Dick Munson is director of Midwest clean energy for the Environmental Defense Fund.
CHICAGO -- The Federal Energy Regulatory Commission's January rejection of the U.S. Department of Energy's flawed proposal to prop up coal and nuclear was an important win for American families, competitive markets, and the environment. But it was a setback for two politically powerful Ohio companies - FirstEnergy Corp. and Murray Energy Corp.
Spearheaded by U.S. Energy Secretary Rick Perry, the expensive proposal would have undermined electricity markets and provided guaranteed profits to uneconomic coal and nuclear plants. Shortly before Perry set in motion this plan to throw the coal industry a lifeline last year, the CEOs for both FirstEnergy and Murray Energy met with President Donald Trump and senior White House officials.
FirstEnergy long has been trying to make up for its bad business decisions, and the utility giant now wants taxpayers or ratepayers to cover its mistakes with giant subsidies.
What's less well known is how extensive those lobbying efforts have been. Fortunately, as demonstrated by FERC's rejection of Perry's plan, they've also been largely unsuccessful.
The subsidy-seeker-in-chief is Chuck Jones, FirstEnergy's CEO and an electrical engineer who's spent 40 years with the utility. But despite FirstEnergy's financial ties to state lobbyists and heavy contributions to political campaigns, Jones couldn't find enough votes among Republicans or Democrats to get a nuclear bailout measure out of an Ohio legislative committee last year.
FirstEnergy's cronyism extends to the nation's capital. Jones works with numerous well-connected lobbyists -- including Corey Lewandowski, Trump's former campaign manager and now chairman of the largest pro-Trump political action committee. Lewandowski, unsurprisingly, was a huge proponent of Perry's pro-coal plan and was furious about the outcome.
FirstEnergy also hired Jeff Miller, a high-earning D.C. lobbyist who ran Perry's 2016 presidential campaign and guided him through the Senate confirmation process.
With the help of Murray Energy, Jones also tried to convince President Trump to identify FirstEnergy's troubled generators as "emergency" units that needed to be paid extra to stay open, but the independent grid manager, PJM, said the plants could close and electric reliability would remain strong.
Jones is well-paid for his efforts, even if his shareholders have seen scant returns and his customers have seen higher bills. The executive's compensation in 2016 totaled $14 million. So far, that pay package has produced few results.
Although, in 2016, the Public Utilities Commission of Ohio approved a $4 billion bailout to keep FirstEnergy's unprofitable power plants operating, the Federal Energy Regulatory Commission overturned that decision, saying that only the federal government had the authority to determine if such deals protect consumers. Jones then asked for more than $12 billion through various outlandish requests. The PUCO did not approve them, instead settling for "only" $600 million over three years - essentially paying off some of the utility's debt in order to bolster its credit rating. That decision now is being reviewed by the Ohio Supreme Court.
The well-paid Jones may be paying lots of money to well-heeled lobbyists, but, at least at the moment, politicians are not buying their arguments. And FERC's rejection of Perry's bailout plan leaves FirstEnergy in a tricky spot financially. With Jones admitting bankruptcy is all but certain for its competitive energy services division (FirstEnergy Solutions, which owns most of the company's uneconomic power plants), combined with questions surrounding FirstEnergy Solutions's ability to pay off $515 million in debt due beginning in the second quarter of this year, the company will have a tough sell on Wall Street.
Noting his political setbacks, Jones recently made a $2.5 billion deal with "vulture capitalists," investor groups that typically buy up distressed companies and restructure them. Those hedge funds will push the utility to reorganize itself if FirstEnergy Solutions, as expected, files for bankruptcy protection. Perhaps it's time for investors to call for new management and a new business plan that focuses not on cronyism and expensive lobbying, but on delivering reliable, clean, and affordable electricity in Ohio.
Dick Munson is director of Midwest clean energy for the Environmental Defense Fund.
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