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FirstEnergy in Dire Straits. PUCO Gives them Money for Nothing.

Last week, the PUCO approved FirstEnergy’s coal bailout case, and as such, customers in FirstEnergy’s territory will collectively be paying up to $204 million more per year on their electric bills, for up to five years. Over $132 million of this is direct payment through a rider on customers’ bills to bolster the company’s credit rating, and the rest would go to cover the company’s taxes. Sadly, there’s little that customers will get back in terms of value for these higher bills.

Fundamentally, the impetus for this case is the fact that FirstEnergy made a series of monumentally bad business decisions, refused to innovate, and doubled down on dirty energy at a time when other utilities were transitioning to cleaner, more efficient resources. FirstEnergy, for whatever reason, did not see the writing on the wall that heavily-polluting coal-fired power is on the decline, and these plants are increasingly more expensive to operate.

The PUCO initially approved FirstEnergy’s bailout proposal on March 31, 2016. 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.

The OEC fought this revised proposal, but it was the PUCO was intent on approving some level of ratepayer support for the company. PUCO staff came out with a recommendation that the company should receive at least $131 million annually for three years for “credit support” in order to keep the company’s credit rating healthy enough for Wall Street investors.

What was most disappointing was that FirstEnergy had other completely viable options on the table that they, and the PUCO, refused to examine or mandate. Options that would have minimized the impacts to consumers and the environment. The Ohio Environmental Council, along with a huge coalition of business, manufacturers, competitive retail suppliers and consumer advocates advocated strongly at the PUCO and at the Federal Energy Regulatory Commission that if the company needs a cash infusion to stay afloat, then they could either reduce dividend payments to shareholders or issue more stock rather than pass the buck on to customers.

Another choice the company could have made would have been to adequately plan and invest in upgrades to the electric grid. With some portions built decades ago, our electric grid is in desperate need of modernization and with such capital investments, FirstEnergy could have earned a reasonable rate of return on taking this common sense course of action. While the PUCO order on this case stipulates that the company must make investments in grid modernization, there is no penalty if the company fails to follow through.

The risk of bad business decisions should rest on the shareholders of FirstEnergy, and not their customers. How is it fair that customers must now live with the company’s poor choices? They will be paying more, but won’t be getting anything for it – not a more resilient and modern grid, not more efficient resources that prevent harmful air pollution, and not a plan for retiring their outdated and uneconomic coal and nuclear plants. This sets a dangerous precedent that is bad for Ohio families, bad for our environment, and bad for our economy.

The OEC will be appealing this decision on a number of fronts, and we’ll keep you posted as these efforts move forward.