- The federal bankruptcy judge overseeing the FirstEnergy Solutions (FES) reorganization has held up the case until the company can reach an equitable agreement with the labor unions representing workers at its nuclear power plants.
- "If this issue had been resolved I would have been prepared to confirm the [reorganization] plan," Judge Alan Koschik told lawyers for the company late Wednesday afternoon at the conclusion of two days of hearings covering remaining issues in the case. "I expect I will be confirming the plan," he added, "but I cannot do it until this issue is resolved."
- FES wants to emerge from bankruptcy free of union contracts and then negotiate new, slimmer agreements that, for example, would do away with the pension plans for long-time employees. The unions have countered current contracts contain negotiated "succession" language requiring that any new owner accept the contracts as they are — exactly what FES wanted to avoid, though when it sold off other power plants it insisted the labor contracts were included.
These issues have stymied bargaining for months and now have become the major obstacle in the bankruptcy case itself.
The company maintains that the benefits in the current contract were negotiated by parent company FirstEnergy Corp. and it therefore will not, or cannot, continue to offer them as a new company.
Joyce Goldstein, a Cleveland labor lawyer representing union locals at the Perry nuclear plant in Ohio and the Beaver Valley plant in Pennsylvania, suggested the contract could be amended to change the name of the company if that were the only issue. But it's not.
FES has filed testimony saying it would not be able to afford the kind of benefits FirstEnergy had granted in the contracts, particularly pension benefits.
Company witnesses on Tuesday had told the judge they expected FES to emerge from bankruptcy with $1.1 billion in cash that could quickly grow to $1.5 billion, Goldstein said in her Wednesday presentation in court.
On top of that projected cash on hand, the passage of House Bill 6 in the Ohio legislature last month will give FES about $150 million annually for seven years, beginning in 2021, to subsidize its two Ohio nuclear power plants. But that subsidy could wind up on the Ohio ballot in November 2020.
Goldstein also pointed to the latest tally of professional fees filed in the court docket — nearly $170 million "in professional fees to professional people who get their full fee," she said.
"How about those people who have earned value for this company whose retirement benefits they worked for their whole careers are now in question," she said.
The company countered that it could ask the court to break the labor contracts as it has with a great many professional and business contracts over the past 18 months — a routine process in bankruptcy cases. But bankruptcy law gives labor contracts a protected status, making such a move difficult, with the chance that the court could reject the request.
Koschik said as much Wednesday, telling the group of FES lawyers that if the company were to ask the court to do that he might reject the request.
"This is a bargaining agreement," he said. "You cannot just reject it. You have to get approval from Ms. Goldstein or me. And I may deny it."
Abid Qureshi, a partner with Akin Gump, the national law firm representing FES, then suggested that if the court could not approve the restructuring plan immediately that it instead set a deadline for the labor issued to be resolved.
He suggested that the court rule that the issue would have to be resolved by the "effective" date of the reorganization plan, meaning the day it would go into effect, some months from whenever the court approves the reorganization plan.
Koschick also rejected that argument. The judge set a status hearing on the issue for Sept. 10.