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Two Pennsylvania PUC Administrative Law Judges (ALJs) would adopt, without modification, a non-unanimous settlement for the FirstEnergy Pennsylvania utilities’ default service plan to adopt major reforms to the retail electric market at FirstEnergy Pennsylvania, including excluding from the purchase of receivables program any product whose rate exceeds the price to compare.

On August 21, 2026 the Pennsylvania ALJ’s issued their recommended decision and the Commission issued a secretarial letter outlining their recommendations and next steps.

Parties that do not agree with any part of this decision, may send written comments (called Exceptions) to the Commission. Your signed Exceptions to the decision, if any, must be: 1) filed with the Secretary of the Commission, and 2) to each party of record, within ten (10) days of the date of this letter.

Replies to Exceptions, if any, must be filed with the Secretary of the Commission and served on each party of record and the Commission’s OSA, in the manner described above. They are due within seven (7) days of the date when Exceptions are due.

Highlights from Joint ALJ’s Analysis:

Default Service Procurement and Implementation Plan – Residential Class Default Service Products (Settlement, ¶¶ 17-21)

“FirstEnergy’s residential class procurement product under the Settlement will provide benefits to default service customers by protecting the Company and its customers from price and volumetric risk as well as providing price stability.”

“Given the limited market experience with 60-month FPFR contracts, we agree with OCA that the additional requirement that an independent market consultant evaluate the reasonableness of the 60-month auction results further protects customers by ensuring that the Commission has an independent analysis of whether the resulting prices reflect reasonable market outcomes.

Responsibility for PJM Charges (including NITS) under the Supplier Master Agreement

“Under the Settlement, for DSP VII, FirstEnergy will use the same form of SMA used in DSP VI with modifications that would allow changes in default service supplier responsibility for AEPS compliance, removal of PJM charges for NITS from the pricing under the SMA, changes to add new PJM billing line items associated with emergency orders issued by DOE, and revisions to clarify the true-up methodology for the capacity proxy price (CPP) used in FirstEnergy’s auctions in the event PJM does not conduct a base residual auction (BRA)”

“RESA alone opposes the Settlement provision for the removal of PJM charges for NITS from the pricing under the SMA.”

“In summary, RESA contends that the record contains no analysis comparing the long-term cost to customers of supplier-managed risk with customer-borne risk, no evidence that suppliers have been unable to manage NITS successfully under FirstEnergy’s long-standing procurement model, and no evidence that customers will ultimately be better served if the wholesale default service product is fundamentally redesigned.223 The third and final reason RESA opposes the Settlement proposal to remove NITS charges from the pricing under the SMA is that the proposal distorts competition between default service and competitive supply.”

“The undersigned agree with the Settlement Parties with respect to FirstEnergy’s proposal for the removal of PJM charges for NITS from the pricing under the SMA, specifically with the arguments advanced in support of the proposal by FirstEnergy and OCA. This proposal should be approved, and we recommend that the Commission do so.

The Commission’s approval of the NITS bypass proposal is consistent with Pennsylvania’s statutory framework governing default service, including the Customer Choice Act, Act 129, AEPS, and the principles articulated in CAUSE-PA. These authorities require the Commission to ensure that default service is procured in a manner that balances competitive procurement, reliability, customer protection, and the provision of service at the least cost to customers over time. They do not require the Commission to structure default service products in a manner that guarantees suppliers compensation for assuming every category of market uncertainty.

FirstEnergy’s NITS bypass proposal advances these statutory objectives by preventing customers from paying unnecessary risk premiums associated with embedding volatile and difficult-to-predict transmission costs into FPFR products. The Commission already endorsed this approach in approving similar procurement structures for other Pennsylvania EDCs, recognizing that removing NITS from FPFR contracts avoids unnecessary costs while promoting rate stability.” 

Excerpts from ordering paragraphs are highlighted below:

FirstEnergy’s Default Service Procurement and Implementation Plans

¶5. FirstEnergy’s DSP VII shall be in effect for a period of four years, from June 1, 2027 through May 31, 2031, consistent with the four-year term approved by the Commission in its August 2022 Order.

¶6. FirstEnergy will divide customers into three classes for purposes of default service procurement, consistent with DSP VI: the residential class, commercial class, and industrial class subject to the definitions that were approved in the August 2022 Order with a change to the 100 kilowatt (kW) threshold that separates the commercial and industrial class groupings.

¶7. Under the Settlement, during the DSP VII term, FirstEnergy will continue to procure full-requirements, load following energy and energy-related products for default service customers through a descending price clock auction (DCA) process. A full requirements, load-following contract requires a supplier to provide energy, capacity, ancillary services, and all other services or products necessary to serve a specified percentage of default service load continuously over the term of the contract.

¶8. The full requirements contracts for the residential class will include a fixed price established through the applicable DCA. During the DSP VII term, contracts for approximately 10% of the load will have terms of 60 months, contracts for approximately 45% of the residential class load will have terms of 12 months, and contracts for the remaining approximately 49% will have terms of 24 months.

¶12. The commercial class load will be supplied by a mix of 12-month (40%) and 24-month (60%) full requirements products with a fixed price established through the DCA process.

¶16. For the industrial class, FirstEnergy will continue to solicit hourly-priced full requirements products with 12-month delivery terms for all default service supply.

¶17. The procurement terms and schedule for the three procurement classes are set forth in Exhibit A to the Joint Petition

¶23. Currently, default service suppliers are responsible for PJM charges for NITS and those costs are embedded in their prices for full requirements products.53 Under the Settlement, commencing June 1, 2027, FirstEnergy will acquire NITS for its default service load and recover associated PJM charges through the NITS component – instead of the cost component – of the PTC and HP Riders.

¶24. Removal of NITS charges from the pricing under SMA eliminates the need for default service suppliers to add premiums into their bids for uncertain NITS costs and may also lead to increased participation in FirstEnergy’s auctions to the benefit of default service customers.

¶25. The Independent Evaluator’s oversight of the 60-month FPFR auction provides the Commission with an independent assessment of the auction process and results.

Classification of Non-Residential Default Service Customers

¶39. “In DSP VII, FirstEnergy is proposing that non-residential default service customers with a demand of 100 kW or above or an MRPL of 100 kW or above will be served under the HP Rider. Tariff changes as shown on FirstEnergy Exhibit DMY-6 define MRPL as a customer’s net demand contribution impact to the Company’s default service procurement activity, as determined upon the net power flow from or into the Company’s distribution system. Default service customers with a demand below 100 kW and MRPL below 100 kW will continue to be served under the PTC Rider.”

¶42. FirstEnergy will assign non-residential default service customers to the PTC Rider or HP Rider based on peak demand or MRPL during DSP VII, subject to a two-year “grandfathering” period for customer-generators that come online before June 1, 2027.79 43. The Settling Parties agreed to a modification of FirstEnergy’s original MRPL proposal to include capacity and line loss portions of FirstEnergy’s existing HP Rider until May 31, 2041 (absent a material change in the capacity markets by PJM) to continue to encourage development of solar generation in the Commonwealth. This provision is supported by Walmart, which is planning to develop solar projects in the Commonwealth of Pennsylvania.80

¶44. The MRPL proposal agreed to by the Settling Parties will properly classify customer-generators with larger, more sophisticated customers under FirstEnergy’s HP Rider and mitigate the “true-up” expense generated by large customer-generators that is projected to be between $60 million to $544 million by 2029 and paid by commercial PTC Rider customers without the Settlement.

¶57. Continued inclusion of large customer-generators in the commercial PTC default service procurement group would increase volumetric and customer switching risk for suppliers because the amount of load ultimately required to be served would be less predictable.

¶58. FirstEnergy proposed a two-year grandfathering for existing online projects as of the beginning of DSP VII.97

Customer Referral Program (CRP)

 The Settlement adopts FirstEnergy’s original proposal to not implement a successor CRP for DSP VII.

¶87.  The Settlement adopts FirstEnergy’s original proposal to not implement a successor CRP for DSP VII.59. FirstEnergy’s proposal would make the MRPL method effective June 1, 2027, for new net metering customer generation coming online after June 1, 2027, and exempting existing net metering generation coming online before June 1, 2027 from the annual reclassification based on MRPL until June 1, 2029.

Electric Generation Supplier Coordination Tariff Changes and Retail Shopping Issues

¶91. The Settlement adopts FirstEnergy’s original proposed modifications to its supplier coordination tariff in two areas: (1) protocols for EGS arrangements with customers and (2) purchase of EGS receivables designed to encourage customers to make intentional choices about the cost of their generation supply and to incentivize EGSs to consider the impact of their pricing on affordability.

¶92. First, EGSs entering into new contracts with residential customers after June 1, 2027, must return those residential customers to default service at the conclusion of the fixed duration contract term absent an affirmative customer choice to remain with the EGS in response to the notices required by the Commission’s regulations at 52 Pa. Code § 54.10.153 Commencing June 1, 2027, EGSs will also be required to provide an attestation of affirmative customer consent on a quarterly basis for all residential customers on variable-priced and charge a rate that is at or below the PTC at the time of the customer’s enrollment transaction or rate change transaction to be eligible for POR for that customer account. month-to-month products.154 To implement changes to EGS arrangements with FirstEnergy residential shopping customers under the Settlement, the Joint Petitioners requested waiver of Section 54.10(3) of the Commission’s regulations for new contracts entered into on and after June 1, 2027 (the beginning of the DSP VII term).155 Second, for all contracts entered into after June 1, 2027, EGSs on utility consolidated billing (UCB) must use “rate-ready” billing.

As reported previously, the Joint Petition is a 23-page document signed by six of the active parties. The Settling Parties have agreed to a non-unanimous settlement covering all issues raised in this proceeding. Those parties are: FirstEnergy, OCA, OSBA, CAUSE-PA, Walmart, and DLC (Joint Petitioners). Two additional parties, the Industrial Customer Groups and PSU do not oppose the Settlement.188 The following nine parties filed briefs or letters stating they object, in whole or in part, to the Settlement: Constellation, CGC, Dimension, EGS Parties, Joint Solar Advocates, Penn Renewables, RESA, Town Square and WGL. Their objections are addressed below.

There are eight attachments to the Settlement. Exhibit A is the Procurement Schedule. Exhibit B is the Revised FirstEnergy Pennsylvania Electric Company Electric Service Tariff (Relevant Pages).