FirstEnergy Coal Retirements: Is It Fake News?

FirstEnergy announced the closure of its remaining coal-fired power plants in Ohio and Pennsylvania Wednesday night. The announcement included a reference to the company’s years-long odyssey in search of a bailout for its coal plants, and that has led some to speculate about what FirstEnergy might really be up to.

The questions are understandable. My opinion, though: this is not fake news.  

What we know for certain is that these announcements represent a shift away from coal that is both inevitable and irreversible and has been obvious for years to anyone with their eyes open. The company has made bad decisions on these plants for years as costs of cleaner alternatives have continued to decline, and they must now accept the consequences and stop asking for a handout. I cannot say it any better than Tony Alexander - former CEO of FirstEnergy - when he referenced a massive 2011 investment in the Sammis plant by saying: “We will run the risk that we will get recovery of those costs in the market. . .. If it doesn’t,” he said, “it’s our risk. Over time, maybe it will pay.”

The coal units set for closure have been on the verge of being announced for some time now. In the first six months of 2018, the Sammis plant in Ohio had an anemic capacity factor of 28%, reflecting a low rate of operation due to uneconomical performance. The Bruce Mansfield plant—the largest coal-burning power plant in Pennsylvania—was itself burning recently, inflicting significant fire damage. Production is down considerably since the fire, and both repairs and continued operation of the plant would be very expensive.

The early skepticism from observers is that these retirement announcements are conveniently timed to provide extra motivation behind FirstEnergy’s attempt at a federal bailout—or any bailout for that matter, since FirstEnergy has been looking for handouts at the state and regional level too. I agree.

It’s important to keep in mind that these efforts have been supported by Murray Energy as well. Murray supplies coal to these plants; nearly all of Bruce Mansfield’s coal and well over half of Sammis’ coal. FirstEnergy recently requested approval to terminate these contracts, which has put them at odds with their long-time friend, Bob Murray (a loss for Murray of over $35M over two years for Bruce Mansfield alone). This could simply be the latest tactic in their joint pursuit of an industry-wide bailout. But it still doesn’t change the real-world implications of these retirement announcements.

When a coal plant or unit has been announced for retirement in the United States, it almost always happens. It’s very difficult to walk these announcements back once they’ve been made. This is true for FirstEnergy’s previous announcements, which have been delayed at times by agreements with the regional grid operator requiring them to stay online because of short-term reliability concerns, but still ended in retirement.

We can also draw from a recent example in southern Ohio with Dayton Power and Light’s announcement of the Killen/Stuart coal plant closures. Some observers expected a buyer to come in and keep them operating; skepticism continued for more than a year. Even with that rumor circulating, the facilities began to lose staff, making the plants more difficult to maintain and operate. Some workers waited around in hopes that their jobs would be protected or saved, but those plants are auctioning off their remaining tools and equipment next month. Nobody is lining up to buy these, or any other, coal plants nowadays. Continuing to entertain hopes for a more coal-friendly economy can have a real impact on these local communities by delaying action, and immediate attention needs to be focused on the real impacts these closures will have.

Some may believe that Donald Trump is preparing to rescue this failing industry by requiring a federal bailout for these plants. There are lots of reasons to suggest this relatively unprecedented effort is choked up in multiple places—with little public support—leading me to believe the effort has lost traction and needed new leverage—hence this news, now. There is every incentive for the company to make this announcement now as a desperate final attempt to pressure decision-makers to give them their bailout, and there was no reason for the company to continue to wait in making these plans public.

Adding to the skepticism, if you’ve been tracking this company’s entertaining path through Bankruptcy Court, you are aware that just days ago, FirstEnergy filed a settlement proposal that addressed their coal units:

“The Debtors currently own and operate two coal-fired power plants—the Bruce Mansfield Power Plant and the W.H. Sammis Power Plant. The possibility of adding another coal-fired power station into the portfolio for the reorganized business would add size and purchasing power to enhance the value to the Debtors’ enterprise. In my experience and opinion, with the uncertain financial outlook of the Pleasants Power Plant, it is difficult to assign a value to this asset. FE Corp. disclosed the book value of the plant is approximately $67 million as of March 31, 2018.”

Now, call me crazy, but as of a few days ago, it didn’t sound like they had plans to retire these recently announced plants, and it’s noteworthy that the Pleasants plant was not included in the announcement today because that plant was already announced for retirement earlier this year. Sure, this could just be a political move, using these local workers and their families as pawns to help satisfy FirstEnergy’s unquenchable thirst for more free cash. That would be a sad situation, indeed.

But at the same time, as a friend once told me, “never attribute to malice what can be explained by stupidity.”

It’s fair to be skeptical of news coming from a utility like FirstEnergy given its recent activity at the state, regional and national levels in trying to obtain a bailout from electricity consumers to pay for these aging, expensive and dirty power plants. But there is serious planning that needs to begin, both for the local communities and the working families in these plants to find sustainable solutions, and for the state’s transition to a cleaner energy economy that creates jobs and provides lower cost energy to our electricity consumers.

About the Authors

Daniel Sawmiller

Ohio Energy Policy Director, Climate and Clean Energy program

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