Northeastern Ohio's economy would take a $570 million a-year hit if the FirstEnergy Corp. would leave Akron.
This is the sobering message contained in an economic impact report that FirstEnergy sent to the Ohio Public Utilities Commission of Ohio (PUCO) to bolster its case for a 6 per cent rate increase.
The hike would enable First Energy to strengthen its position on Wall Street at a time when its two-year-old rate case and related drama has caused jittery rating agencies to slash the firm's credit standing.
If FirstEnergy would lose its PUCO case, it is unlikely the company could maintain its investment credit rating and "will put into jeopardy the future of a Fortune 200 company," a company official said.
The prospect of the firm leaving its Akron headquarters has rattled the city, if not the entire region and state. Northeast Ohio has a sad history of losing four of eleven Fortune 500 companies since 2008.
The potential disaster has captured the attention of the Akron Beacon-Journal—not exactly a bosom buddy of FirstEnergy—which bluntly editorialized in July:
"It hardly takes a leap to imagine another power company looking to buy..." the Beacon-Journal editorialized in July, continuing "Akron cannot afford to see one of its two Fortune 200 companies, purchased, the headquarters headed out of town."
FirstEnergy CEO Chuck Jones said the FirstEnergy rate request is less than increases in Pennsylvania and West Virginia and added:
"The rate increase in Ohio, our home state is the final piece to help insure FirstEnergy's future remains in Ohio for years to come."
"He's very serious," said The Rev. E.T. Caviness, chairman of the Greater Cleveland Clergy Coalition, who said the firm is vital to the state economy. The clergy first demonstrated against the rate hike then changed its position after Jones personally met with the pastors and explained the seriousness of the rate case.
The economic impact study shows what First Energy represents in Ohio. The firm:
* Employs 1,370 highly skilled persons in Akron and has spinoff benefits to 2,099 other workers who provide goods and services to the company and its employees.
* Pays nearly $27 million in state and local taxes.
* Contributed $13.7 million in 2015 to its foundation and local sponsorships like the All American Soap Box Derby.
Wall Street's blessing is critical to the future of FirstEnergy. Its Stocks and bonds have reached risk level. Moody's investor services has labeled the company's outlook as "negative."
While the original plan would have raised enough cash to keep the coal-fired W.H. Sammis plant on the Ohio River and the Davis-Besse nuclear facility near Toledo competitive, the revised order blocks using revenue for these facilities. The firm was forced to shut down five boilers.
FirstEnergy says the rate increase would have bought the plants enough time to weather the natural gas price war and remain operational until generation costs matched or even exceeded coal and nuclear fuels.
The increase would likely have calmed jitters on Wall Street and not threaten the firm's ambitious construction program which requires borrowing.
Opposition groups have argued that FirstEnergy has exaggerated the consumer benefits of the rate deal and has overly hyped its predictions about future natural gas prices.
The Ohio Manufacturers Association said the law of supply and demand not customer subsidies should prevail, though FirstEnergy says "federal (energy) markets are not working."
(The OMA, however, does believe in public subsidies as they constantly hassle government for tax relief).
Though rate hikes are seldom crowd-pleasers, FirstEnergy has particularly diverse allies. Backing the firm's case, for example, are the Teamsters and Cleveland Building Trades Council as well as the Council on Smaller Enterprises. Community groups are side-by-side with the NAACP and Greater Cleveland Clergy Coalition.
In fact, Rev. Caviness penned a letter to Gov. John Kasich actually requesting him to intervene on FirstEnergy's behalf.
"There may be some minor rate increases in the first few years," Caviness wrote. "But we believe FirstEnergy's approach will benefit our communities in the long run, protect jobs and safeguard vulnerable customers from skyrocketing energy bills in the future."
Caviness said in an interview that Kasich responded by mail expressing surprise that an anti-poverty group was backing a corporate giant, and said he had forwarded Caviness' concerns to the PUCO.
PUCO granted FirstEnergy a rate hike in March, but the Federal Energy Regulatory Commission (FERC) voided it, saying the federal government, not the state, has the final say over any decision that affects the national energy market. It ruled that any new revenue could not be used on the aged plants, a crushing blow to First Energy's long-range game plan.
FirstEnergy resubmitted its previously approved application but PUCO then ruled that any new revenue could not be spent on the plants. It cut the transitional period from eight to three years, in a sharp reversal of its March decision.
The decision stunned FirstEnergy officials, especially since the new PUCO chairman, Asim Haque, who is on record saying he was convinced the earlier plan would, indeed, save customers money in the long run if used for the older plants.
Understandably, increasing utilities rates is a rocky road.
A skeptical public frowns on the prospect of higher bills. Politicians capitalize on the David vs. Goliath confrontation to further their careers.
It is also hard to defend coal-fired plants while President Barack Obama, and his wannabe successor Hillary Clinton, want to shut down the mines.
Little wonder that the Federal Energy Regulatory Commission (FERC)—all Obama appointees—overrode PUCO's March decision to grant the rate increase.
There is also unrelenting pressure from investors, many of them elderly and on fixed incomes, and who depend on the quarterly dividend checks. The annual dividend was reduced from $2.20 per share to $1.44, costing stockholders over $300 million a year.
In the meantime, while First Energy is twisting in regulatory winds, the complicated rate case moves on with no settlement in sight. The foot-dragging continues even as everyone seems to realize just how high the stakes are for Akron, Northeastern Ohio and even Ohio.
In its editorial titled "Will the commission (PUCO) keep its word to FirstEnergy?, the paper warned the state agency: "Don't back out of the deal."
Joseph L.Wagner is a free-lance writer who has retired from The Plain Dealer and has more than two decades of reporting experience on political and government affairs in Greater Cleveland.