W. Va. — FirstEnergy will transfer ownership of the coal-fired Pleasants Power Station to creditors in a bankruptcy deal affecting two of its Ohio-based subsidiaries.
The bankruptcy agreement involves FirstEnergy Solutions (FES) and its subsidiaries, and FirstEnergy Nuclear Operating Company (FENOC).
The two companies announced their Chapter 11 filing on March 31. On April 20, the parent company announced it had reached an agreement in principle with two key groups of creditors in the proceedings.
As part of the settlement agreement, FirstEnergy explained in a Monday email exchange with The Dominion Post, the 1,300 megawatt Pleasants plant in Willow Island, Pleasants County, would be transferred from Allegheny Energy Supply, a FirstEnergy subsidiary not involved in the proceedings, to the creditors of FES and FENOC.
“The settlement agreement is a significant step toward FES and FENOC ultimately emerging from bankruptcy, and it is intended to fully release FirstEnergy and related parties from all claims,” spokesman Todd Schneider said.
The bankruptcy and the Pleasants transfer are part of FirstEnergy’s announced strategy of moving completely out of the competitive, deregulated energy market and fully into the regulated market where revenues are more predictable and secure.
As previously reported, Allegheny’s sisters Mon Power and Potomac Edison had tried and failed to buy Pleasants as part of that same strategy.
Facing state and federal regulatory obstacles, they announced cancellation of the plan in early February. The move also faced significant opposition from various stakeholders who feared the transfer would shift the plant’s financial burdens form stockholders to ratepayers.
Then, in late February, FirstEnergy announced its plan to sell or close the plant. “At this time, the plant is still scheduled for sale or closure by January 2019,” Schneider said Monday.
Asked if the transfer might alter plans to sell or close Pleasants, Schneider said, “That decision will be up to the creditors.”
Bankruptcy background
FES and FENOC own, and operate two coal-fired plants, one dual fuel gas/oil plant, one pet-coke fired plant and three nuclear power plants in the competitive, nonregulated, power-generation industry. In contrast, Mon Power is regulated: Rates are subject to approval by the state Public Service Commission.
FirstEnergy announced in November 2016 its plan to exit the competitive generation business. In March, FirstEnergy said in a release, FES filed notice with PJM Interconnection, the regional transmission organization, that its three nuclear facilities would be deactivated or sold during the next three years. In the meantime, all of the plants will continue current operations.
In the meantime, FES President Donald R. Schneider, said, the bankruptcy represented “our best path forward as we continue to pursue opportunities for restructuring, asset sales and legislative and regulatory relief.”
The regulatory relief FES is seeking is reflected in a March 29 application with U.S. Secretary of Energy Rick Perry seeking an emergency order directing PJM to secure the long-term capacity of certain nuclear and coal-fired plants in the region — including FES plants — to compensate their owners “for the full benefits they provide to energy markets and the public at large, including fuel security and diversity.”
In the 44-page application, FES accuses PJM of shortsightedness in protecting the stability and dependability of the energy grid in the face of mounting challenges, such as weather disasters.
“PJM continues to claim all is well with its system but at the same time shows it does not have a clear view of what resilience is, how to measure it, or how to ensure it,” FES wrote. “PJM has demonstrated little urgency to remedy this problem any time so, so immediate action by the secretary is needed to alleviate the present emergency.”
FES notes that PJM’s market monitor found that six to nine nuclear plants in its region operated at a financial loss in two of the last three years. Similarly, a significant number of coal units are facing retirement because they also lose money. The monitor said more than 90 percent of the at-risk market is coal or nuclear.
Nuclear and cola plants are designed to run around the clock, FES said, even during low-demand, low-price periods, forcing them to operate at a loss. In contrast, nearly all oil, gas and hydroelectric plants recovered their full costs in 2017.
FES concludes, “The time for talk is over. We find ourselves at a crisis point where significant baseload generation will cease to exist in [regional transmission organization] markets without quick and decisive intervention.”
Regarding the bankruptcy proceedings, FirstEnergy notes that it and its other subsidiaries are not part of the Chapter 11 filing.
President and CEO Charles E. Jones said in a release, “The six million customers of our regulated utilities will continue to receive the same reliable service, while our regulated generation facilities will continue normal operations, with the same longstanding commitment to safety and the environment. … Becoming a fully regulated utility company should give FirstEnergy a stronger balance sheet, solid cash flows and more predictable earnings.”
The bankruptcy settlement agreement is subject to approval by the boards of directors of FirstEnergy, FES and its subsidiaries, FENOC, and Allegheny Energy Supply; the execution of definitive agreements and the approval of the bankruptcy court and certain other conditions, Schneider said.
