FirstEnergy and Three Mile Island and Maryland

First Energy and Allegheny Energy have filed applications with FERC and the Maryland Public Service Commission (PSC) for permission to merge their companies. The prospect of this merger raises many issues for Marylanders who hope that the PSC will fully explore them.

One hot topic that cannot be ignored is Three Mile Island (TMI).  Indeed, the issue arose during the June 3 PSC hearing on whether the Commission should accept the PATH “coal-by-wire” transmission project proposed by Allegheny Energy.  One issue in that proceeding is the ever-shifting structure of corporate entities controlling PATH — and the proposed merger would rearrange it once more.  One attorney claimed that FirstEnergy owned Three Mile Island while another said that FirstEnergy had no connection to TMI.

What are the facts about the relationship between FirstEnergy and TMI?

On March 28, 1979, the famous disaster occurred at TMI Reactor Unit 2 (TMI 2).  (TMI 2’s sister reactor TMI 1 was acquired by Exelon Corporation in 1999 and continues to operate.  In late 2009, the Nuclear Regulatory Commission (NRC) renewed TMI 1’s operating license through 2034.)

What is the status of TMI 2 today?

TMI Unit 2 has been permanently shut down and is in monitored storage. GPU Nuclear (now owned by First Energy Corp.) placed the unit in monitored storage in December 1993. Monitoring of TMI Unit 2 and its surrounding areas will continue until the unit is fully decommissioned, with regular reports made to the Nuclear Regulatory Commission (NRC), the Commonwealth of Pennsylvania and the public.

Will the ongoing burden of cleaning up TMI 2 impact Maryland ratepayers if the FirstEnergy-Allegheny merger goes forward?  Pennsylvania ratepayers have paid dearly:

A 1995 ruling by the Pennsylvania Supreme Court allowed GPU — since bought by FirstEnergy — to charge rate payers for the TMI-2 disaster. Those same rate payers had already shelled out $700 million to build the unit, which was on line for only 90 days — just 1/120th of its planned operating lifetime — when the meltdown began. The rate payers have also footed a $1 billion bill to de-fuel Unit 2.

According to FirstEnergy’s 10-K, JCP&L is involved in an ongoing proceeding at the New Jersey Board of Public Utilities over decommissioning costs for TMI-2 (see page 222).

Meanwhile, the undamaged generator from TMI 2 is moving to a new life in North Carolina:

Officials at the Nuclear Regulatory Commission say the electrical generator from the damaged Unit 2 reactor at TMI will be used at Progress Energy Inc.’s Shearon Harris nuclear plant in southwest Wake County.

Did FirstEnergy have anything to do with the accident at Three Mile Island?  Yes and no.  No, because at the time of the accident, the corporate entity now known as FirstEnergy did not exist.  FirstEnergy was created in 1997 out of the merger of several Ohio and Pennsylvania utilities.

Yes, because today’s FirstEnergy is the corporate successor to the company that built and operated TMI 2 at the time of the accident.  TMI 1 and 2 were originally built and operated by General Public Utilities (GPU).  In 2001, GPU merged with FirstEnergy.  FirstEnergy, through its wholly owned subsidiary JCP&L, is the current owner of TMI 2.

Did mistakes by GPU (FirstEnergy) corporate managers contribute to the accident at TMI 2?  A retrospective by the Washington Post raised troubling questions.  TMI 2 began commercial operation on December 30, 1978 — just three months before the accident.

By getting TMI 2 into service 25 hours before the new year, Met Ed saved itself upwards of $40 million in taxes.

There are other signs that TMI 2 was rushed into operation:

Between March 28, 1978, when the chain reaction began in the nuclear unit, and its December entry into commercial service, the plant had been shut down for repairs 195 of the 274 days – 71 percent of the time. That was not typical of the industry as a whole, which reports about a 40 percent malfunction rate during early reactor operations. And during those 274 days, Met Ed found problems that were similar to those that occurred on the day of the Big Accident.

Does this remind you of another recent disaster?

BP had fallen behind schedule and over budget, paying roughly $500,000 a day to lease the rig from Transocean. The rig was 43 days late for starting a new drilling job for BP by the day of the explosion, a delay that had already cost the company more than $21 million.

Concerns raised by the accident at Three Mile Island remain relevant because FirstEnergy continues to own and operate three nuclear power plants: Beaver ValleyDavis-Besse, and Perry.  Of the three, Davis-Besse is the most troubled.

In March 2002, damage to the reactor pressure vessel was discovered and the plant shut down for two years.  In 2006, FirstEnergy entered into a deferred prosecution agreement with the Department of Justice related to charges arising out of the incident.  Andrew Siemaszko, an engineer at the plant, was sentenced to probation for lying to the NRC.  The Union of Concerned Scientists backed Siemaszko, arguing that he was used as a scapegoat by the NRC and FirstEnergy for serious problems at Davis-Besse.  Some observers consider the 2002 incident to our nation’s worst nuclear accident since Three Mile Island.  Problems continue at Davis-Besse.

Anything that affects the financial health of FirstEnergy could affect its regulated subsidiaries in Maryland if the merger with Allegheny goes ahead.  A close examination of FirstEnergy’s nuclear management record will better inform the PSC’s understanding of the future riskiness of the merger entity.

On February 11, Standard & Poor’s downgraded FirstEnergy’s debt:

We downgraded FirstEnergy Corp. and subsidiaries to ‘BBB-‘ from ‘BBB’ based on its intention to merge with lower-rated Allegheny Energy Inc. We affirmed the ‘BBB-‘ ratings on Allegheny and subsidiaries because the proposed merger would only slightly improve its credit profile. An extended merger approval will place further stress on management’s resources while economic and regulatory challenges need to be successfully met to maintain credit quality. If the merger is not completed, FirstEnergy’s ratings would remain at the lower level due to our changed assessment of its risk appetite and commitment to credit quality.


Leave a comment

Filed under Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s