislation allowing utility debt securitization of  "phase in recovery bonds."  These assets include fuel and infrastructure costs as well as environmental clean-up expenses that the PUCO has allowed utilities to defer and collect from customers at a later date.

Under the bill, only assets that the PUCO has previously ordered to be deferred, which include costs for fuel, infrastructure costs, and environmental clean-up expenses, can be securitized.  

A spokesperson for PUCO said they were expecting to see the First Energy deal either next Wednesday of Thursday.


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