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Toledo, Ohio & Lake Erie

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Oregon City Council last Monday expressed concerns about the recent announcement by FirstEnergy that its FirstEnergy General Corp. subsidiary plans to cut back operations at the Bay Shore power plant as a result of the slow economy, a lower demand for electricity, and pending federal environmental regulations. 

“We all have mixed feelings about the announcement by FirstEnergy,” said Councilman Mike Sheehy at last Monday’s council meeting. “Clearly, they’re making reduced operations. I’m quite pleased the operation with BP will continue. It’s something we can all be proud of. It’s an operation that serves BP, FirstEnergy, and our community. I hope that continues to be ongoing.”

Years ago, BP upgraded its Toledo refinery and partnered with FirstEnergy in the use of petroleum coke, a waste byproduct from the refining process. A new boiler built by FirstEnergy uses petroleum coke to generate low-cost steam to make electricity at the plant. The process, which saves BP in disposal costs and FirstEnergy in fuel costs, also benefits the environment by reducing carbon dioxide, nitrogen oxide and sulfur dioxide emissions.

FirstEnergy announced last week that the Bay Shore facility will be one of four of its smaller coal burning power plants in Ohio to scale back operations. From September of this year through August next year, Bay Shore units 2-4 will operate with a minimum three-day notice and in response to customer demand, such as during summer and winter extreme weather conditions, when the company expects the units to dispatch more frequently.

Beginning next September, for about 18 months, the Bay Shore units will be available only in the winter and summer months.

The changes are expected to reduce operating costs and provide more predictability while maintaining availability for future operations, as needed. The company noted that efforts will be made to reassign affected employees to other FirstEnergy facilities.

“Hopefully, those people most directly affected who may be losing positions will find positions nearby and we don’t see anyone lose their jobs,” said Sheehy. “It’s going to be a tough thing for us at the city, and a tough thing for our school system as far as finances go. It is what it is. We’ll see what the future brings.”

Councilman Sandy Bihn asked Administrator Mike Beazley how the cutbacks will impact the school district.

“I understand the income tax part, but the buildings will still be there, and the operations will be there. How will it be impacted? The real estate will still be there,” said Bihn.

“I wouldn’t speculate on what they actually might do,” said Beazley, “but I know that among the factors that a property owner on commercial property uses to determine the value of the property is the amount of business activity that goes on there. I don’t know if they would petition for a reduction in value or not, but it’s among the things property owners think about when they do less business at a manufacturing facility.”

Mayor Mike Seferian said FirstEnergy expects the changes to be temporary.

“I’m thinking the reevaluation is possible, but maybe not likely,” said Seferian.  “The other factor is, when you talk about the 83 jobs lost, we might lose them from our city, but [FirstEnergy] plans to keep those people employed and put them in other locations. What they have told us is that those people will maintain their jobs.”

As a result of the operating changes at the plants, the company estimates it could write off up to $287 million in value related to the assets, which could result in a reduction of up to $0.59 per share of common stock in the third quarter of this year, according to FirstEnergy.

The other power plants affected by the operational changes include units 1-4 in Eastlake, the Lake Shore plant in Cleveland, and a plant in Ashtabula.

Together, the units have a generating capacity of 1,620 megawatts. They produced about 6.8 percent of the company’s total production last year.

“While we’ve seen signs of economic recovery in the first half of this year compared with 2009,” said Gary R. Leidich, executive vice president of FirstEnergy and president of FirstEnergy Generation Corp., “customer demand is still well below 2008 levels. As a result, our smaller, load-following plants have been called upon to operate less frequently. By reducing operations at these facilities, we will better match our generation with our expected customer loads and position our company to comply with ever increasing environmental regulations.”

 

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