News and Analysis
In recent weeks, investors, analysts, policymakers, media and other stakeholders have been combing through the FirstEnergy Solutions (FES) bankruptcy settlement with creditors and former parent corporation, FirstEnergy (FE). One provision of interest allows FirstEnergy to participate in 50-50 sharing of federal or state bailout revenues.
An analysis by Bank of America Merrill Lynch states that: “This was framed as a way to reward FirstEnergy for any success with legislation and keep FirstEnergy management incentivized to remain involved in those efforts.”
Under that term sheet, FE has up to three years after the bankruptcy to exercise the warrant that entitles it to 50% of recoveries after FES’s unsecured creditors recover 60% of their claims.
Bottom line: FirstEnergy has a vested interest in federal or state bailouts and will continue lobbying federal and state officials for policies that will disrupt and distort a well-functioning market, even though it is no longer in the generation market. 5/3/2018
Last week the PUCO approved a settlement reached on a series of AEP rate cases. The OMA Energy Group was involved in settlement discussions and improved the cost impacts on the manufacturing sector. However, there were numerous moving parts including some provisions that will hike customer costs.
The settlement specifically confirms the OMA’s ability to challenge AEP’s new rider that customers must pay to bailout the unprofitable large coal power plants known as Ohio Valley Electric Corporation (OVEC).
OMA’s energy counsel, Kim Bojko of Carpenter Lipps & Leland, will explain the case impacts, as well as other PUCO cases of interest to manufacturers, at the May 16 meeting of the OMA Energy Committee. Register here.
Contact OMA’s Ryan Augsburger if you would like more information. 5/3/2018
Representatives from American Fine Sinter Company, Tiffin, with AEP Ohio leadership
Pictured with AEP Ohio leadership are Weastec, Inc. President Yasuhiko “Nick” Ida and Senior Manager Robert Moots. Weastec is in Hillsboro.
AEP Ohio recognized several power customers who have made outstanding contributions to increasing energy efficiency and environmental stewardship.
Abbott Nutrition, American Fine Sinter, General Mills, Glatfelter and Weastec were among the manufacturers awarded the AEP Energy Efficiency Champion Award this week.
Learn more about how your company can decrease energy usage, increase efficiency and save money. 4/26/2018
Free of the drag of its unprofitable generation business, FirstEnergy Solutions (FES), FirstEnergy reported a healthy profit of $1.2 billion for the first quarter.
John Funk of the Cleveland Plain Dealer reported that much of the profitability stems from an accounting gain related to the decision for subsidiary FirstEnergy Solutions file bankruptcy protection on March 31, the last day of the quarter.
Also, during the investor call, FirstEnergy’s CEO announced that a settlement between FES and its creditors had been reached which will release FirstEnergy from all claims. Here’s an analysis of the bankruptcy settlement prepared by Carpenter Lipps & Leland.
Meanwhile, FirstEnergy, FES, some coal interests, and community leaders in the footprint of the power plants continue to press federal and state officials about the need for a bailout. FES took steps late this week to certify its plans to close its Ohio nuclear power plants. In a letter to the Nuclear Regulatory Commission, FES Generation informed the agency that the Davis-Besse plant near Toledo will close on May 31, 2020 and the Perry plant in Lake County will close on May 31, 2021. 4/26/2018
At its annual meeting this week, Columbus-based American Electric Power (AEP) reported first-quarter 2018 corporate earnings of $454 million.
AEP’s Chairman and CEO Nick Akins used the occasion to announce plans to invest more than $17 billion in transmission and distribution upgrades. While AEP serves customers in many states, AEP’s Ohio customers have seen dramatic rises in both distribution and transmission portions of their bills without corresponding benefits.
Members of the OMA Energy Group will be monitoring case activity at the PUCO and FERC to ensure grid investments are necessary and produce customer benefits. Learn more about the work and benefits of the OMA Energy Group. 4/26/2018
FirstEnergy has used its PAC to promote Rep. Larry Householder in his bid for speaker vs. Rep. Ryan Smith.
A report by Cleveland.com illuminates how the utility’s PAC has invested in House candidates recruited by Householder: “In the first two months of 2018, the Akron-based power company’s political action committee donated more than $5,000 to the Perry County Republican and a total of about $149,000 to more than a dozen other House candidates, state campaign finance records show. Most, if not all, of the recipients have either backed Householder for speaker or are considered by many to be on his side, although some have not come out publicly in support of him.” 4/26/2018
The OMA’s Sustainability Peer Network tours The J.M. Smucker Company Grind2Energy installation.
Here, the OMA’s Sustainability Peer Network views the CNG compressor at SmithFoods Inc., Orrville.
This week the OMA’s Sustainability Peer Network members had the opportunity to tour two OMA member facilities in Orrville: The J.M. Smucker Company and SmithFoods Inc.
Projects showcased included SmithFoods’ natural gas fleet fueling station and the J.M. Smucker Company’s Grind2Energy food waste recycling system and its green-designed R&D building.
Participants were also treated to a lunch prepared by the Smucker Company chef that featured foods from both companies plus local and sustainably managed foods.
To help OMA members network, learn, and share about sustainability goals, practices, and projects, the OMA created the Sustainability Peer Network. You can join here. The next meeting will be at the OMA offices on Tuesday, June 19. 4/19/2018
From this month’s OMA Energy Guide INSIGHTS regarding the recently announced bankruptcy of First Energy Solutions (FES):
“No one would have predicted a few years ago that the very same company fighting our policy makers for the opportunity to live or die by the market through electric deregulation would be the same company succumbing to Chapter 11 bankruptcy restructuring, mainly due to the effects of an open market.
“The company which once had the largest market share of electric-shopping customers in Ohio has been lobbying everyone, even President Trump, for a life preserver to keep its high-cost power plants operating.
“When one hears about a perceived utility going bankrupt most immediately think “Get out the candles, honey, the power is going out” but what are the real impacts of this bankruptcy on Ohio’s people, policy and the price we pay for power?”
This week, the U.S. Department of Energy (DOE) and the National Association of Manufacturers (NAM) announced the Sustainability in Manufacturing Partnership. Through this partnership fostered by DOE’s Better Plants program, DOE and the NAM will work together to help U.S. manufacturers drive energy productivity improvements and accelerate adoption of energy efficient technologies.
The Sustainability in Manufacturing Partnership will provide DOE and the NAM opportunities to engage directly with manufacturers, identify energy efficiency improvements, and recognize companies and leaders that have led the way in innovative strategies. 4/10/2018
The FirstEnergy affiliate companies that own and operate power generation, that is, FirstEnergy Solutions (FES), as well as its subsidiaries and FirstEnergy Nuclear Operating Company (FENOC), filed for Chapter 11 bankruptcy protection over the holiday weekend.
Days earlier the company had publicly announced its intent to shutter unprofitable power plants, most notably its nuclear power plants, two of which are in Ohio.
Officials of the regional grid operator PJM Interconnection, as well as the PUCO, said that in spite of the announced power plant shutdowns, this is not an issue of reliability and that there is no immediate emergency because the market is working to provide more than adequate reserves and to promote fuel diversity.
In its announcements, FES, like its parent company previously, said it will continue to seek legislative and regulatory relief at the state and federal level. In that vein, FirstEnergy supporters have reportedly been meeting with top federal government officials to push for an emergency order to compensate certain FES-owned power plants at customer expense. PJM refuted the justification advanced by FES in this letter to Department of Energy Secretary Rick Perry.
In the last 45 days, two congressional joint letters signed by 23 members of Congress and three U.S. Senators have urged the president to subsidize the FES power plants. Most of Ohio’s Congressional delegation are among the signatories.
Concerned members can contact their member of Congress and ask them to reconsider their support for bailouts. 4/5/2018