FirstEnergy Files for Bankruptcy; To Close 4 Nuclear Reactors
- Jul 7, 2018 10:29 pm GMT
Late Saturday night March 31st, while most of the country was sleeping, FirstEnergy filed for bankruptcy protection. The unsecured creditor with the most exposure is Bank of New York Mellon Trust ($1 billion). The BNSF Railway is owed $72 million. The decision comes just one day before a $100 million bond pay was due. The utility made a decision to file for bankruptcy rather than make the payment.
Earlier last week FirstEnergy Solutions told the PJM Interconnection that it will close four nuclear power plants – two in Ohio and two more in Pennsylvania – for a total of about 4 Gwe of CO2 emission free electrical generation capacity. Both states are deregulated markets. Competition from the low price of natural gas is the main reason the utility has been losing money. The plants affected are Davis-Besse and Perry in Ohio and Beaver Valley in Pennsylvania.
The one-two punch, which has been expected since January, created an energy crisis of national proportions. The utility asked the Department of Energy to invoke emergency powers to keep the reactors open. What FirstEnergy wants is for DOE Secretary Rick Perry to do is to order the PJM Interconnection to pay more more coal and nuclear power so that operators can recover their costs and not shut down.
Energy experts say the request is a long shot at best because the process to make a decision under Section 202c of the Federal Power Act takes too long and the legal authority invoked in the request isn’t intended to deal with a strictly economic crisis.
Not surprisingly, green groups and fossil fuel trade groups promptly condemned the request. Lawsuits are expected from both groups if FERC moved ahead to try to save the reactors
Another factor is that a case made for CO2 emission reduction related to dealing with climate change will likely collide with with the tone deaf policy position of the Trump administration which says global climate change is not a problem.
In the meantime, FirstEnergy says it has enough cash on hand to keep operating and that there will not be electricity shortages in its service areas which stretch from Illinois to New Jersey.
The move to close the nuclear reactors was condemned by the Nuclear Energy Institute (NEI) which is the main trade group that represents the industry. In a statement NEI said the closure threatens the resiliency of the electrical grid and will thwart environment goals. Once the reactors are closed, they will be replaced by CO2 emitting natural gas plants.
For its part the PJM Interconnection denied that grid resiliency would be affected and disputed that closure of the reactors constitutes an “emergency” under the provisions of the Federal Power Act.
NEI also points out the economic impacts will include the loss of 2,300 jobs and $540 million in local taxes which in some cases will devastate the local communities near the reactors. NEI President Marie Korsnick said that electricity prices will go up throughout the multi-state region. About 65 million people live in the areas served by the PJM Interconnection.
Legislators in Ohio and Pennsylvania have been wary of the potential backlash from rate increases that would occur if they took action to save the reactors. Proposals to address the problem have languished in both states.
What politicians in both states are looking for is action by the Federal Energy Regulatory Commission (FERC) to make the decision, and take the heat, for the rate increases needed to keep the plants open. So far neither Secretary Perry nor FERC have made any substantive responses to FirstEnergy’s request.
Minnesota May Be Next
Legislation pending in the Minnesota Legislature (SF 3504) would designate the 671 MW Monticello nuclear power plant and the twin unit 1,100 MW Prairie Island plant, both owned by Xcel Energy, as “Carbon Reduction Facilities.”
Under the plan that would be carried out if the legislation becomes law, Xcel Energy would base capital investments on an Integrated Resource Plan (IRP) that would be approved by the Minnesota Public Utilities Commission.
Rates to pay for the capital investments would be approved after the fact by the PUC which would be required to act within 10 months of submission of the rate case. The legislation is intended to cover the total cost of operations of the plants which is above and beyond the current rate case.
Xcel says that it plans to spend at least $1.4 billion on its nuclear plants over the next 17 years. About $1 billion is needed to keep the Prairie Island units going through to their current license expiration dates of 2033 and 2034. An estimated $420 million is needed for Monticello which has a license that expires in 2030.
Business interests which do not want to pay rate increases associated with the capital costs are opposed to the bill and have made their views known through the Minnesota Chamber of Commerce.
The bill was reported out of the Senate Energy and Utilities Committee by a vote of 7-2 in favor and sent to the Senate floor for action. A companion bill is moving through the House.
Court Approves Westinghouse Reorganization Plan
WNN: Westinghouse Electric Company’s reorganization plan – including its sale to Brookfield – has been approved by the US Bankruptcy Court. Westinghouse said the court’s approval of the plan is a “significant milestone in the company’s strategic restructuring”.
Westinghouse filed for Chapter 11 bankruptcy protection with US courts in March 2017 to enable it to undergo strategic restructuring. The company’s bankruptcy filing affected projects to construct a total of four AP1000 reactors at two projects, Vogtle in Georgia, and VC Summer in South Carolina.
Last January, it was announced that Brookfield Business Partners, together with institutional partners – collectively known as Brookfield – had agreed to acquire 100% of Westinghouse from Japanese parent company Toshiba for about $4.6 billion. The deal also settles major debt claims.
The company said it expects the transactions to close in the third quarter of 2018.
Photo Credit: IAEA Imagebank via Flickr
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