FirstEnergy Seeks Corporate Fossil Fuel Bailout Amidst Bankruptcy

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The subsidiaries that run FirstEnergy Corp.’s nuclear and coal-fired power plants filed for bankruptcy at the end of March after months of speculation, while at the same time essentially petitioning the US Department of Energy to declare an emergency that would effectively bail out the ruined fossil fuel company.

For many around the world, the past weekend would have been spent celebrating Easter in its various forms, but for FirstEnergy, the Akron, Ohio-based electric utility there was no celebration as it officially filed for Chapter 11 bankruptcy and announced that it would be closing its three nuclear plants in Ohio and Pennsylvania. Together, FirstEnergy Solutions, its subsidiaries, and FirstEnergy Nuclear Operating Company own and operate two coal-fired plants, one dual fuel gas/oil plant, one pet-coke fired plant and three nuclear power plants. However, according to the Ohio branch of the Institute for Energy Economic and Financial Analysis (IEEFA Ohio), “The utility has been signalling for many months that it intends to get out of the power-generation business” having already closed all but one of its coal-fired power plants in Ohio.

The Chapter 11 filing does not involve parent company First Energy or affect its distribution, transmission, regulated generation, and Allegheny Energy Supply (AE Supply) subsidiaries.

“FirstEnergy and its other subsidiaries are not part of this Chapter 11 filing,” said Charles E. Jones, president and chief executive officer of FirstEnergy.  “The six million customers of our regulated utilities will continue to receive the same reliable service, while our regulated generation facilities will continue normal operations, with the same longstanding commitment to safety and the environment.”

However, despite attempting to spin its bankruptcy filing as “a milestone in its previously announced strategy to exit the competitive generation business and become a fully regulated utility company with a stronger balance sheet, solid cash flows and more predictable earnings,” there is obviously more at play for the company as it also urged US Energy Secretary Rick Perry to “find that an emergency condition exists … that requires immediate intervention by the Secretary.”

Specifically, FirstEnergy is seeking protection “in the form of a Section 202(c) emergency” that would essentially play out as a government bailout of a failing and uneconomic company. The language of the petition (PDF) to Secretary Perry is not even subtle in its desire for the government to essentially donate to the upkeep of a failing business, explaining that the role its coal and nuclear plants provide are vital “to maintain the stability of the electric grid” and that PJM Interconnection should “promptly compensate at-risk merchant nuclear and coal-fired power plants for the full benefits they provide to energy markets and the public at large.”

This is exactly the same argument that was rejected earlier this year by the Federal Energy Regulatory Commission (FERC) when Secretary Perry himself proposed that the Government should subsidize coal and nuclear energy. Secretary Perry’s argument was that coal and nuclear are vital to the national electricity grid.

However, the weight of evidence against the Secretary’s proposition led to FERC rejecting the idea. FirstEnergy seems not to have paid much attention, however, and is seeking the very same protections that FERC already denied Perry.

The reality is that FirstEnergy Solutions has a terrible business track record, as highlighted by Sandy Buchanan, IEEFA’s executive director:

“The utility has no one to blame for its ruin but itself.

“Its long record of flawed nuclear projects is deplorable, but perhaps chief among its many missteps in recent years was its doubling down on coal by purchasing Pennsylvania-based utility Allegheny Energy in 2011—a deal it went forward with at a time when energy markets were clearly shifting away from expensive coal-fired power and toward gas and renewables.”

The news of FirstEnergy Solutions’ bankruptcy filing and its parallel desire to be bailed out by the federal government was met with almost unanimous disdain from around the sector.

“Advanced Energy Economy calls on Secretary Perry to reject FirstEnergy’s blatant appeal for a multi-billion dollar bailout of uneconomic and unnecessary power plants,” said Malcolm Woolf, senior vice president of policy for AEE, a national business organization. “This outrageous attempt to evade established market procedures is unprecedented. FirstEnergy is asking the Secretary of Energy to exercise authority that is reserved for an emergency threatening national security just to salvage power plants that are losing money for their owners and costing money for consumers.”

“PJM currently has generating capacity well in excess of that needed to keep the lights on,” Woolf continued. “FirstEnergy’s request attempts to short-circuit PJM’s well-established process for analyzing the reliability impacts of generation retirements, and ignores FERC’s ruling earlier this year finding that no emergency exists that would justify providing special treatment to coal and nuclear power plants in our competitive electricity markets. We fully expect Secretary Perry to reject this application as an inappropriate use of his emergency powers, just as he did last year when Murray Energy asked him to keep coal plants open.”

Similar sentiments and outrage were expressed by those in the renewable energy sector, a sector which is increasingly more responsible for the decline in reliance upon coal not just in the United States, but around the world.

“Americans enjoy affordable, reliable electricity thanks to well-functioning markets and a robust energy supply,” said Amy Farrell, Senior Vice President, Government and Public Affairs of the American Wind Energy Association. “Consumers will suffer higher electricity rates if Section 202(c) of the Federal Power Act, a law intended to be used narrowly during national emergencies, is misused to prop up failing power plants in the name of ‘resilience.’ There is no emergency and the question of resilience is appropriately being considered in the ongoing FERC proceeding. We urge the Department of Energy to reject FirstEnergy Solutions’ request.”

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Joshua S Hill

I'm a Christian, a nerd, a geek, and I believe that we're pretty quickly directing planet-Earth into hell in a handbasket! I also write for Fantasy Book Review (, and can be found writing articles for a variety of other sites. Check me out at for more.

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