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Bad Credit? Risky Credit? No Credit? No Problem. Here’s $130 Million

This sums up the latest twist in FirstEnergy’s plan to saddle customers with the cost of their bad bets on coal-fired power plants. Despite the federal rejection of their bailout proposal several months ago, FirstEnergy modified its “ask” to the PUCO, and in hearings starting this week, the utility has a leg up. This is largely due to the PUCO staff already recommending that the commission give the utility $130 million per year in “credit support” for the next few years. Who will be paying for this? FirstEnergy customers.

If you have followed this blog, you know the story: Over a year ago, Ohio’s largest electric utility asked the PUCO to bail out its largest coal plant and largest nuclear power plant. Without ratepayer guarantees for these two plants, the company argued, they’d have to close the plants, power would become more expensive, and the risk of blackouts would go up. A majority of electric consumer advocates, manufacturing interests, and environmental groups opposed this plan. For a while, the PUCO’s staff of experts agreed with our arguments that this plan was anti-environment, anti-consumer, anti-competitive, and took choices away from FirstEnergy customers. But then, this past December, the PUCO staff changed its tune and supported the bailout. On March 31 the Commission approved this bad deal.

Less than a month later, however, the Federal Energy Regulatory Commission (FERC) effectively overturned that decision. Not to be deterred, FirstEnergy modified its proposal to circumvent further FERC oversight, and laid the decision once again at the feet of the PUCO.  While the staff opposed FirstEnergy’s modified plan, they are recommending an equally egregious alternative. The PUCO staff’s recommendation is that FirstEnergy be allowed to collect $131 million per year for the next three to five years from its customers to help FirstEnergy maintain investment-grade credit status.

A deal that started out as a bailout of First Energy’s dirty coal plants has morphed into a golden parachute for FirstEnergy’s bad bet on fossil fuels. From the information we have so far, it appears that the proposal would allow FirstEnergy to get the money up front from customers. The Staff proposes that in return, FirstEnergy has to come up with a “long term plan” and invest in “distribution grid modernization,” although there is little to no detail provided as to what that entails.

You heard that correctly; in return for a cash infusion of at least half a billion dollars, FirstEnergy need only put together a plan and invest in grid modernization with no specific benchmarks. Now, don’t get me wrong, investment in making the distribution grid more modern, more efficient, and more customer focused is a good thing and something that the company should be doing.

But if any of us had bad credit and asked for this type of loan, with a vague payback plan, and no hard commitments on what we’ll do with the money to become solvent once more, we would be laughed out of the bank.  Why then, is the PUCO staff proposing to reward the bad choices that have hurt FirstEnergy’s credit? Will the PUCO side with customers, public health, and a path towards cleaner energy or will they side with FirstEnergy’s shareholders, and the company’s profit margins?  These are the questions we and our consumer, environmental, and manufacturing partners will be asking this week as the case goes to hearing.