Nobody can predict the future. But from markets to sports, so much of our world is focused on speculation. Ohio-based FirstEnergy has a habit of missing market predictions in spectacular fashion, often because the numbers it advances “prove” the political point that would most benefit the utility’s bottom line.
Consider the case of Environmental Protection Agency’s proposal to reduce mercury and particulate emissions from power plants. FirstEnergy wanted to kill the Mercury and Air Toxic Standards (MATS) and argued the recommended rules would cost it some $3 billion to comply. That predicted cost came in the third quarter of 2011, before the EPA standard was finalized. A year later, after the final rule was released, FirstEnergy cut its estimate nearly in half, to $1.7 billion. A year later the number was down to $465 million, and by 2015 the company admitted it needed to spend only $370 million to comply with MATS.
FirstEnergy’s forecasting “prowess” also extends to its bailout request now before the Public Utility Commission of Ohio (PUCO). According to Cathy Kunkel with the Institute for Energy Economics & Financial Analysis (IEEFA), “FirstEnergy needs to show PUCO that wholesale market prices are likely to rise steeply so that ratepayers will benefit from the new contract it seeks.”
At FirstEnergy, too much is never enough.
According to one Wall Street analyst, the Ohio-based utility “benefitted substantially” from recent auctions by PJM, the electric grid manager in the Midwest and Mid-Atlantic. In fact, it appears the company’s bounty for the next two years is $435 million more than it was projected to earn.
This is a direct result of FirstEnergy and other utilities’ successful efforts earlier this year to convince PJM to change how its electricity auctions were structured.
After the Polar Vortex of 2014, when many power plants shut down because they couldn’t obtain fuel over frozen pipelines or highways, the utilities argued PJM should provide higher payments for power plants that could provide reliable electricity in winter months as well as in the summer when air conditioning demands are high. The change, of course, would provide more revenue to coal-fired and nuclear-fired units that tend to run consistently, including FirstEnergy’s old and inefficient power plants.
You might think FirstEnergy would celebrate its success in redesigned power markets. But you would be wrong. Despite the auction windfall, the company maintains it still needs the Public Utility Commission of Ohio (PUCO) to approve a $3 billion bailout from Ohio customers to keep its inefficient, dirty power plants running. Fortunately, it appears the PUCO staff has seen right through this request. Read More
After a long summer and several delays, the Public Utility Commission of Ohio (PUCO) is scheduled to begin hearing FirstEnergy’s plea for subsidies today. Over the past few months, Environmental Defense Fund (EDF) and other stakeholders have hit the streets, airways, and internet to explain the company’s proposal. Thankfully for you, we’ve summarized the high-points of all this analysis in an easy-to-read outline. Here are the basics:
What is First Energy requesting?
- FirstEnergy is asking PUCO to approve non-competitive purchase agreements that would enable the utility’s distributors to buy power at above-market prices from FirstEnergy’s subsidiary power plants. August 31 marks the beginning of testimony and cross examination of FirstEnergy executives, as well as diverse stakeholders, including EDF. This process may take up to seven weeks.
- FirstEnergy is seeking subsidies for the 52-year-old Sammis coal-fired plant; two 60-year-old coal-fired power plants (Kyger Creek in Cheshire, Ohio, and Clifty Creek in Madison, Indiana); the Davis-Bessie nuclear plant, which is two years from the expiration of its 40-year license; and for the utility’s share of the Ohio Valley Electric Corporation. The subsidies essentially shift the financial risk of these older and more expensive generators from FirstEnergy’s shareholders to its customers, who would fund the proposal through fees and higher rates.
They 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. Read More
Over the past few months, I have written a good deal about FirstEnergy, the massive electric utility serving customers across six states, and specifically its attempts to saddle Ohioans with the cost of its risky investments. The company has asked the Public Utility Commission of Ohio (PUCO) to guarantee profits for its uneconomic power plants through customer-funded subsidies.
FirstEnergy has also prevented opponents of its bailout from examining all relevant information to the case, including the credibility of its key witnesses. But, last week, the PUCO rejected these attempts to hide information about FirstEnergy’s embattled $3 billion proposal. As we near the start of the proposed bailout hearings on August 31st, this decision is a victory for transparency – and places the utility’s proposal on shakier ground than ever.
The full story involves a consultant – Judah Rose of ICF International – who FirstEnergy hired to justify the bailout. Rose was asked to project future electricity market prices, which would determine the economic value of the power generation plants in question. This contributed to how FirstEnergy settled on the figures for its bailout request. Read More
All around the country, we are seeing signs of innovation when it comes to the electricity industry. The state of New York is performing a comprehensive review of related technologies and business practices, Illinois is modernizing the electric grid and empowering customers to save energy by creating transparency around smart meter data, and the wind industry in Texas continues to set new records. The U.S. grid is truly beginning to evolve from the system Thomas Edison created 100 years ago, moving toward a more flexible grid that runs on clean, renewable resources.
Yet some players – with significant revenue and power – are not on board. FirstEnergy, the Akron-based utility giant, has been clinging to the past and waging war on clean energy in Ohio, as I explain in my op-ed published today in the Akron Beacon Journal. The Beacon Journal is the hometown newspaper of FirstEnergy’s headquarters. Read More