FirstEnergy CEO decries mandates driven by ‘social agenda’
Akron, Ohio-based FirstEnergy is among the nation’s largest diversified electric utilities, with 10 regulated distribution communities in Ohio, Pennsylvania, New Jersey and West Virginia. The company also has a competitive unit, FirstEnergy Solutions, which supplies power and sells into retail markets in the Northeast, Midwest and Mid-Atlantic from its more than 14,000 megawatts of generation.
FirstEnergy is very reliant on coal-fired generation, which produces 56 percent of its power. Nuclear and renewables add 22 percent and 11 percent, respectively. And even though FirstEnergy operates in the heart of the Marcellus Shale region with its burgeoning production of natural gas, only 8 percent of its generation fleet is powered by gas.
Like others in the electric sector, FirstEnergy has experienced weak demand for power in the aftermath of 2008’s Great Recession, which hit especially hard in the industrial belt that its utilities serve. The company’s 2013 utility sales were below 2007 levels during a period when wholesale energy prices dropped by more than 40 percent, Alexander said. For 2013, revenue from FirstEnergy’s regulated distribution business was off by $322 million, to $8.738 billion, the company reported Feb. 25.
The “multiyear economic downturn” and “no load growth at our utilities” also were cited by Alexander in January when he announced the company was cutting its quarterly dividend by 34 percent from the 55 cents per share paid since 2008.
Yesterday, Alexander often sounded irritated at the changes occurring through “this effort to experiment” with the electric business. “Quite frankly, I believe state and federal policymakers are manipulating the supply and demand, and distorting markets for electricity, to further advance the ‘war on coal,'” Alexander said at the chamber luncheon where he was featured as part of its CEO Leadership Series.
Alexander was critical of U.S. EPA’s efforts to regulate carbon dioxide emissions, saying that it would just “accelerate faster what’s going to naturally occur anyway in this business.” Over the next 20 to 40 years, “almost every coal-fired plant in America that exists today will be upwards of 70, 80, 90 years old,” Alexander said. “Those plants aren’t going to be around. We’re dealing with something that’s going to naturally move on in time.”
The CEO departed only once from his prepared remarks, and that was to decry the fact that he had been told that FirstEnergy would not “be able to use natural gas this summer for peaking units” and that supplies will instead be diverted to storage to rebuild reserves called upon during this winter’s extreme cold in the region.
Alexander said the pipeline serving his gas generation — which he could not identify — said that storage was taking precedent. As a result, if the peaking units are needed this summer, they will burn oil “at probably five times the cost,” he said in response to a question.
He said his goal in the next several years is to establish among stakeholders the “basic concept” for regulators and customers “to understand that at the end of the day you can’t use a private company’s balance sheet and its ability to bill to carry our social policy. You cannot use that capability to ultimately tax all customers for what you perceive is a benefit to certain customers,” he said.
“This country needs time,” Alexander said, returning to a theme. “We will ultimately work through this … and as the economy grows, so will the use of electricity.”