Desperately Seeking Monopoly Protection

11513503393_78e4c159c3_zThey say crises don’t test your character, they reveal it. I believe they do the same thing to your vision of the future. Times are tough for Ohio’s FirstEnergy, and CEO Chuck Jones is signaling where he wants the utility to be in the future: the past.

First, we need to look back to last year, when Jones pushed the Ohio legislature to halt state efficiency and renewable energy standards that helped reduce electricity demand and saved Ohio customers millions of dollars.

This year, Jones’ vision quest is a $3 billion bailout – to be paid for by his customers – that would guarantee the purchase of power generated by FirstEnergy’s older and costlier power plants. In a recent op-ed, Jones argued that the deal would secure Ohioan’s energy independence.

Just a few weeks after Jones’ energy independence play, he has put forth a new vision: re-regulation, which means returning FirstEnergy to a monopoly with guaranteed profits. It was less than a decade ago that Ohio deregulated its electricity market to the applause of the utility industry, including FirstEnergy. Clearly, the CEO is getting a little desperate.

There is no doubt Jones has a problem. Several of his power plants are old, inefficient, and costly, particularly compared to generators powered by natural gas and wind. They simply can’t compete.

Killing renewables and efficiency by sanction was step one. Step two – the bailout – now seems to be faltering as it undergoes scrutiny before the Ohio Public Utilities Commission (PUCO). Jones recently told financial analysts that the bailout is critical to his company’s future, and he seems increasingly stressed by the PUCO’s delays and the growing criticism from a broad array of stakeholders. Maybe sensing he will lose before the PUCO, Jones told the Plain Dealer he would embrace a move toward re-regulation “in a heartbeat.”

The heart of every Ohioan should skip a beat at FirstEnergy’s self-interested flip flopping on deregulation. Not too long ago, FirstEnergy embraced deregulation, thinking it could profit handsomely in competitive markets. And it did, for a while. But the company made numerous poor business decisions, like doubling down on coal rather than embracing cleaner forms of energy, like natural gas and wind. Now gas and wind prices are low, energy efficiency is reducing demand, and FirstEnergy is stuck with a pile of coal nobody wants.

This seems like a strange time to suggest re-regulation. The Ohio legislature is fairly conservative. A law to guarantee profits, kill competition, and re-establish a monopoly would likely run afoul of the free-market platform so many of them were elected on.

And it doesn’t look like Jones’ fellow utilities are ready to follow FirstEnergy to re-regulation. Though AEP wants a bailout similar to FirstEnergy’s, its CEO told reporters he would not embrace a return to state-controlled rates.

Perhaps most revealing is the reaction of Dynegy, a FirstEnergy competitor that owns 11 large power generators in Ohio. According to CEO Bob Flexon, Jones’ appeal for re-regulation is nothing more than FirstEnergy admitting it wants “big, fat margins so they can pay big dividends to shareholders,” without having to compete for them. Flexon went further: “Coal plants and nuclear plants in this market are losers. For some reason they want to keep them. In order to keep them, they need them regulated because they can’t compete.” And he went further still, saying FirstEnergy is “taking the weakest in the herd and putting it in the front to the benefit of the shareholders and the detriment of Ohio.”

Understandably, Jones seems increasingly nervous about his company’s fate. It’s true today’s energy market is different than it was ten years ago. But it will be different again in another ten. Companies like FirstEnergy expect their CEOs to look forward and lead them into the future. But whether it’s asking for a bailout, killing emerging energy resources like renewables and energy efficiency, or advocating re-regulation, Jones doesn’t appear to be looking forward at all.

Photo Source: William Warby

This is one in a series of posts that examine FirstEnergy’s proposed bailout for its aging coal fleet and other market manipulations. Stay up to date on FirstEnergy by visiting EDF’s website, where we’ve published helpful resources and will host a series of newsletters. If you would like to receive our FirstEnergy newsletter directly, please click here.

This entry was posted in Clean Energy, Energy Efficiency, FirstEnergy, Ohio, Renewable Energy, Utility Business Models. Bookmark the permalink. Both comments and trackbacks are currently closed.

5 Comments

  1. Hal Slater
    Posted August 18, 2015 at 7:49 am | Permalink

    Your statement "This seems like a strange time to suggest re-regulation. The Ohio legislature is fairly conservative. A law to guarantee profits, kill competition, and re-establish a monopoly would likely run afoul of the free-market platform so many of them were elected on." reveals that so-called "conservatives" are actually corporate welfarists who do not believe a word they say about "free" anything. They want their income guaranteed and they want to tell others how to live. I am so tired of them at this point. How many times can they (Conservatives, GOP) be wrong and we still have to listen to them? I think our freedom of speech is being abused by people who don't think they are obligated to speak the truth.

    • Dick Munson
      Posted August 21, 2015 at 4:15 pm | Permalink

      Hal:

      Thanks for your note. FirstEnergy’s efforts to re-regulate itself should run into opposition from liberals as well as conservatives, who express support for competition and opposition to guaranteed profits. I’d welcome challenging the utility on such an effort before the Ohio legislature.

      Best wishes.

      Dick

  2. Posted August 19, 2015 at 11:23 am | Permalink

    Great article. Hal's comment nails it too.

    Self-service and chase of $ for no value provided has completely subverted the concept of public service. I wish they could put people in jail for lack of integrity – Chuck Jones sounds like a good one to go first…

  3. Posted August 19, 2015 at 11:24 am | Permalink

    Getting stuck in the past helps no one. It would likely be a good idea to flood the email inboxes at the PUCO about this. The new chairman, Andre Porter, seems already supportive, and some support for moving into the future in his inbox would likely help.

    In this article he tells First Energy to stop scaring the public:

    http://www.bizjournals.com/columbus/blog/ohio-energy-inc/2015/08/stop-trying-to-scare-ohioans-puco-chief-tells.html?ana=fbk

    • Dick Munson
      Posted August 24, 2015 at 11:20 am | Permalink

      Thank you, Nate. That article is a great example of how big utilities like FirstEnergy use scare tactics to keep their profits up.

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