FirstEnergy, the Akron-based electric utility holding company, is facing what looks like an existential challenge. The company is on the verge of losing all of its expensive nuclear and coal-fired generation and becoming an entirely regulated firm.
The generating subsidiary, FirstEnergy Solutions, is almost certain to file for bankruptcy by the end of March. CEO Chuck Jones told the Cleveland Plain Dealer, “While I cannot speak for the unregulated business, I would be shocked if they go beyond the end of March without some type of filing.” POWER magazine reported this week, “FirstEnergy Corp. bled $2.64 billion from its competitive businesses over 2017, financial losses exacerbated by market declines in contract sales, higher operating expenses, and cost associated with asset impairment and plant exit.”
FirstEnergy announced last week that it will close the 1,300-MW Pleasants coal-fired station in West Virginia or sell it by Jan. 1, 2019. The Pittsburgh Post-Gazette reported that the Bruce Mansfield 2,400-MW coal fired plant and the two-unit, 1,800-MW Beaver Valley nuclear plant, both in Beaver County, Pa., are likely to be in the sights for possible sale or shut-down, as are the Davis-Besse and Perry nuclear plants in Ohio.
FirstEnergy’s generating portfolio, in a separate operation from the distribution utility under Ohio’s 1990s restructuring law, bids into the PJM Interconnection’s wholesale competitive markets and has been bleeding red ink for several years. The high-cost generating portfolio of some 16,000 MW consists of 58% coal, 25% nuclear, 12% renewables, and 5% oil and gas.
The Post-Gazette noted that FirstEnergy “has already written down more than $11 billion of the value” of the Beaver County generating assets, “including $2 billion recorded late last year on the nuclear division, giving the likelihood that they’ll be retired earlier than expected. That effectively says the Beaver Valley plant, which employs about 800 workers, is now worth nothing.”
The company lost $1.7 billion in 2017 ($3.88/share) compared to red ink of $6.2 billion ($14.49/share) in 2016.
FirstEnergy has been seeking buyers for its generation, with no takers, and trying to persuade Ohio lawmakers to bail out the company’s nuclear and fossil generation, with no success there, either.
In an email, Dick Munson, veteran energy observer and Midwest representative for the Environmental Defense Fund, said four clouds “are gathering above FirstEnergy’s bailout attempts.” First, the the Trump administration’s attempt to get the Federal Energy Regulatory Commission to overturn the competitive markets to favor coal and nuclear failed and the Energy Department let it be known that it would not issue an emergency order to keep the plants running.
Second, said Munson, FERC turned down a FirstEnergy request to shift the Pleasants plant in West Virginia from a competitive generator to a captive, regulated asset of its West Virginia distribution subsidiary. Third, Ohio’s legislature is not moving to save the company’s plant. And fourth, the Public Utilities Commission of Ohio is pondering whether the tax savings that will flow to the company from the Trump tax plan should go to its customers rather than its shareholders.
Amidst the gathering storm, FirstEnergy has moved to shake up its board and senior executives “in preparation for becoming a fully regulated utility,” the Akron Beacon-Journal reported. The company named a new board chairman, replacing a chairman who had reached the mandatory retirement age of 72 and another board member, who also reached mandatory retirement. The Beacon-Journal reported, “FirstEnergy announced nine senior management changes that it said are designed to support its transition to a fully regulated utility company and broaden the experience of key executives,” effective in early March.
— Kennedy Maize