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FirstEnergy Unit Files Rate Case to Upgrade Service Quality

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FirstEnergy‘s (FE - Free Report) subsidiary — Potomac Edison — filed a rate case to the Maryland Public Service Commission (“PSC”) in nearly 25 years to recover the amount invested in enhancing service reliability, grid flexibility and modernizing existing setups. The rate file also includes initiatives to install more automated distribution equipment, replace additional aging underground electric cable and trim trees frequently.

Notably, the company is undertaking initiatives to serve 265,000 customers in Maryland more efficiently through lesser number of outages with shorter duration. Courtesy of these ongoing infrastructure spending, the outages and their duration in Potomac Edison’s service territories are declining.

If the rate hike is approved without any changes, it will increase monthly bills for the typical residential customer using 1,000 kilowatt-hours by $6.00 per month. The new rates will become effective from first-quarter 2019.

Reasons for the Move?

Utility companies are generally regulated, fundamentally strong and mature. To provide an uninterrupted supply of basic amenities, these companies need to upgrade and strengthen their infrastructure and modernize the generation fleet. Regular investments for the maintenance of existing infrastructure and replacement of old assets are necessary. Usage of smart technologies is important to reduce maintenance cost.

To recover the invested capitals, utility companies’ files rate hike to the commissions.

Utilities File for Rate Hike

Other utilities have also filed for rate hike to recover invested capital and maintain the flow of business.

Recently, Duke Energy’s (DUK - Free Report) subsidiary — Duke Energy Carolinas — applied for new rates to the North Carolina Utilities Commission (“NCUC”).

NiSource (NI - Free Report) plans to invest $1.7-$1.8 billion to strengthen utility infrastructure in 2018. The company filed rate hike applications in different commissions to recover investment and maintain  infrastructure strengthening activities.

Price Movement

Shares of FirstEnergy have gained 12.9%, against the industry’s decline of 6.0% in the past 12 months.

Zacks Rank & Other Key Pick

FirstEnergy currently carries a Zacks Rank #2 (Buy). Another top-ranked stock from the same space is NRG Energy, Inc. (NRG - Free Report) , sporting a Zacks Rank #1 (Strong Buy). The company delivered an average earnings surprise of 213.28% in the past four quarters. The Zacks Consensus Estimate for earnings moved up 3.5% in the past 30 days. You can see the complete list of today's Zacks #1 Rank stocks here.

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