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Utility FirstEnergy has asked for what is effectively a government bailout for several nuclear and coal-fired plants, after it said it would have to shutter three nuclear power facilities over the next three years.
The company called on Energy Secretary Rick Perry to use emergency powers to force regional power grid operator PJM Interconnection to compensate FirstEnergy’s local power plant operating unit for the benefits its business provides the region through the negotiation of a new contract. Among these benefits FirstEnergy listed reliability of power supply and the employment they provide.
A day before its appeal to the Energy Department, FirstEnergy issued a press release stating it would close three NPPs in Pennsylvania and Ohio with a combined capacity of over 4 GW.
Don Moul, head of FirstEnergy Solutions, which operates the plants, said “Though the plants have taken aggressive measures to cut costs, the market challenges facing these units are beyond their control.”
Moul also called on local political leaders to consider ways of “recognizing the importance of these facilities to the employees and local economies in which they operate.”
Coal and nuclear power plants in the United States have faced constantly growing pressure from cheap and abundant natural gas made available by the rise of hydraulic fracturing. The cheap gas is making coal-fired and nuclear power plants uncompetitive and utilities are being forced to retire these facilities.
Related: JP Morgan Sees Oil Prices Fall Back To $50
Secretary Perry last year proposed a subsidy plan for the industry but regulators rejected it. The proposal suggested coal and nuclear plant operators get paid for providing base load electricity, that is, round-the-clock electricity generation.
The regulator said it will study the national grid’s resilience to supply interruptions but many grid operators said they are already factoring in everything that has to do with their grid’s resilience to disruptions.
There has been speculation that in the absence of government help FirstEnergy Solutions would have to file for bankruptcy and even the parent company’s chief executive, Charles Jones, said last month it would be surprising if the unit did not file for some sort of bankruptcy protection by the end of this month.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.