EDITORIAL: Short at the PUCO, or will the commission keep its word to FirstEnergy?
July 10--Few analysts were surprised when the Federal Energy Regulatory Commission scuttled the controversial power purchase agreement that FirstEnergy struck with state regulators. The possibility always was there, the call close, the commission wanting time to examine the potential fallout for wholesale electricity markets.
FirstEnergy and the Public Utilities Commission of Ohio were prepared. The order approving the agreement in March states that if the deal is invalidated, in whole or in part, the companies will continue to implement any remaining portions, "while a good faith effort is made" by the parties "to restore the invalidated provision to its equivalent value." It included a window of 60 days.
Equivalent value? The objective for FirstEnergy from the start has been bolstering its fragile financial position. The Akron-based power company wants to keep its investment-grade credit rating.
A long, heated argument has ensued about why the rating now is jeopardized. Critics point to the company's poor decisions concerning deregulation (mandated by the state). Clear, too, is that the marketplace has tilted sharply to natural gas. Coal and nuclear power, key elements of the FirstEnergy portfolio, are less competitive.
If it makes sense to reach an agreement for reasons of reliability and environmental stewardship (the Davis-Besse nuclear plant part of addressing climate change), the opportunity also is there to press for gains in efficiency, renewable energy and updating the transmission grid.
That has been part of the conversation. FirstEnergy, for instance, has received too little credit for its pledge to reduce carbon emissions 90 percent below 2005 levels across its system by 2045. When federal regulators balked, the utility reshaped its plan. The opening is there for state regulators to press harder in pursuit of framing a comprehensive energy strategy.
Unfortunately, the PUCO staff has responded to the amended FirstEnergy plan with something wholly inadequate. The staff has taken appropriate aim at grid modernization. It also recognizes the value in the company maintaining an investment-grade credit rating. What it neglects is the language the PUCO approved four months ago, the now chairman, Asim Haque, even writing a concurring opinion to underscore his understanding of the stakes.
The staff recommendation falls far short of "equivalent value." It shrinks the time frame from eight years to three, proposing a much smaller revenue stream of $131 million annually. In short, the PUCO would break its word.
This editorial page long has had differences with FirstEnergy. In this instance, a deal should be a deal, that language included for just such circumstances. As a downtown neighbor of FirstEnergy, we don't have the luxury of waving off concerns about its financial position. If the utility loses its investment-grade rating, it hardly takes a leap to imagine another power company looking to buy as part of consolidating and strengthening its position.
So much smoke from an old coal-fired power plant? Akron cannot afford to see one of its two Fortune 200 companies purchased, the headquarters headed out of town, 1,370 jobs at risk, along with $151 million in payroll. The FirstEnergy Foundation made grants and gifts of $3.7 million last year. The company spends $10 million a year on local sponsorships.
Here, it's more complicated than drawing a cartoon of an environmental villain. It involves weighing higher rates for customers against broader costs across the city, region and state. So, push for the company to do better on the green front, something Chuck Jones, the chief executive, has staked his word on doing. Don't back out of the deal.
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(c)2016 the Akron Beacon Journal (Akron, Ohio)
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