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Review of IEEFA’s FirstEnergy Report: “Painstakingly Documented”

October 17, 2014

WILLIAM M. BOWEN, A PROFESSOR AT CLEVELAND STATE UNIVERSITY, GOES ALL IN today in a column posted on Crain’s Cleveland Business examining IEEFA’s recent report on the many holes in First Energy’s business strategy and finances.

“It is painstakingly documented,” Bowen says of the IEEFA report. “And it is entirely consistent with what I know about the behavior of monopolists generally, the tendency for FirstEnergy officials to play quiet hard ball in particular, the views of knowledgeable people in the field with whom I fairly regularly speak, and the many research papers I’ve read about all of the changes going on today in the world of energy.”

Bowen, a professor of public administration and urban studies at the university’s Maxine Goodman Levin College of Urban Affairs, is not hopeful that FirstEnergy executives will take such an open view.

“The most appropriate response to change on behalf of FirstEnergy, arguably, would be to acknowledge openly the problems identified in the paper, address them and adapt to them by embracing distributed generation, energy efficiency, demand response and renewable energy within their operations,” he writes. “But FirstEnergy C-levelers more likely will retrench and modulate between denying them and dismissing them as irrelevant.”

The paper, “First Energy: A Major Utility Seeks a Subsidized Turnaround,” details how the flagging company, which provides electricity to more than six million customers, is pursuing a business strategy the will depend on regulatory capture and ratepayer bailouts. Its authors are Tom Sanzillo, IEEFA’s director of finance, and Cathy Kunkel, an IEEFA fellow.

Additional excerpts from Bowen’s column.

  • “The paper portrays FirstEnergy as it uses its monopoly power, deep pockets and asymmetric information to support an aggressive political and regulatory strategy designed to obstruct change, exploit government subsidies and secure high electricity prices, resulting in a net loss of welfare to the community.”
  • “Think transformation in the telephone industry from pre-1982 to today. There are a lot of parallels between the changes that started 30 years ago in the telephone industry, and those in the electricity industry that are starting to take root.”
  • “It would be much easier for at least this ratepayer to support such a bailout if FirstEnergy were embracing — instead of fighting — new utility paradigms like distributed generation and micro-grids.”

Here’s the full column by Bowen.

— Karl Cates
[email protected]
Twitter @ieefa_institute




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