Not Just a Bad Day For FirstEnergy
Originally published in Newsday
Not Just a Bad Day For First Energy
Struggling through series of setbacks
By Andrew Smith
STAFF CORRESPONDENT
August 18, 2003
Akron, Ohio - FirstEnergy had spent the summer under siege even before the first lights went out on Thursday.
The Ohio-based company has struggled to repair damage both to its crippled Davis-Besse nuclear plant east of Toledo and its reputation after boric acid nearly ate a hole in the lid of its reactor. Its stock took a hit earlier this month when a new internal audit forced it to restate earnings. Two days later, a federal judge found that the company rebuilt a power plant without proper smog controls, a violation of the Clean Air Act.
"Obviously, this hasn't been a great week for the company," FirstEnergy spokeswoman Kristen Baird said of the latest calamity involving the company that may be at the root of last week's massive blackout. On a serene Sunday, she and other company officials huddled in their office building in downtown Akron.
"This company has gotten by for years playing it fast and loose," said one of FirstEnergy's most persistent critics, U.S. Rep. Dennis Kucinich (D-Ohio), a presidential candidate. "The public interest requires that the utility be held accountable. This is not a company that should be given the benefit of the doubt."
FirstEnergy is a holding company that owns seven subsidiary utilities in Ohio, Pennsylvania and New Jersey. It was formed in 1997 from the merger of Akron-based Ohio Edison, the Cleveland Electric Illuminating Co. and Toledo Edison. In 2001, it acquired General Public Utilities, which owned Pennsylvania Electric Co., Metropolitan Edison near Reading, Pa., and New Jersey Central Power and Light.
Together, the utilities serve 4.3 million customers in an area that covers more than 36,000 square miles. It has annual revenue of $12 billion.
It has struggled, however, in the continuing transition to a competitive marketplace for utilities. It's run up $12.5 billion in debt, and after firing former auditor Arthur Andersen, it has had to restate earnings when new auditor PricewaterhouseCoopers told the company to calculate the costs of transition differently, Baird said.
But she said the company remains "a strong performer otherwise."
Kucinich, whose campaign symbol of a light bulb is a badge of past battles with FirstEnergy predecessor Cleveland Electric Illuminating, disagrees. In a phone interview from Iowa, where he was campaigning, Kucinich said the blackout is not even the company's most serious failure. That would be Davis-Besse, the Toledo-area plant that almost had a disastrous hole in its reactor lid, he said.
"In order to protect their stock position, they've made shortcuts on maintenance," Kucinich said. "They covered it up and they were given a pass by regulators."
He said the same thing happened with the transmission lines that failed.
"They've got a transmission system that's long been in need of upgrading, and they haven't," Kucinich said.
Baird acknowledged that the company has botched the operation of Davis-Besse, but rejected the idea that its problems are symptomatic of whatever caused the blackout.
Indeed, she said FirstEnergy has been among the more conservative utilities in this era of deregulation, resisting the Enron-style urge to focus on energy trading instead of serving customers.
"Our strategy wasn't thought to be sexy," she said.
With Davis-Besse, earnings statements and, if necessary, the blackout, Baird said the company will do the right thing.
"I don't think this company has done anything but step up to the plate and admit when things have been wrong, and tried to fix them," Baird said.
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