Days after FirstEnergy approached the Department of Energy with a request for what would have effectively been a bailout package, the company announced that its coal subsidiary FirstEnergy Solutions and nuclear unit FirstEnergy Nuclear Operating Co. filed for Chapter 11 bankruptcy protection.
The move was unsurprising, coming so soon after the parent appealed to the government for help as the coal and nuclear business have found it increasingly difficult to compete with cheap natural gas as power generation fuel. The appeal specifically concerned several coal-fired and nuclear power generation plants in Pennsylvania and Ohio that would be unable to survive without government intervention.
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." Indeed, the rise of natural gas thanks to fracking has made life very difficult for coal plants and NPPs in the competitive market environment.
As a result, FirstEnergy said in a statement, FirstEnergy Solutions will be restructured into a fully regulated utility "with a stronger balance sheet, solid cash flows and more predictable earnings." FENOC will also be restructured. As of end-March, both companies will be excluded from FirstEnergy's financial reports.
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Over the past few years utilities have been forced to shutter unprofitable coal-fired and nuclear power plants before their time, and the government has not turned a deaf ear to their plight, in keeping with the administration's prioritization of the fossil fuel industry.
Last year, Energy Secretary Rick Perry even proposed a plan for subsidizing coal and nuclear plants for providing base load generation, that is, round-the-clock power, but the plan was rejected by the utility regulators, who said they will study the national grid's resilience to supply interruptions. Many grid operators said they are already factoring in everything that has to do with their grid's resilience to disruptions.
By Irina Slav for Oilprice.com
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