Bankruptcy judge turns back FirstEnergy reorganization plan
A federal bankruptcy judge on Thursday rejected a reorganization plan from FirstEnergy that would have seen its generation subsidiary walk away from coal and nuclear plants it plans to close in Ohio and Pennsylvania, according to multiple media reports.
FirstEnergy reached a deal with creditors in January to close 8 GW of uncompetitive plants. That deal, however, did not address cleanup costs for closing the generation, and a bankruptcy judge reportedly called it "patently unconfirmable" in an oral ruling this week.
Company officials said they will file revised documents with the bankruptcy court. FirstEnergy continues to push state legislators for financial support to save its plants, but those efforts have so far been unsuccessful.
The ruling from bankruptcy Judge Alan Koschik means FirstEnergy's reorganization plan is on hold, at least for now.
Under FirstEnergy's January deal with a majority of its creditors, the company's generation subsidiary FirstEnergy Solutions (FES) would close the money-losing coal and nuclear plants, but retain its retail supply services. As a result of the creditor deal, FirstEnergy canceled a planned sale of that retail business to Constellation, the competitive arm of rival utility Exelon.
That deal, however, was predicated on FirstEnergy not paying for the cleanup costs at its closing plants, and critics accused it of abusing bankruptcy law to escape the liabilities.
Under the agreement, FirstEnergy "would be shielded from any claims or causes of action related in any way to the debtors' businesses and property, including from any liability for the costly decommissioning of its power plants," the Ohio Consumer Counsel wrote in a filing last month. "Were funds for decommissioning to be inadequate, for example, consumers or taxpayers might be (unfairly) called upon to fund FirstEnergy and FES's power plant decommissioning liabilities to federal and state governments."
Koschik's oral ruling on Thursday sided with that line of argument, according to The Wall Street Journal, pushing FirstEnergy back to the drawing board.
"Working with our advisors, we have already initiated action to address the court's ruling and will submit a new request to have the disclosure statement approved in a timely manner," FirstEnergy Solutions CEO John Judge said in a statement. "The company remains focused on a plan that will significantly strengthen its financial position and allow it to exit Chapter 11 in 2019."
FirstEnergy plans to close the three nuclear plants in 2021 — the 908 MW Davis-Besse Nuclear Power Station and 1,268 MW Perry Nuclear plant in Ohio and the 1,872 MW Beaver Valley plant in Pennsylvania.
By the end of 2022, it also plans to retire four fossil plants — units 1-3 at the Bruce Mansfield plant in Pennsylvania (2.49 GW), units 5-7 at the W.H. Sammis plant in Ohio (1.49 GW), the 24 MW Eastlake 6 coal unit in Ohio and a 13 MW diesel oil generator at Sammis.
The company has pressured state lawmakers to subsidize the plants and even asked the U.S. Department of Energy to issue an emergency order to keep them online. Grid operator PJM, however, says the plants can all retire without threatening grid reliability.
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