Dive Brief:
- FirstEnergy reported earnings of $64 million for Q2 2014, up over last year's loss of $164 million over the same period.
- Despite posting the increase in earnings, FirstEnergy's operating earnings, which exclude one-time items such as the power plant deactivation costs that impacted last year's Q2 earnings, were down from $0.59 per share for Q2 2013 to $0.49 per share for Q2 2014.
- FirstEnergy's Q2 2014 operating earnings were down largely due to higher operating expenses at its distribution segment and lower margins at its unregulated competitive electricity supply arm.
Dive Insight:
Because its competitive business is struggling, FirstEnergy announced that its regulated utilities in Pennsylvania and Ohio filed rate plans to help ensure FirstEnergy's unregulated power plants stay afloat.
Competitive markets "are clearly in transition," FirstEnergy CEO Tony Alexander told investors on an earnings call. "While we have experienced a relatively stable and predictable wholesale market for the past several years, we believe that a fundamental change in markets is underway as available generation is being reduced due to environmental rules and competitive market to rely more heavily on natural gas and other less reliable resources."
FirstEnergy's program, which proposes having the company's regulated utilities in Ohio buying 3,200 MW from the company's unregulated fleet and selling it on the wholesale market, "will help protect customers from retail volatility and price increases that result from rising energy and capacity prices in future years," Alexander explained.
FirstEnergy plans to take further action to protect its competitive wing by "reducing our exposure to weather sensitive retail loads and maintaining a more open position to take advantage of market upsides," Alexander said. FirstEnergy also plans "to provide our own reserve margins since the wholesale markets can no longer be relied upon to assure reasonable pricing."