FirstEnergy & FirstEnergy Solutions Abusing Bankruptcy Law?

News reports this week detail recent action by federal authorities alleging that FirstEnergy and FirstEnergy Solutions have used the U.S. bankruptcy process to “scheme to” absolve former parent corporation FirstEnergy of future environmental responsibilities for power plants.

The government officials allege the companies have engaged in “abuse of the bankruptcy system.” The bankruptcy proceedings began just over one year ago.

The Office of the Ohio Consumers’ Counsel (OCC) argued that in the bankruptcy plan before the court “FirstEnergy would be shielded from any claims or causes of action related in any way to the Debtors’ businesses and property, including from any liability for the costly decommissioning of its power plants.” And, “Were funds for decommissioning to be inadequate, …, consumers or taxpayers might be (unfairly) called upon to fund FirstEnergy and FES’s power plant decommissioning liabilities to federal and state governments.”

Late yesterday Judge Koschik of the bankruptcy court issued a ruling finding that FES’s proposed release of FirstEnergy from its decommissioning and environmental obligations to the government made the underlying plan unconfirmable. “Basically the judge sent FES back to the drawing board on how to exit bankruptcy, which will trigger renegotiation of the complex settlement agreement,” said OMA’s energy counsel Kim Bojko of Carpenter Lipps & Leland. 4/4/2019