FirstEnergy Corp. subsidiaries Ohio Edison Co., The Cleveland Electric Illuminating Co. and The Toledo Edison Co. recently filed a three-year rate plan for Public Utilities Commission of Ohio consideration, pursuant to a comprehensive law enacted in Ohio in 2025. The commission's review of the application could take up to a year.

➤ FirstEnergy's Ohio utilities are seeking a total $481.4 million multiyear electric distribution base rate increase that would be implemented beginning in mid-2027. Certain existing rider revenues would be transferred to base rates, bringing the net ratepayer increase to $392.2 million.

➤ The utilities propose a 10.20% return on equity (ROE), which would be a meaningful increase to the 9.63% equity return the Public Utilities Commission of Ohio (PUC) approved in the companies' previous rate case six months ago.

➤ The next few years are expected to be dynamic for Ohio's utilities. Multiyear rate adjustments are permitted under the terms of House Bill (H.B.) 15, enacted in Ohio in 2025, altering many aspects of the state's utility regulatory framework. Electric security plans (ESPs) that have been in place for many years for the electric distribution utilities, including the FirstEnergy utilities in Ohio, are to ultimately be eliminated. H.B. 15 includes other key ratemaking provisions that will impact the utilities.

➤ Ohio has taken meaningful steps to improve its regulatory climate, which Regulatory Research Associates accords an Average/1 ranking.

In Case 26-0347-EL-AIR, FirstEnergy's Ohio utilities filed for an aggregate $481.4 million multiyear electric distribution base rate increase. After factoring in revenues currently reflected in riders that would be moved to base rates at the conclusion of this proceeding, the net increase to ratepayers over the full term of the rate plan would be $392.2 million. The riders are Rider AMI (grid modernization programs), Rider DCR (incremental capital investments) and Riders DUN and PUR (incremental uncollectible expenses). The utilities would maintain a zero balance in these riders and otherwise be subject to the terms of their existing ESP 4 framework until its May 31, 2029, expiration.

The total rate base proposed by the utilities for the final year of the rate plan is $6.393 billion, a roughly $2 billion increase relative to the total rate base authorized for the companies in November 2025 in their prior rate case.

Electric utilities in Ohio are permitted to propose an interim rate adjustment if the commission has not issued a final order within 275 days of the company's application. An interim rate change would not be allowed to exceed the midpoint of the rate change range put forth by the PUC staff in its report during the case. If the PUC were to fail to render a decision on the permanent rate adjustment request within 360 days of the case filing, the utility's rate change request would be deemed to be approved by operation of law. As such, a final PUC order is expected to be issued by May 2027.

H.B. 15, enacted May 15, 2025, requires the use of a true-up mechanism that is to reflect the utility's actual investment, revenues and expenses for each year of the multiyear rate plan. At the conclusion of the plan, a traditional base rate case is to be filed. The new law also addresses the future of the electric utilities' ESPs, which were established by legislation enacted in 2008 to address generation pricing in the state. ESPs incorporate a "comprehensive distribution reliability plan" and allow recovery of the associated costs via several riders. The ESP currently in place for each of the utilities is to be terminated at the conclusion of the final standard service offer auction delivery period, previously approved by the PUC.

Ohio Edison

Ohio Edison proposes a $205.2 million total base rate increase. For the first year of the company's plan, the company proposes a $141.2 million base rate increase premised upon a 10.20% return on equity (53.23% of capital) and an 8.40% return on an average rate base valued at $2.674 billion for a test year ending June 30, 2028. A portion of the company's rate base ($94.6 million) represents regulatory assets that are to be accorded a debt return only. The remaining portion of the rate base is to be accorded an 8.47% weighted average cost of capital. Therefore, the weighted overall return on the total rate base figure is 8.40%.

For the first year of the plan, the net ratepayer impact would be a $99.8 million rate hike after accounting for $41.4 million of rider-related revenues that would be transferred to base rates.

For the second year of the plan, the company proposes a $27.8 million base rate increase premised upon a 10.20% return on equity (54.15% of capital) and an 8.43% return on an average rate base valued at $2.824 billion for a test year ending June 30, 2029. A portion of the company's rate base ($77.7 million) represents regulatory assets that are to be accorded a debt return only. The remaining portion of the rate base is to be accorded an 8.49% weighted average cost of capital. Therefore, the weighted overall return on the total rate base figure is 8.43%.

For the third year of the plan, the company proposes a $36.2 million base rate increase premised upon a 10.20% return on equity (53.68% of capital) and an 8.45% return on an average rate base valued at $2.979 billion for a test year ending June 30, 2030. A portion of the company's rate base ($60.9 million) represents regulatory assets that are to be accorded a debt return only. The remaining portion of the rate base is to be accorded an 8.49% weighted average cost of capital. Therefore, the weighted overall return on the total rate base figure is 8.45%.

Cleveland Electric Illuminating

The utility seeks a $199.1 million base rate hike. For the first year of the company's plan, the company proposes a $156.0 million base rate increase premised upon a 10.20% return on equity (53.11% of capital) and a 7.67% return on an average rate base valued at $2.341 billion for a test year ending June 30, 2028. A portion of the company's rate base ($19.8 million) represents regulatory assets that are to be accorded a debt-only return. The remaining portion of the rate base is to be accorded a 7.69% weighted average cost of capital. Therefore, the weighted overall return on the total rate base figure is 7.67%.

For the first year of the plan, the net ratepayer impact would be a $121.4 million rate hike after $34.6 million of rider-related revenues that would be transferred to base rates are considered.

For the second year of the plan, the company proposes a $17.0 million base rate increase premised upon a 10.20% return on equity (53.42% of capital) and a 7.85% return on a rate base valued at $2.449 billion for a test year ending June 30, 2029. A portion of the company's rate base ($16.4 million) represents regulatory assets that are to be accorded a debt-only return. The remaining portion of the rate base is to be accorded a 7.87% weighted average cost of capital. Therefore, the weighted overall return on the total rate base figure is 7.85%.

For the third year of the plan, the company proposes a $26.1 million base rate increase premised upon a 10.20% return on equity (53.96% of capital) and a 7.87% return on an average rate base valued at $2.557 billion for a test year ending June 30, 2030. A portion of the company's rate base ($13.0 million) represents regulatory assets that are to be accorded a debt return only. The remaining portion of the rate base is to be accorded a 7.88% weighted average cost of capital. Therefore, the weighted overall return on the total rate base figure is 7.87%.

Toledo Edison

The company requests a $77.1 million base rate increase. For the first year of the company's plan, the company proposes a $46.0 million base rate increase premised upon a 10.20% return on equity (53.52% of capital) and a 7.78% return on an average rate base valued at $717.8 million for a test year ending June 30, 2028. A portion of the company's rate base ($48.7 million) represents regulatory assets that are to be accorded a debt return only. The remaining portion of the rate base is to be accorded a 7.96% weighted average cost of capital. Therefore, the weighted overall return on the total rate base figure is 7.78%.

For the first year of the plan, the net ratepayer impact would be a $32.8 million rate hike after $13.2 million of rider-related revenues that would be transferred to base rates are considered.

For the second year of the plan, the company proposes a $14.0 million base rate increase premised upon a 10.20% return on equity (53.36% of capital) and an 8.03% return on an average rate base valued at $776.0 million for a test year ending June 30, 2029. A portion of the company's rate base ($39.8 million) represents regulatory assets that are to be accorded a debt-only return. The remaining portion of the rate base is to be accorded an 8.15% weighted average cost of capital. Therefore, the weighted overall return on the total rate base figure is 8.03%.

For the third year of the plan, the company proposes a $17.1 million base rate increase premised upon a 10.20% return on equity (53.89% of capital) and an 8.09% return on an average rate base valued at $857.7 million for a test year ending June 30, 2030. A portion of the company's rate base ($30.9 million) represents regulatory assets that are to be accorded a debt return only. The remaining portion of the rate base is to be accorded an 8.18% weighted average cost of capital. Therefore, the weighted overall return on the total rate base figure is 8.09%.

Previous case

The FirstEnergy utilities' previous Ohio-jurisdictional rate proceeding, Case 24-0468-EL-AIR, was decided in November 2025, when the PUC authorized base rate increases totaling slightly more than $500 million. However, after factoring in the impact of revenues that were already reflected in riders, the net aggregate rate hike for the utilities was $34 million. A 9.63% return on equity (51.20% of capital) was authorized for each utility, and an aggregate $4.411 billion rate base was approved.

Pursuant to orders on rehearing, the PUC revised the approved net rate changes to a $25.4 million rate reduction for Ohio Edison, a $48.8 million rate increase for Cleveland Electric Illuminating and a $29.6 million rate reduction for Toledo Edison.

RRA view on Ohio regulatory climate

From an investor perspective, Ohio's energy regulatory climate is slightly more constructive than average. In light of the enactment of H.B. 15, RRA accords it an Average/1 ranking.

In Case 26-0132-EL-AIR, Duke Energy Corp. subsidiary Duke Energy Ohio Inc. proposes a $90.2 million electric distribution base rate increase premised upon a 10.50% ROE. A decision could be rendered in March 2027.

The commission is considering a request put forth by Enbridge Inc. subsidiary The East Ohio Gas Co. for a $163.1 million base rate hike premised upon a 10.30% ROE in Case 25-1097-GA-AIR. A PUC decision could be issued by December.

In October 2025, National Fuel Gas Co. and CenterPoint Energy Inc. announced the terms of an agreement that would result in National Fuel Gas acquiring Vectren Energy Delivery of Ohio LLC from direct parent CenterPoint Energy Resources Corp. for $2.62 billion. The transaction is expected to be completed in the fourth quarter of 2026, pending the completion of a "notice filing" and subsequent review by the PUC in Case 26-0033-GA-UNC. The companies do not believe that PUC approval is required for the transaction to be completed, but acknowledge that the commission could review the transaction to ascertain any impacts it might have on Vectren Energy Delivery of Ohio customers in accordance with its general supervisory authority. The staff recently indicated its support for the transaction.

In Case 26-0435-EL-MER, AES Corp. electric distribution utility The Dayton Power and Light Co. and affiliates associated with an investor group led by Global Infrastructure Management LLC and EQT Partners AB recently filed for PUC approval of a transaction that calls for the sale of a majority interest in AES Corp. to the group. AES Corp. agreed to be acquired by the group in early March. The new majority owners said they would offer the utility enhanced financial flexibility to invest in its infrastructure and have a long-term investment focus. They also said they would operate under the utility's existing regulatory framework and customer rates would not be affected. The remaining 30% interest in the utility is indirectly held by La Caisse de dépôt et placement du Québec, which is expected to maintain its stake after the deal is completed. The companies seek issuance of a PUC final order on the request in September.

With respect to rate-related matters, Dayton Power and Light filed a base rate change request in November 2025 in Case 25-0958-EL-AIR on the heels of the conclusion of its previous rate proceeding. Dayton Power and Light is seeking an aggregate $237.6 million base rate hike that would take effect in 2027–2029. A 10.10% ROE is reflected in the company's application. A PUC decision could be issued in October. Dayton Power and Light is operating under the terms of its ESP 4 plan, which was approved in 2023 in Case 22-0900-EL-SSO. The plan is to be in place until July 1, 2026.

The other large utilities under the PUC's purview are American Electric Power Co. Inc. subsidiary Ohio Power Co. and NiSource Inc. subsidiary Columbia Gas of Ohio Inc.