FirstEnergy Solutions successor faces $500M in damages and a new hearing before FERC

Dive Brief:

The Ohio Valley Electric Corporation (OVEC) is back in federal bankruptcy court this week with a demand for more than $500 million from Energy Harbor, the successor to FirstEnergy Solutions (FES), for damages it contends it has suffered and will suffer because the court allowed FES to break its long-term contract with OVEC.
Created in the 1950s, OVEC is jointly owned and operated by utilities in Ohio and nearby states. It sells its power into the PJM market, often at a loss. FES inherited the contract from its parent FirstEnergy Corporation, and had been obligated to pay its share of expenses and buy a small portion of the electricity the company's 60-year-old coal-fired power plants generate.
OVEC's $500 million claim came just as the Federal Energy Regulatory Commission issued an order demanding that Energy Harbor explain whether breaking the OVEC contract was necessary for its survival. FERC also invited FES opponents to weigh in. It set a schedule for arguments to be filed and said it expected to rule on the matter within 180 days.

Dive Insight:

FERC contended unsuccessfully in bankruptcy court that the OVEC contract could not be broken without considering the impact on the public. The agency, along with OVEC, said that there was a jurisdictional issue at hand as well.

They argued that the bankruptcy court had to consider the public interest in forcing FES to keep the contract — which had been approved by FERC in the first place. They argued that the court could not treat the contract as just another business contract.

The bankruptcy court disagreed and allowed FES to break the contract. FERC, OVEC and others with similar contracts appealed to the U.S. Circuit Court of Appeals for the Sixth Circuit. The appellate court ruled that the bankruptcy court had jurisdiction but that it should have considered FERC's arguments rather than deciding the issue strictly as a business matter.

The bankruptcy court has yet to set a new hearing and is expected to wait for the outcome of the new case FERC created this week.