Friday August 12, 2016

Like the number of U.S. gold Olympic medals, FirstEnergy’s request before the Public Utilities Commission of Ohio (PUCO) just keeps getting bigger. The company now wants three payment streams that total an outlandish nearly $13 billion:

1. $4 billion for its original proposal for a virtual power purchase agreement that would keep its uneconomic power plants operating;
2. $4 billion+ for money to help reduce the utility’s debt and maintain its credit approval; and
3. $4 billion+ to compensate the company for keeping its HQ in Ohio.

It may not be as exciting as horse dancing, but we’d award the PUCO a gold medal if it chooses not to rubber-stamp FirstEnergy’s greed. The commissioners should show independence and ensure FirstEnergy shareholders and executives – not Ohio customers – shoulder the utility’s past mistakes.

You can always visit EDF’s FirstEnergy website for our newsletter archive and links to the latest news about FirstEnergy’s bailout.

“De-Risk” for Whom, Exactly?

Last time, we noted the big news that FirstEnergy is closing a lot of coal megawatts in Ohio. But what happens in Ohio does not stay in Ohio: This led to the company announcing a major quarterly loss and, according to the Charleston Gazette-Mail, the intention “to ‘de-risk’ by pushing plants onto electricity customers in states like West Virginia.”

Specifically, FirstEnergy wants to offload a coal-fired power plant to its W.V.-based subsidiary, where electricity is regulated. The move essentially transfers risk from shareholders to customers in the northern half of the state, who would become responsible for paying to keep the plant open.

The company is justifying the sale on the basis of a 15-year energy and demand forecast, which claims the coal plant’s electricity is the cheapest option for the region – claims contradicted by environmental and consumer advocates, as well as by findings from the regional grid operator. It’s not the first time FirstEnergy price predictions would be way off, nor is it the first time West Virginians would have to cough up the dough as a result (see: 2013 FirstEnergy bailout in W.V.).

It must be easy to “de-risk” when the risk-giver is a huge, politically powerful company, and the risk-receivers are everyday people.

FirstEnergy Avoiding Competition

Why exactly is FirstEnergy turning its attention to “states like West Virginia?”

States like West Virginia = states that have a regulated electricity market, in which FirstEnergy would be guaranteed profits and wouldn’t have to bother with pesky competitors. But don’t just take our word for it. The company’s CEO said, “Longer-term, we do not believe competitive generation is a good fit for FirstEnergy and we are focused on regulated operations.”

Let’s not forget: FirstEnergy used to be all for competitive markets – before low natural gas prices started driving down profits. In fact, back in 2007, FirstEnergy’s then-CEO regaled about the wonders of deregulation and competition in testimony before the Ohio legislature:

“Competition drives innovation, a desire to succeed, efforts to improve productivity, and lower prices. This basic reality applies to today’s electricity markets – and it should remain a driving force for our business and industry in the years ahead.”

Now that the company’s coal investments can’t hack it, competition is still a driving force. But it’s driving FirstEnergy out of deregulated markets – and into the arms of safe, guaranteed profits.

Quote of the Week

It’s not the PUCO’s job to bail out utilities that make bad business decisions, like the one FirstEnergy made when it doubled down on coal – just as natural gas prices began to plummet.

Mark Drajem of Bloomberg News presented the following apt analogy, in our quote of the week:

• "FirstEnergy is a company that invested heavily in flip-phone technology just before Steve Jobs unveiled the iPhone."

Can you imagine if your phone bill had an extra fee to prop up an ailing flip phone company? Neither can we.

P.S.  Drajem’s article also notes a plaque in FirstEnergy’s Sammis plant that “praises the pioneering work of the engineer for whom the plant is named: Mr. Sammis was ‘a courageous defender of the principles of free enterprise,’ it reads.” As Alanis Morissette might say, “Isn’t it ironic?”