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FES: Petition By Ohio Consumers' Counsel Seeking To Make FES Send Notices Of "Hypothetical" Bankruptcy To Customers Would Harm Retail Market, Instill, "Fear and Concern"

FES Says OCC Petition Based On Speculation And Conjecture


November 21, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Requiring FirstEnergy Solutions to send its retail customers notices about a hypothetical bankruptcy filing that FES could potentially undertake in the future, "would needlessly instill fear and concern among FES customers and harm the CRES [competitive retail electric service] market," FirstEnergy Solutions said in a motion at PUCO

As previously reported (see full details here), OCC, citing certain disclosures in FirstEnergy SEC filings about whether FES could continue as a going concern, had requested that PUCO require FES to file a plan with PUCO to protect customers in the event of a bankruptcy. Among other things, OCC said, "The plan should include proposed messages for FES to send its consumers, before and after a bankruptcy filing, with information about options in the event FES defaults. The information about options should include reference to the availability of the utilities' standard offers. In addition to protections for existing consumers, FES's plan should include proposals for informing potential consumers (whose business FES is soliciting) about the potential bankruptcy and possible impacts on service terms and conditions."

FES said that OCC's argument is based on, "a selective, incomplete quotation from an SEC filing."

"OCC’s Motion reflects a fundamental misunderstanding of FES’s current financial condition. Furthermore, OCC’s Motion is supported by nothing more than speculation and conjecture about possible hypothetical events that may or may not transpire at some unknown point in the future. Even if FES were to decide in the future to file Chapter 11 in order to restructure, a bankruptcy filing would have little to no impact on residential customers as most are not creditors of FES. Based on historical precedent, the restructuring of energy companies through a bankruptcy process has not harmed customers or caused interruptions or loss of service as OCC surmises," FES said

FES said that it is paying all of its debts as they come due, has ample liquidity and has not filed for bankruptcy (nor made any decision to file for bankruptcy).

"OCC’s Motion and Correspondence betray a complete misunderstanding of FES’s current financial position. As the SEC filings cited by OCC explain (but which OCC conveniently omits from its Motion and Correspondence), with respect to liquidity, FES has continued access to the FirstEnergy unregulated companies’ money pool, and FES has access to a $500 million line of credit, which is entirely undrawn, and an additional $200 million of surety credit support ($169 million of which has been utilized). Further, FES has continued to pay all of its debts as they come due, which OCC does not (and cannot) dispute. In short, OCC has painted an incomplete picture of FES’s current financial situation, and has failed to provide any proof that FES’s retail customers are at risk," FES said

"However, hypothetically, if FES were to decide at some point in the future to file for Chapter 11, OCC misrepresents the potential impact of such an event on retail customers. Specifically, OCC fails to appreciate that, if FES were in the future to file for Chapter 11, FES would continue its retail operations/services unabated and retail customers would not be affected. Maintaining the loyalty and confidence of retail customers is of prime importance to FES, and would continue to be of prime importance during any restructuring process, as those customers provide an important revenue stream for FES. Additionally, irrespective of any such hypothetical bankruptcy filing, electric distribution utilities will continue to bill and collect from FES customers. As such, a potential restructuring is unlikely to have any impact on the service received by retail customers," FES said

"OCC’s request that FES be required to send messages to its customers in advance of any hypothetical Chapter 11 filing describing options if FES were to default would be extremely confusing to customers and very damaging to FES’s business. As discussed above, FES has not made any decision to file for bankruptcy and FES’s current financial condition is that it has in excess of $500 million of available liquidity and is paying all of its debts as they come due. Requiring FES to send notices indicating that it is contemplating a bankruptcy filing -- without having made any definitive decision to do so and without any identified harm to customers -- would be needlessly confusing to customers and unnecessarily costly to FES. If hundreds of thousands of customers receive such notices, there likely would be substantial confusion surrounding the significance and meaning of those notices. This in turn would lead to many customer inquiries, which then require considerable time and attention of FES to timely review and respond to such inquiries. Such an outcome would be a significant and unnecessary drain on FES’s resources with no corresponding benefit to customers. If FES were to decide to file for bankruptcy in the future, then the United States Bankruptcy Code and the Federal Rules of Bankruptcy Procedure would govern as to which persons are required to receive notice of any such bankruptcy filing and any pleadings filed during a bankruptcy case" FES said

"In addition to being unhelpful and confusing to customers, sending messages to customers about a hypothetical restructuring would needlessly instill fear and concern among FES customers and harm the CRES market. FES is particularly sensitive to ensuring the provision of excellent service to its retail customers to preserve its market share in a highly competitive industry. Yet, without any actual proof or justification, OCC misleadingly suggests that FES could suddenly close its doors and renege on commitments to retail customers if FES were to file for Chapter 11. OCC’s proposals would effectively undermine customer confidence in FES for no good reason, thereby potentially jeopardizing FES’s financial situation. By engaging in this kind of irresponsible fear-mongering, OCC effectively is supporting FES’s competitors while harming the retail customers OCC purports to represent. In short, OCC’s proposals are ill-advised, harmful to customers, and counterproductive," FES said

"Notably, OCC is asking the Commission to take action based on filings and disclosures FES’s parent is required to make as a publicly-traded company. Yet other CRES providers and retail natural gas providers that are not public companies are immune from review between certifications. The Commission should not accept OCC’s invitation to create a new set of rules for certifications involving publicly-traded companies, when those rules cannot be applied to all providers," FES said

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