FirstEnergy’s experiment in selling retail electricity below cost blew up in recent months. Here is the story in The Cleveland Plain Dealer. The geniuses that run FirstEnergy cooked up their new deregulated retail company, FirstEnergy Solutions, and created a business plan based on undercutting everyone else in the market, regardless of how much money it lost them. Surprise, surprise. This brilliant strategy succeeded in losing so much money that FirstEnergy Solutions almost blew up the FirstEnergy holding company.
The collapse of FirstEnergy Corp.’s retail marketing company is news — but not to national retail power suppliers or to local electricity brokers working with them.
For months they saw it coming, a failure signaled in the spring when FirstEnergy Solutions said it would be passing on to its customers the “polar vortex” surcharges that grid manager PJM Interconnection levied against the company.
Then a week ago during a quarterly financial conference Anthony Alexander, FirstEnergy’s CEO, confirmed the rumors.
He said the company had decided that FirstEnergy Solutions — which also owns the corporation’s power plants — would focus on selling its power into wholesale markets and stop pitching retail deals to commercial and most industrial customers, leaving only a few very large industrial customers and its long-term, less risky municipal retail contracts serving residential customers.
About 70 FirstEnergy Solutions sales and sales-support positions will be cut next week, leaving the company’s commercial and industrial customers scratching their heads, and competitors scrambling to grab new customers as their contracts with the Akron-based company run out.
Competitors — about 30 of them in Ohio alone — are ready for what will be a marketing bonanza. And they are not shedding tears.
“They took a strategic approach to sell their generation at retail prices that were less than the wholesale market (prices) that would support them,” said J.D. Burrows, vice president of marketing at Houston-based competitor GDF Suez Energy Resources, North America.
“It is my opinion that FirstEnergy Solutions’ behavior was irresponsible. It is almost unbelievable. They bought market share but in the long run, they short-changed their customers,” he said in an interview earlier this week.
Heckuva job, Tony.