FirstEnergy may or may not have been the cause of the last week's largest blackout in U.S. history - its officials continue to insist on their innocence, pointing accusatory fingers toward the east - but it doesn't look good for the company regardless.
The Cleveland Plain Dealer reports FirstEnergy is nearing a perfect storm of problems:
- Last week's disastrous power failure sucker-punched FirstEnergy Corp.'s ailing finances at a time when the Akron utility is under mounting pressure to reduce its debt and tackle costly operational problems.
Now, bad publicity and potential regulatory and legal issues surrounding the blackout could make it even harder for the company to climb back onto stronger financial ground.
....Primarily, FirstEnergy has been under mounting pressure to shed some of its debt, which is at least $13 billion, much of it taken on with the 2001 purchase of New Jersey utility GPU Inc.
....Also straining FirstEnergy's finances has been the cost of the unexpected idling of its Davis-Besse nuclear power plant, shut 18 months ago after workers found a corrosion hole in the reactor's lid. To date, the idling of Davis-Besse has cost FirstEnergy a total of $500 million and costs at least another $25 million each month it remains down.
Last month, instead of allowing an increase, regulators in New Jersey ordered the company to lower rates, in part because of a big outage over the July 4 weekend. FirstEnergy promised some $60 million in upgrades.
Early this month, a federal judge ruled the company violated the Clean Air Act by not installing pollution-control equipment at an Ohio coal plant. And the company stunned Wall Street by announcing it lost money in the second quarter, would restate earnings for the last five quarters and would reduce projected earnings through 2005 because of recommended accounting changes.
If the utility is found to be a key contributor to the blackout, it might have to pay an additional $375 million to upgrade Ohio transmission lines
- FirstEnergy Corp. restated earnings for the past three years late yesterday, resulting in lowered net income for the most recent quarter and for 2002.
The restatement lowered the company's first-quarter earnings by $22.5 million, or 8 cents a share, to $218.5 million, or 74 cents a share.
Article comments
1 - Mac Diva
Thanks, Eric! I knew you were the man for this topic. It does not look good for WorstEnergy.