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Power blackout is latest of FirstEnergy problems
By Dafna Linzer
ASSOCIATED PRESS
It has been a bad month for FirstEnergy.
The Ohio-based owner of power lines that might have triggered the largest blackout in U.S. history was found guilty of pollution in early August, warned about its staggering $12.5 billion debt and forced to slash earnings estimates.
All this comes as the company is under scrutiny for safety at its nuclear plant, which has been the subject of congressional hearings and an investigation by the Nuclear Regulatory Commission.
The drain on the company's financing — stemming mostly from cleanup of the shuttered nuclear plant — could make it harder to tackle any financial fallout from the outage.
Company officials said yesterday they would concentrate on the blackout investigation and not other problems.
A preliminary analysis shows that FirstEnergy — which owns four of the first five lines that failed — was experiencing unusual conditions as much as four hours before the blackout hit Thursday, sweeping across eight states and parts of Canada.
"What happened on Thursday afternoon is much more complex than a few tripped power lines in our system," said Todd Schneider, a FirstEnergy spokesman.
Still, he said, the company didn't consider shutting down lines before the blackout.
"At the time, there was no reason to isolate it," he said.
Efforts to nail down the source of the blackout have shifted to Ohio and FirstEnergy Corp., the nation's fourth-largest investor-owned utility and No. 159 on the Fortune 500 list.
FirstEnergy said a system that is supposed to flash a red warning on computer monitors at the company's control center was not operational when the lines began failing.
The Akron-based company has 16 power plants and annual revenue of more than $12 billion, with customers along an area that stretches from Ohio to New Jersey.
Although considered a utility, FirstEnergy operates as more of a conglomerate, handling everything from plant operations to customer services. The company benefited enormously from industry deregulation, which was blamed in part for failures to overhaul the power grid and modernize the lines.
FirstEnergy's Davis-Besse nuclear plant east of Toledo was shut in February 2002 for maintenance. A month later, it was discovered that boric acid ate through much of a 6-inch-thick steel cap on the plant's reactor vessel.
The company, awaiting an NRC decision before reopening the plant, has been forced to purchase power elsewhere to make up for the halt in productivity at Davis-Besse. Repairs and replacement power have cost the company $450 million since July.
Troubles at the plant caught the attention of Congress and the Environmental Protection Agency.
More problems began this summer.
On Aug. 7, a federal judge ruled that FirstEnergy violated pollution-control laws when it rebuilt a power plant without installing state-of-the-art smog controls required under the Clean Air Act. A second trial will determine penalties.
The government argued that pollutants from FirstEnergy and other plants wind up in the Northeast, where they cause acid rain and health problems.
Similar cases are pending against Columbus, Ohio-based American Electric Power, Illinois Power Co., Duke Energy Corp. and Southern Co.
On the day of the court decision, Standard & Poor's held FirstEnergy's credit rating one notch above junk status. It said the company's outlook remains negative, and that long-term debt should be reduced to $10 billion by year's end.
In early August, FirstEnergy reported a second-quarter loss of $57.9 million, or 20 cents per share, as a result of special charges. FirstEnergy also said it would restate 2002 finances.
On Saturday, a top investigator said the failure of three transmission lines in northern Ohio likely started the blackout, which stretched into the weekend.
Investigators were "fairly certain" that the problem started in Ohio, said Michehl Gent, head of the North American Electric Reliability Council. "We are now trying to determine why the situation was not brought under control."
The council is a nonprofit, industry-sponsored group that oversees power-line reliability.
Ohio regulators also said the blackout may have started in their state.
FirstEnergy executives spent the weekend trying to determine the extent of the utility's role in the outage.
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