FirstEnergy / Ohio Utility Bailouts

FirstEnergy Solutions restructuring plan hits roadblock as federal agencies object

FirstEnergy Solutions faces heavy opposition from federal authorities over the restructuring plan it has proposed in federal bankruptcy court. The company’s hopes for a May 6 vote by major creditor groups on its proposal to create a new company, with its own stock, now appear unrealistic, given the across-the-board opposition by the U.S. EPA, the NRC, FERC, the SEC and the court’s own U.S. Trustee. The FES proposal would include the continued operation of its nuclear power plants, including the Perry nuclear plant.

CLEVELAND — “The U.S. Securities and Exchange Commission argues that the FirstEnergy Solutions restructuring plan is against the law because it eliminates any responsibility of ‘non-debtor third parties,’ such as FirstEnergy executives and directors, of any liability ‘with respect to any acts taken or omitted in connection with or related to the FE settlement . . . by eliminating liability for negligent conduct, the [clause in the agreement] effectively releases parties from, among other things, violations of the federal securities laws that are based on strict liability or simple negligence.’

The Federal Energy Regulatory Commission, which has appealed an earlier ruling by Bankruptcy Judge Alan Koschik that allowed FES to walk away from a long-term commitment to buy power from coal-fired power plants owned by all of Ohio’s utilities, objected to the FES restructuring plan because it does not detail the financial impact on the company if the FERC appeal prevails. The FERC also complained that the FES plan eliminates the ability of individual creditors to object.

Total FES debt is about $3.6 billion.

Federal attorneys for the NRC and U.S. EPA, working with lawyers for Ohio and Pennsylvania, argue that FirstEnergy itself has significant independent liability to the government under environmental laws. They contend that terms of the restructuring agreement that let FE off the hook are illegal.

The U.S. Trustee similarly argues that the restructuring plan, as presented by the company, contains too many provisions releasing FE from any responsibility. The Trustee also argues that the plan appears to circumvent the normal bankruptcy reorganization process.”

— John Funk, The Plain Dealer 

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