Coal plants helped cause bribery scandal. Now FirstEnergy might be buying one back
Akron-based FirstEnergy might be poised to increase its coal-fired generation capacity by 40% with the purchase of a West Virginia plant it owned less than four years ago and spun off as part of a massive racketeering scandal.
The reason why the company paid out more than $60 million between 2017 and 2020 to force through a $1.3 billion bailout was pretty straightforward: It was sending money-losing nuclear and coal plants through bankruptcy and executives thought the vast subsidies from the bailout would make the newly independent company that emerged attractive to buyers.
In its desperation to offload the plants, FirstEnergy funded what federal prosecutors said was probably the biggest bribery and money laundering scandal in Ohio history.
After the scandal broke into the open in 2020, FirstEnergy fired its top executives, signed a deferred prosecution agreement, and paid a $230 million fine. As if that weren’t enough reputational damage, the company’s name was dragged constantly through the muck of a seven-week trial that ended earlier this month with the racketeering convictions of former Ohio House Speaker Larry Householder and state GOP Chairman Matthew Borges.
But after all that, FirstEnergy might be poised to buy back one of the coal plants it went to such lengths to offload.
The Pleasants Power Station is on the West Virginia side of the Ohio River southeast of Marietta. FirstEnergy placed it with subsidiary FirstEnergy Solutions just after the corrupt bailout passed in 2019. The subsidiary emerged from bankruptcy as Energy Harbor in February 2020. The newly independent company then handed the unprofitable coal plant off to Energy Transition & Environmental Management, which is preparing it for closure.
Pleasants is scheduled to be closed by June, but West Virginia Gov. Jim Justice and members of the West Virginia Legislature are mounting a push for FirstEnergy to buy it back and make it part of the company’s regulated Monongahela Power or Potomac Edison subsidiaries.
The political effort seems to be aimed at protecting coal jobs at a time when coal’s been uncompetitive with natural gas and renewable sources of energy. But Justice said he’s all in to save the plant — and, apparently, to make consumers pay for it.
“The Senate, the House, and myself are going to do any and everything we possibly can, to make this become a reality, to where this plant works for many, many years to come, and runs as a coal-fired power plant,” WOWK quoted Justice as saying last month. “We need it.”
Early this year, the state’s regulator, the West Virginia Public Service Commission, ordered the FirstEnergy subsidiaries to submit a report on the feasibility of buying the Pleasants facility by March 31. It was part of an order granting the two companies a $92 million rate increase, the Parkersburg News and Sentinel reported.
It wouldn’t be a great business move, according to some observers. In an analysis released last September, the Institute for Energy Economics and Financial Analysis said that the proposal to sell the 44-year-old Pleasants plant is “high risk, low reward.”
“For years, its owners have threatened to sell or close the economically struggling plant, and have now set June 2023 as its retirement date,” the report said. “But they have left the door open to selling the facility, a contentious possibility that is likely to be repeated over and over across the region as current owners look to dispose of their aging, increasingly uncompetitive coal-fired generation facilities.”
So what might interest FirstEnergy in re-acquiring such an apparent white elephant — other than the $92 million its subsidiaries were awarded at the same time that the same state agency that ordered the companies to consider the purchase?
Certainly, it wouldn’t appear to fit with the company’s strategy coming out of the Ohio bailout scandal.
For starters, adding 1,300 MW to its 3,160 MW in existing coal-fired generation capacity would “eviscerate” FirstEnergy’s goal to reduce greenhouse gas emissions by 30% by 2030, the environmental law group Earthjustice said.
Such a failure would be especially discouraging in light of a dire report released on Monday by the International Panel on Climate Change. It said the window to keep from damning future generations to a nightmarish existence is closing even more rapidly than expected.
In addition to melting sea ice and more intense storms and many other findings, it said, “In all regions, increases in extreme heat events have resulted in human mortality and morbidity. The occurrence of climate-related food-borne and water-borne diseases and the incidence of vector-borne diseases have increased.”
And for those concerned about refugees, it offered this: “Climate and weather extremes are increasingly driving displacement in Africa, Asia, North America, and Central and South America…”
FirstEnergy was sent a list of questions last week — including one about how adding a coal plant would affect meeting its environmental commitments. But it provided only one answer.
“As ordered by the West Virginia Public Service Commission, (Monongahela) Power is currently evaluating the possibility of purchasing the Pleasants Power Station,” a spokeswoman, Hannah Catlett, said in an email. “We plan to report our findings back to the commission in the coming weeks.”
Also making a purchase of the Pleasants plant questionable for FirstEnergy is that in SEC filings, it repeatedly cited the risks associated with owning coal plants.
“We have coal-fired generation capacity, which exposes us to risk from regulations relating to coal, (greenhouse gasses) and (coal ash) and could lead to increased costs or the need to spend significant resources to defend allegations of violation,” reads the heading to a section of its Form 10-K for the year that ended Dec. 31.
Michael Soules, a senior attorney with Earthjustice, said FirstEnergy might have a risk-management interest in buying Pleasants and putting it in a regulated utility like Monongahela or Potomac Edison. Unlike so-called “merchant” plants where losses fall on shareholders, ratepayers cover them for regulated utilities.
“The risks associated with owning another large coal plant can be ameliorated if they could pass all of those costs off onto the captive ratepayers of their West Virginia utilities,” Soules said. “Maybe the thinking is ‘Well hey, maybe we have a piggy bank in the form of the customers of Monongahela Power Company and Potomac Edison.’”
That can be especially true for any liability FirstEnergy might have related to coal ash, the residue of burnt coal that often is placed in landfills, where toxins like mercury, cadmium and arsenic can leach into groundwater.
“Moving all of that liability to the captive customers of their (regulated) utility would potentially be financially lucrative to FirstEnergy Corp,” Soules said.
This story was republished from the Ohio Capital Journal under a Creative Commons license.