Don't be fooled. Know the facts about FirstEnergy's Bailout Plan.
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Monday August 22, 2016

The past few weeks, the Public Utilities Commission of Ohio (PUCO) has continued to consider FirstEnergy’s latest – and ever expanding – bailout request. Most recently, the PUCO invited testimony and “initial rehearing briefs” from opponents detailing why the utility’s three requests, which now total an astronomical nearly $13 billion, don’t have any legs to stand on.

We’ve taken the liberty of going through these briefs, highlighting common themes, and picking some of our favorite arguments from each. The players: Environmental Defense Fund and the Ohio Environmental Council (we submitted together), Sierra Club, the state’s utility consumer advocates at Ohio Consumers’ Counsel, the regional grid operator PJM Interconnection, and the Ohio Manufacturers’ Association.

So if, like us, your idea of “summer reading” doesn’t involve hundreds of pages of legal briefs, we hope you enjoy this Cliff’s Notes version.

In addition to all the old reasons to reject the bailout (refresher: bad for competition, customers, and the environment), a few common themes emerge:

  • The original justifications for the bailout – keeping uneconomic power plants operating, grid reliability, maintaining a diverse energy supply, and job retention – are out the window. The new proposals don’t even pretend to be about anything but money.
  • If FirstEnergy’s credit rating is suffering, it’s not the responsibility of the PUCO to fix it. In fact, it goes against the PUCO’s purpose and principles to do so.
  • FirstEnergy – like any business – has alternatives for easing its own financial woes (the result of its own bad business decisions). For example, cutting executive paychecks.
  • If you hear FirstEnergy mention “grid modernization,” don’t get your hopes up. There is no clear requirement or stipulation that any money will be put toward making the grid smarter or more efficient.
  • The PUCO could conceivably help with FirstEnergy’s credit rating – if there were an emergency. But there’s no emergency. FirstEnergy hasn’t even tried to provide any evidence to the contrary. And if there were an emergency, the utility didn’t follow the proper procedure to address it.
  • The argument in which FirstEnergy dangles its HQ over the commissioners’ heads is a ruse. The PUCO already approved a provision that requires the utility to maintain its headquarters in Akron. The company also signed a lease to keep the office location through June 2025.
  • If the PUCO does hand over a lot of dollars, the Federal Energy Regulatory Commission (FERC) will not be happy about it. Nor the Ohio Supreme Court for that matter.

Continue on down to our “Quotes of the Week” for a few choice, hard-hitting selections from the briefs. And you can always visit EDF’s FirstEnergy website for our newsletter archive and links to the latest news about FirstEnergy’s bailout.

 
 

Which Came First – The Money or the Grid Modernization?

FirstEnergy is a massive company, with generation and distribution affiliates in six different states. One of those states is Maryland, where the utility just announced it is “completing distribution and transmission infrastructure upgrades to the Potomac Edison territory power grid that will be worth $128 million when complete.”

Re-read the last part of the sentence: “when complete.” As in, FirstEnergy is investing millions of dollars now, to reap an even bigger reward later. As in, the company didn’t ask the state’s PUC to give it the money upfront.

Flip back to Ohio, where FirstEnergy is seeking billions now, so it can “jump-start” (a.k.a. non-committedly consider) grid-modernization at an unspecified point in the future.

 
 

FirstEnergy: Beware the Ohio Supreme Court

As you may recall, the PUCO approved FirstEnergy’s bailout in March, and about a month later FERC struck it down. If the PUCO approves another deal for the utility giant, it may be facing another smack-down.

That’s because the PUCO recently approved a rider that allowed another major power-producer, AEP, “to recover the equivalent of transition revenues” – even though the language of the rider didn’t appear to be about transition charges. (Without getting into the details, the recovery of transition charges is not permitted.) The Ohio Supreme Court looked past the word façade and, recognizing the rider for what it really was, overturned the PUCO’s approval.

One of FirstEnergy’s requests (the “virtual PPA”) contains suspiciously similar charges. If the PUCO decides to give it the greenlight, the commissioners should be prepared to face the Ohio Supreme Court.

 
 

Quotes of the Week

When you’re dealing with a huge, politically powerful Goliath, the Davids must use every weapon at hand. In this case, that weapon is forceful language. Here’s a greatest hits sampling from the opponents’ briefs:

• Sierra Club on FirstEnergy’s lack of justificatory proof:

FirstEnergy “must, at a minimum, provide the type of forward-looking financial information that is necessary to reviewing the justness and reasonableness of the [proposal] and required by [law]. The Companies’ steadfast refusal to do so renders the [proposal] un-approvable on this record.”

• PJM on risk and Ohioans:

“Ohio customers should not be forced to pay subsidies to sustain particular generators in the PJM market and to shoulder investment risks properly placed on investors. The [original deal] was a bad bargain for Ohio customers and not in the public interest. The New Plan is no better, and it should not be approved.”

• Ohio Manufacturers’ Association on competition and economic impact:

The bailout “will in no way stabilize rates or create rate certainty. This lack of stability and certainty will impede the ability of companies, including manufacturers, to make sound business decisions regarding pricing and will thwart their ability to take advantage of competitive market pricing […] The overall effect is a negative impact for customers and for the economic development of the state of Ohio as a whole.”

• Ohio Consumers’ Counsel on who’s to blame for bad credit:

“Upon closer inspection, it becomes clear that this [credit] downgrade is due to the FirstEnergy Corp.’s mismanagement of its own competitive generation affiliates. In a manner, Ohio consumers would be footing the bill for a credit support proposal that is necessary due to management’s decisions regarding FirstEnergy’s competitive affiliates. […] The credit support proposal violates Ohio law, sets a dangerous public policy precedent, and harms consumers.”

• Environmental Defense Fund and Ohio Environmental Council on the message the PUCO would send by approving the bailout:

“A decision by this Commission to approve any credit support rider unreasonably and unlawfully rewards First Energy Corp.’s bad behavior. Approval of the proposal sends a clear message for all [distribution utilities] – if your parent company makes bad investments, if management has no plans to protect its credit rating or cash flow, do not worry, the Commission will make sure customers cover it.”