- Ohio-based FirstEnergy Corp.’s chief executive officer says his company is ready to assist state lawmakers develop a new energy policy to deal, in part, with the impact of the December Federal Energy Regulatory Commission order directing PJM Interconnection to offset state subsidies given to owners of certain generating resources, including renewables and nuclear plants.
- CEO Charles Jones told financial analysts during the company’s fourth quarter and 2019 earnings call Friday that Ohio’s government is generally unhappy with the results of electric utility deregulation, including PJM’s market system. The PJM auction system is designed to give customers the lowest priced electricity at any given time.
- Insisting that he has no official position, given that the company’s power plant subsidiary FirstEnergy Solutions (FES) will soon emerge from bankruptcy as an independent and unregulated company, Jones repeated an argument that the market system which has emerged since Ohio began moving toward deregulation 20 years ago "does not provide the best long-term outcome for my customers."
The unhappiness of state lawmakers that Jones alluded to had already erupted on Jan. 28 when the Ohio Senate’s Energy and Public Utilities Committee invited the Ohio Consumers’ Counsel (OCC) and a pro-coal group, America’s Power, to submit testimony to help the committee start developing "a comprehensive energy policy."
The OCC’s testimony focused on excessive charges that Ohio’s delivery utilities have added to rates since lawmakers last tweaked deregulation rules in 2008. America’s Power recapped the arguments of coal interests and owners of coal-fired power plants, that gas turbine plants and wind and solar farms make the grid less secure.
While the state’s traditional utilities long resisted deregulation with the argument that it would not encourage the development of new power plants, Ohio’s lawmakers have more recently been reacting to the December FERC order requiring PJM to offset state subsidies to certain power plants, including subsidized wind and solar farms, competing in PJM-run markets. If implemented, the order could cost Ohio electric customers more than $1 billion a year in new fees — on top of new state-ordered fees, according to one study.
The FERC order came on the heels of Ohio House Bill 6, passed last year, providing $150 million a year from 2021 through 2027 in new customer-paid subsidies for two nuclear plants owned by FES and $60 million a year from 2020 through 2030 for two old coal-fired plants owned by the Ohio Valley Electric Corp., created by a consortium of utilities in the 1950s.
Jones said state lawmakers had "already kind of talked about their disappointment with the PJM market and their intention to use the next year or so to look at energy policy for the state."
"I think there are a lot of things they are going to look at, but beyond that, you know what our intention is. We’ll be at the table helping where they want help, providing our guidance where they want guidance, and expressing our views where we feel strongly about certain things should go a certain way," he told analysts.
With the exception of its West Virginia operations, FirstEnergy is now a delivery-only company and the candid acknowledgment from Jones that the company stands ready to dive into state energy policy came during a discussion of how the company is now focused on steady growth through safe investments in its local distribution and long-distance transmission systems.
The company reported full-year 2019 net earnings of $908 million, or $1.68 per share on total revenue of $11 billion. That compared to 2018 earnings of $981 million, or $1.99 per share, on $11.3 billion in revenue. The company is forecasting 2020 earnings of $900 million to $1.41 billion.