Dive Brief:

• The Justice Department and its federal bankruptcy court division, the U.S. Trustee, objected to FirstEnergy Solutions' (FES) latest (sixth) reorganization plan in a filing on Friday, based on the protection that the plan would give to parent energy First Energy and other affiliates.

• FES is facing a phalanx of opponents, including several federal agencies, for its plan to emerge from federal bankruptcy protection free of past obligations. The bankruptcy court refused to approve an earlier FES plan that would similarly protect FirstEnergy affiliated from creditors or the government if future environmental issues become evident at former power plant sites.

• The Midwest-based Environmental Law and Policy Center (ELPC) led a coalition of environmental groups to urge the court to throw out the restructuring plan because it fails to show how the reorganized FES — without backup from its parent FirstEnergy Corp. — will ever have enough money in its nuclear decommissioning funds to clean up the power plants sites when the plants are eventually closed. 

Dive Insight:

FES appears to have searched for another way to skin the same cat it wasn’t able to earlier — protecting its former parent FirstEnergy Corp. and other affiliates (non-debtors) from future liabilities connected to the company’s power plants. The strategy, again, would prevent creditors (non-consensual third parties) unhappy with the deal that FES has negotiated with its major debt holders from doing anything about it. And that has drawn the ire of the Justice Department.

A hearing on the plan is scheduled for Aug. 20, and opponent testimony was due Friday. The Federal Energy Regulatory Commission (FERC) also objected to the current restructuring proposal, arguing that it would violate bankruptcy case law.

The bankruptcy court previously ruled against FERC on the question of whether FES could use the bankruptcy case to break its contract with other utilities to fund the Ohio Valley Electric Corp., which is continuing to operate two uncompetitive 1955 coal-fired power plants.

FERC has appealed that ruling to the 6th Circuit Court of Appeals on the grounds that the FES payments to OVEC were rates, which are the exclusive purview of the FERC. The agency is now arguing that the restructuring plan cannot be approved until it has the opportunity to rule on the change in rates, assuming it prevails in the 6th Circuit.

The Ohio Consumers’ Counsel has weighed in on the OVEC issue on the side of FERC, arguing that a restructuring plan as written would prevent FERC from ruling on the OVEC issue — and that FES could therefore ask the 6th Circuit to throw out the OCC and FERC appeals “based on the theory that the appeals are somehow mooted by the Reorganization Plan.”

"The (reorganization) Plan improperly provides for exclusive jurisdiction of the Bankruptcy Court going forward to the exclusion of any jurisdiction for regulatory bodies which may currently exist under otherwise applicable law. The OCC submits these objections and joins FERC’s objections on both of these points," the agency’s lawyers wrote.

The environmental groups led by the ELPC continue to argue that the decommissioning funds for the four FES nuclear reactors are insufficient and will remain so.

FES owns four reactors at three sites. In Ohio, the company’s two reactors are located on Lake Erie — Davis-Besse east of Toledo and Perry, northeast of Cleveland. FES also owns a two-reactor power plant on the Ohio River near Pittsburgh. 

As a subsidiary of FirstEnergy, a regulated utility, FES and the FirstEnergy Nuclear Operating Co. (FENOC), another FirstEnergy subsidiary, could — and did at times — turn to FirstEnergy when the Nuclear Regulatory Commission determined the decommissioning funds were not where they should be.

ELPC's objection contends that FENOC is now having trouble before the Nuclear Regulatory Commission with its application to transfer the nuclear operating licenses to the re-organized companies when they emerge from bankruptcy because of a projected $79 million shortfall in the decommissioning fund for one of the Pennsylvania reactors. The shortfall for the FES/FENOC four-reactor nuclear fleet is more significant, the ELPC argues, though the NRC has said as of now the decommissioning funds are adequate.

“At the beginning of 2019, the combined value of the four nuclear power plant decommissioning trust funds was $1.6 billion. The sum of the site-specific decommissioning cost estimates for the four nuclear power plants was $3.2 billon,” the ELPC argues, citing an analysis it commissioned by former NRC Commission member Peter Bradford.