If you live in WV and pay your electric bills to either Mon Power or Potomac Edison, you need to pay attention to what is happening with FirstEnergy the Akron, OH-based holding company that owns these WV utilities.
Cathy Kunkel, whose work has appeared here on The Power Line, is a fellow at the Institute for Energy Economics and Financial Analysis. She just posted an piece at the IEEFA Web site about the “early retirement” of former FirstEnergy CEO Tony Alexander, two years before his current contract ended. The decision was sudden and there were no previous indications that Alexander was considering retirement.
Here is Cathy’s account of Alexander’s failed tenure as FirstEnergy CEO
Under Alexander’s reign, FirstEnergy doubled down on coal-fire power generation at exactly the wrong time. That happened in 2010 when FirstEnergy merged with Allegheny Energy, a company that was 78 percent dependent on coal. The deal increased FirstEnergy’s asset value by more than 30 percent but also put FirstEnergy at tremendous risk for being so coal dependent. Those risks materialized almost immediately—low natural gas prices and greater market penetration of renewable energy and energy-efficiency programs drove wholesale electricity prices to record lows, dealing FirstEnergy’s coal-fired power plant earnings a deep blow. As a result, FirstEnergy’s financial performance lagged far behind its peers, even as Alexander made the Forbes 500 list of best-paid CEOs with a compensation package estimated in 2012 at $43 million over five years.
It’s not overstating it to say Alexander’s missteps were epic. First came the failure to diversify away from coal. Then came a cynical strategy by which the company aimed to get taxpayers and customers to bail the company out. These efforts, detailed in our October 2014 report on FirstEnergy, included organized political opposition to the development of renewables and overt campaigning against popular energy-efficiency programs. That FirstEnergy bailout scheme under Alexander ultimately sought to put ratepayers on the hook for FirstEnergy’s money-losing power plants. It is a scheme that unfortunately is alive and well: today, for example, FirstEnergy customers are awaiting a ruling from the Public Utilities Commission of Ohio on whether the company will be allowed to set up a long-term contract through which customers will pay above-market prices for electricity from FirstEnergy’s Sammis coal plant and Davis-Besse nuclear plant.
FirstEnergy’s backward-looking, coal-focused strategy hasn’t worked for shareholders either. The company cut its dividend in 2014, its stock price is down by more than half since 2008 and is roughly where it was when Alexander took over 10 years (while the S&P 500 Index, by comparison, had more than doubled), and the company is saddled with huge debt.
Large utility holding companies such as FirstEnergy have learned that they can’t compete in even the heavily rigged energy markets created by the wave of deregulation under Clinton and Cheney. FirstEnergy has rushed to dump its uncompetitive coal-fired plants on customers in regulated markets, where rate payers are forced to pay the plants’ costs and profits. FirstEnergy is even trying to get the PUC in supposedly deregulated OH to allow long term power contracts that would bailout FE’s failing nuclear and coal plants there.
So it is not surprising that FE’s board has hired Charles Jones, FE’s former director of regulated utilities, to replace Alexander. The board has also decided that Alexander’s bad advice and poor judgment is still needed, because they kept him on the holding company’s board of directors.
The Jones appointment is a clear signal that FE is going to continue the political strong-arming and manipulation of regulated markets that began in the past couple of years, as FE tried to dig its way out of the hole Alexander dug for the company.