FirstEnergy to scale back operations at smaller coal-fired units in response to economy, demand, regulations

Source: FirstEnergy Corp.

FirstEnergy Corp. (NYSE: FE) announced that its FirstEnergy Generation Corp. subsidiary plans to make operational changes at certain of its smaller coal-fired units in response to the continued slow economy and lower demand for electricity, as well as uncertainty related to proposed new federal environmental regulations. 

The changes - which affect Bay Shore units 2-4 in Oregon, Ohio; Eastlake Plant units 1-4 in Eastlake, Ohio; the Lake Shore Plant in Cleveland, Ohio; and the Ashtabula Plant in Ashtabula, Ohio - are designed to reduce operating costs and provide more predictability while maintaining availability for future operations, as needed. Efforts will be made to reassign affected employees to other FirstEnergy facilities. 

"While we've seen signs of economic recovery in the first half of this year compared with 2009, customer demand is still well below 2008 levels," said Gary R. Leidich, executive vice president of FirstEnergy and president of FirstEnergy Generation Corp. "As a result, our smaller, load-following plants have been called upon to operate less frequently. By reducing operations at these facilities, we will better match our generation with our expected customer loads and position our company to comply with ever increasing environmental regulations." 

During the period of September 2010 through August 2011, the affected units will operate with a minimum three-day notice and in response to customer demand, such as during summer and winter extreme weather conditions, when we anticipate that the units will dispatch more frequently. 

Beginning September 2011, for approximately 18 months, the Bay Shore and Eastlake units will be available only in the winter and summer months, and the Ashtabula and Lake Shore plants will be temporarily idled. 

As a result of the operating changes at the plants, the company estimates it could write off up to $287 million in value related to the assets. This write off could result in a reduction of up to $0.59 per share of common stock in the third quarter of 2010. 

The changes are subject to review by the Midwest Independent Transmission System Operator (MISO), PJM Interconnection and the independent market monitors to ensure that there is no negative impact on system reliability. 

In 2009, FirstEnergy Generation Corp. took steps to minimize the use of these plants in response to the slowing economy. These included dispatching all the units on an economic basis and establishing a three-day start time with MISO for the Lake Shore and Ashtabula plants. Since that time, the units have been called upon to operate on a limited basis. 

Together, the units have a generating capacity of 1,620 megawatts (MW). In 2009 they produced approximately 6.8 percent of the company's total generation output that year.



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