AuthorTopic: FirstEnergy Seeks US Gov Rescue.  (Read 495 times)

Offline Palloy2

  • Global Moderator
  • Sous Chef
  • *****
  • Posts: 6097
    • View Profile
    • Palloy's Blog
FirstEnergy Seeks US Gov Rescue.
« on: March 31, 2018, 08:03:01 PM »
FirstEnergy Seeks US Gov Rescue. Who Should Pay for Bad Decisions by Capitalists? Not the Capitalists, Obviously
Leonard Hyman and Willian Tilles
Mar 31, 2018

FirstEnergy, the Ohio-based utility holding company, has sent an SOS to the Department of Energy. It wants the DOE to issue an emergency order to PJM, the electricity grid trading organization. PJM, it says, should compensate FirstEnergy Solutions (FES), FirstEnergy’s unregulated generating subsidiary, for the added reliability that FES’s nuclear and coal-fired facilities provide to PJM, and to protect the jobs of the workers at the plants. (Not to mention the jobs of the coal miners and the financial well-being of the coal supplier.)

Does this sound familiar? Yes, it is the same argument made by DOE Secretary Rick Perry in his ill-fated attempt to get the Federal Energy Regulatory Commission to back his plan to rescue coal and nuclear plants, cloaked in a reliability-improvement scheme. But the Trump appointees at the FERC sank this scheme.

As for FirstEnergy’s request, it looks like a last-minute attempt to avoid a bankruptcy filing for FES, something that had been talked about publicly for some time.

FES produces half of its electricity from four aged nuclear power stations and another 30% from coal. These facilities have had a hard time competing in the market. FirstEnergy’s management has made no secret that a financial reorganization for FES was in the cards.

On January 23, Moody’s slammed FES with a three-notch downgrade, to “Ca,” just above default. It “reflects the increased likelihood of a default occurring within the next few months,” Moody’s said. FES needs to make a $100 million bond payment on April 2, but may not be able to, which could trigger a default.

Let’s for a minute consider the history behind this move. FirstEnergy was formed in 1997 when Ohio Edison, a coal burning utility, bought Centerior, a troubled northern Ohio utility with some big nuclear problems. It expanded further with the purchase of GPU, the owner of Three Mile Island, in 2001. Then FirstEnergy decided to double down on coal, buying Allegheny Energy, a coal-burning utility.

These mergers were typical of the time and the region. Eat nor be eaten. Join the PJM transmission system in order to sell cheap Midwestern coal and nuclear-produced electricity to eastern markets. Get the generation out from under the regulated utility, so that it could make big money in competitive markets.

The strategy, however, did not work as planned. Too many other outfits joined PJM with the intent of selling cheap Midwestern coal and nuclear power to the east, and the eastern market did not expand. Natural gas production in the east made gas-fired power cheap. Renewables made a dent in the market, too. The additions to the market made base-load coal and nuclear less valuable. And on top of that, the threat of global climate change made coal-fired power plants look less and less like a long term option. As a result of these events, power prices fell and FES headed into it owns financial crisis, as did many other power producers.
So, what constitutes good public policy here?

Will reliability at PJM suffer greatly if the DOE does not bail out FES by, essentially, putting a tax on all other power producers and their customers in PJM? PJM thinks not.

Should consumers be forced to rescue competitive businesses from the consequences of their own profit-motivated but failed decisions? Doing so creates a moral hazard issue, of course, opening the way to more requests from failing businesses.

On the other hand, the government, in the past, rescued Lockheed, General Motors (out of bankruptcy), Chrysler (out of bankruptcy), and big banks too numerous to mention, all in the name of stabilizing the economy, maintaining the defense establishment, and saving jobs. Don’t coal miners and nuclear operators deserve the same consideration?

We have our own opinion on the reasonableness of the rescue plea, but its reasonableness is not the issue. Do we want to create a capitalist system in which the capitalists win when they are right and the public loses when they are wrong?

The whole purpose of electricity deregulation was to remove the risk of bad judgment from the consumer and put it on the producer. If that was the wrong move, then we need to re-regulate, not make ad hoc rescue decisions. If it was the right move, then stick with it. That is the real choice.
"The State is a body of armed men."

Offline Eddie

  • Global Moderator
  • Master Chef
  • *****
  • Posts: 17502
    • View Profile
Re: FirstEnergy Seeks US Gov Rescue.
« Reply #1 on: April 01, 2018, 07:31:36 AM »
Do we want to create a capitalist system in which the capitalists win when they are right and the public loses when they are wrong?

I think we have already. It's just a matter of who gets the bail-outs and who doesn't. The system has been broken now for some time.
What makes the desert beautiful is that somewhere it hides a well.

Offline K-Dog

  • Global Moderator
  • Sous Chef
  • *****
  • Posts: 3136
    • View Profile
    • K-Dog
In the collapse drama Trump is just a bad commercial break.
« Reply #2 on: April 21, 2018, 02:56:01 PM »
Incredible' News as Banking Giant HSBC Ditches New Coal, Tar Sands, and Offshore Arctic Drilling Projects

I'll be different and just link the article.

https://www.commondreams.org/news/2018/04/20/incredible-news-banking-giant-hsbc-ditches-new-coal-tar-sands-and-offshore-arctic

This is an article Agelbert would go emoji crazy over if he found it first.   :multiplespotting:  I won't.

The article reports that HSBC is getting socially conscious because they are going to screen energy investments as being socially responsible before funding them.  I doubt it.  I suspect that this is public relations because they won't be funding some high risk investments which depend on high priced gasoline to make a profit which will be reported in the news soon.  Somebody at HSBC more likely reads 'Kunstler' than has grown a heart, and knows the economy goes to shit when gas prices go up over four bucks a gallon.  The musical chair tricks that will get played then will leave HSBC holding the bag and they know it.  Time for some public relations then.  HSBC won't get paid if they loan the money for tar sands.  Better they loan money on retirement complexes for past shelf-date baby boomers on their way out.  That way they own something when it all takes the next big ratchet click down.



We now have a board position where bankers lie and pretend they are spiritual because they know low EROEI investments are bad and are going to keep their cash.  What then is the next move on our cosmic chessboard?



 :cwmddd:

A serious question for serious diners! 

Oilfield prison labor?  An exile to a 'reclamation zone' Like something from 'The Handmaids Tale' TV series where instead cursed inmates process tar sands on the public dime instead of cleaning up pollution.



The world as we know it will be going away but I doubt it will be going quietly into the night.



Quote
In another signal that "the era of fossil fuels is coming to a close," Europe's biggest bank, HSBC, announced Friday that it will no longer fund oil or gas projects in the Arctic, tar sands projects, or most coal projects.

The era of fossil fuels comes to a close but nothing can replace it.  It feeds us and keeps us from freezing to death.  This will not end well.

Under ideal conditions of temperature and pressure the organism will grow without limit.

Offline azozeo

  • Master Chef
  • *****
  • Posts: 8642
    • View Profile
Re: FirstEnergy Seeks US Gov Rescue.
« Reply #3 on: April 21, 2018, 04:17:17 PM »
Bravo, Well Done  :icon_sunny:
I know exactly what you mean. Let me tell you why you’re here. You’re here because you know something. What you know you can’t explain, but you feel it. You’ve felt it your entire life, that there’s something wrong with the world.
You don’t know what it is but its there, like a splinter in your mind

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 38029
    • View Profile
Re: In the collapse drama Trump is just a bad commercial break.
« Reply #4 on: April 21, 2018, 06:59:29 PM »
Incredible' News as Banking Giant HSBC Ditches New Coal, Tar Sands, and Offshore Arctic Drilling Projects

I'll be different and just link the article.

https://www.commondreams.org/news/2018/04/20/incredible-news-banking-giant-hsbc-ditches-new-coal-tar-sands-and-offshore-arctic

I imagine for a while the oil companies will still find somebody to buy their junk bonds.  It will be interesting to see if any other TBTF Banks follow HSBCs lead.

RE
Save As Many As You Can

 

Related Topics

  Subject / Started by Replies Last post
0 Replies
282 Views
Last post March 02, 2016, 09:05:53 AM
by Eddie
0 Replies
431 Views
Last post December 14, 2016, 12:07:57 PM
by azozeo
0 Replies
165 Views
Last post November 07, 2018, 12:03:54 PM
by azozeo