FirstEnergy has decided to spend more than $3 billion and eventually up to $7 billion to rebuild its power lines. You will pay for this.
FirstEnergy wants to rebuild its high-voltage lines AKRON -- FirstEnergy Corp. is planning to spend more than $3 billion in the next five years to upgrade its Ohio and western Pennsylvania high-voltage power lines and equipment.
The decision means that customers will pay more for electricity delivery- how much more cannot yet be calculated.
Anthony Alexander, CEO, on Tuesday told financial analysts that the company's board of directors a week ago approved a $2.8 billion spending plan to upgrade the transmission system - the same one involved in the blackout a decade ago.
The announcement came the same day the company announced lackluster profits for the third quarter and the first nine months of the year.
The $2.8 billion is in addition to the $700 million in regional transmission line upgrades the company has already planned because it chose to close some older, coal-fired Ohio power plants rather than upgrade them to meet new mercury emission standards.
The new big spend is part of the company's larger strategy to "re-position" its business by relying less on its unregulated, competitive sales divisions, which are not doing as well as well as once expected, and more on old-fashioned regulated subsidiaries, where growth can be planned and where revenue increases are guaranteed.
The move is a turnaround from the company's strategy five year ago when it fiercely fought for -- and won -- the right to keep its power plants deregulated and out of state rate-making.
"The majority of our growth in the next several years will come from investments in transmission," Alexander told the analysts during the company's quarterly earnings conference in order to make it clear to them that he and other executives are "not going to sit back and hope and wait" for power prices to increase.
In addition to the massive, new spending plan for the wires, the company will throttle back the sales teams of the unregulated FirstEnergy Solutions in the future, which already sell more power than the company's power plants can generate, forcing the company to then buy power in risky wholesale power markets.
Another part of the re-positioning has been to close the most expensive coal-fired power plants in other states as well as Ohio rather than upgrade them while at the same time spending money for new equipment at the company's four nuclear power plants.
"The cumulative impact of our actions has been to reposition this company," Alexander said. "These actions have resulted in a reduction of our exposure and risk to power markets, simultaneously increasing growth of our regulated operations.
"We expect that our regulated operations will represent a growing percentage of earnings, and more importantly our overall growth.
Some of the analysts wanted to know whether the company would have to prove it really needs to spend so much money for upgrades to its wires, and whether that would slow things down.
The company will not need regulatory approval for some of the initial work, Alexander said.
The upgrades will improve reliability, cut future maintenance costs and enhance security, he said, adding that a lot of the company's wires are coming to the end of their useful life.
He promised more detail in a presentation he is planning for Tuesday, Nov. 12 at a national industry conference. FirstEnergy will webcast Alexander's remarks live and archive a recording.