8-KOther Events

FIRSTENERGY CORP 8-K Report, Corporate Update (Apr 28, 2016)

Filed April 28, 2016For Securities:FE

Summary

FirstEnergy Corp. (FE) disclosed in this 8-K filing dated April 28, 2016, that the Federal Energy Regulatory Commission (FERC) issued an order on April 27, 2016, which rescinded a previously granted affiliate restrictions waiver. This waiver was related to a Unit Power Agreement (ESP IV PPA) between FirstEnergy Solutions Corp. (FES) and its Ohio subsidiaries (Ohio Edison, CEI, and Toledo Edison). The PPA was established following an Ohio regulatory approval for the companies' Electric Security Plan IV (ESP IV). The FERC order requires FES to submit the ESP IV PPA for FERC's review and approval and to revise its market-based rate tariff. This development means FES will control and offer the Davis-Besse Nuclear Power Station and W.H. Sammis Plant for the May 2016 PJM capacity auction. FirstEnergy expressed disappointment, believing the PPA benefits Ohio customers by protecting against price volatility and supporting local jobs and tax revenue. The company is evaluating its options, including seeking a rehearing or regulatory solutions.

Key Highlights

  • 1FERC rescinded an affiliate restrictions waiver for the ESP IV PPA between FirstEnergy Solutions Corp. (FES) and its Ohio subsidiaries.
  • 2The rescinded waiver impacts transactions governed by the April 1, 2016, ESP IV PPA, which followed Ohio's approval of Electric Security Plan IV (ESP IV).
  • 3FES must now submit the ESP IV PPA to FERC for review and approval before transacting with its Ohio affiliates.
  • 4A compliance filing is required to clarify that affiliate sales restrictions apply to the ESP IV PPA.
  • 5FES will control and offer the Davis-Besse and Sammis power plants in the May 2016 PJM capacity auction.
  • 6FirstEnergy believes the ESP IV PPA benefits Ohio customers and the state economy, and is considering further actions, including rehearing requests or legislative/regulatory solutions.

Frequently Asked Questions

The main impact is that a previously granted waiver allowing FirstEnergy Solutions Corp. (FES) to engage in certain transactions with its Ohio utility subsidiaries (Ohio Edison, CEI, Toledo Edison) under the ESP IV PPA has been rescinded by FERC. This necessitates FES to seek FERC's review and approval for the ESP IV PPA and revise its rate tariffs, restricting its ability to freely transact with its affiliates under that agreement.

FirstEnergy believes the ESP IV PPA is beneficial for customers of its Ohio companies by shielding them from rising retail electricity prices and future market volatility. They also state the PPA supports thousands of Ohio jobs, preserves tax revenues, and aids local industries. The FERC order jeopardizes these perceived benefits.

FirstEnergy is evaluating its options, which may include seeking a rehearing of the FERC Order, filing the ESP IV PPA with FERC for review and approval, and exploring short-term and long-term legislative and regulatory solutions in Ohio to preserve the benefits of the ESP IV PPA.

Due to the FERC Order, FES will control and offer the output from the Davis-Besse Nuclear Power Station and the W.H. Sammis Plant for the May 2016 PJM capacity auction. Previously, the ESP IV PPA likely facilitated different arrangements for these assets.