Merchant Generation Exec: "Capacity and Energy Markets" Don't Support Investment In, Or In Some Cases Operation Of, Generating Units; FirstEnergy Closing Plants in PJM

"[O]ur competitive operations have been challenged, not by operational performance, but by capacity and energy markets that do not support investment in, or in some instances the operation of, generating units," FirstEnergy CEO Anthony Alexander said yesterday during an earnings call.

As a result, Alexander reiterated that FirstEnergy is reducing the size and mix of its merchant generation fleet, and has been selling and closing competitive units. Alexander noted that last month FirstEnergy closed its Hatfield's Ferry and Mitchell plants in Pennsylvania -- despite state regulators raising concerns about reliability from such closures (click here) -- and said that the company expects to complete the sale of certain hydro assets later this year.

Once certain Reliability Must-Run units are deactivated, FirstEnergy will have trimmed its competitive fleet to 13,000 MW.

As a result of these actions, FirstEnergy has reset its annual competitive retail sales target to about 100 million megawatt-hours, which fits into its overall strategy to sell at retail about 25% more than its fleet produces.

Turning to competitive retail energy results, FirstEnergy Solutions continued its trend of broadly increasing year-over-year retail sales through its direct (to large and medium C&I), aggregation, and mass market channels, though Ohio aggregation sales were down by 805 GWh for the third quarter, more than offset by increases in Illinois aggregation sales.

Generally, commodity margin from FES retail sales rose on increased volumes but was offset by lower pricing versus the year-ago, with the exception of mass market sales, where there was no impact on margin from pricing versus the year-ago. Direct (large/medium C&I) and aggregation retail sales saw commodity margin negatively impacted by lower pricing, offset by volume increases.

A breakdown of retail sales volumes by channel and by state can be found on page 17 of FirstEnergy's investor report.

FirstEnergy's investor report, on page 16, also includes aggregate shopping data for each of its regulated distribution companies