FirstEnergy Seeks US Gov Rescue. Who Should Pay for Bad Decisions by Capitalists? Not the Capitalists, Obviously

The coal and nuclear power generator may default in April.

By Leonard S. Hyman and William I. Tilles:

FirsEnergy, the Ohio-based utility holding company, has sent an SOS to the Department of Energy. It wants the DOE to issue an emergency order to PJM, the electricity grid trading organization. PJM, it says, should compensate FirstEnergy Solutions (FES), FirstEnergy’s unregulated generating subsidiary, for the added reliability that FES’s nuclear and coal-fired facilities provide to PJM, and to protect the jobs of the workers at the plants. (Not to mention the jobs of the coal miners and the financial well-being of the coal supplier.)

Does this sound familiar? Yes, it is the same argument made by DOE Secretary Rick Perry in his ill-fated attempt to get the Federal Energy Regulatory Commission to back his plan to rescue coal and nuclear plants, cloaked in a reliability-improvement scheme. But the Trump appointees at the FERC sank this scheme.

As for FirstEnergy’s request, it looks like a last-minute attempt to avoid a bankruptcy filing for FES, something that had been talked about publicly for some time.

FES produces half of its electricity from four aged nuclear power stations and another 30% from coal. These facilities have had a hard time competing in the market. FirstEnergy’s management has made no secret that a financial reorganization for FES was in the cards.

On January 23, Moody’s slammed FES with a three-notch downgrade, to “Ca,” just above default. It “reflects the increased likelihood of a default occurring within the next few months,” Moody’s said. FES needs to make a $100 million bond payment on April 2, but may not be able to, which could trigger a default.

Let’s for a minute consider the history behind this move. FirstEnergy was formed in 1997 when Ohio Edison, a coal burning utility, bought Centerior, a troubled northern Ohio utility with some big nuclear problems. It expanded further with the purchase of GPU, the owner of Three Mile Island, in 2001. Then FirstEnergy decided to double down on coal, buying Allegheny Energy, a coal-burning utility.

These mergers were typical of the time and the region. Eat nor be eaten. Join the PJM transmission system in order to sell cheap Midwestern coal and nuclear-produced electricity to eastern markets. Get the generation out from under the regulated utility, so that it could make big money in competitive markets.

The strategy, however, did not work as planned. Too many other outfits joined PJM with the intent of selling cheap Midwestern coal and nuclear power to the east, and the eastern market did not expand. Natural gas production in the east made gas-fired power cheap. Renewables made a dent in the market, too. The additions to the market made base-load coal and nuclear less valuable. And on top of that, the threat of global climate change made coal-fired power plants look less and less like a long term option. As a result of these events, power prices fell and FES headed into it owns financial crisis, as did many other power producers.

So, what constitutes good public policy here?

Will reliability at PJM suffer greatly if the DOE does not bail out FES by, essentially, putting a tax on all other power producers and their customers in PJM? PJM thinks not.

Should consumers be forced to rescue competitive businesses from the consequences of their own profit-motivated but failed decisions? Doing so creates a moral hazard issue, of course, opening the way to more requests from failing businesses.

On the other hand, the government, in the past, rescued Lockheed, General Motors (out of bankruptcy), Chrysler (out of bankruptcy), and big banks too numerous to mention, all in the name of stabilizing the economy, maintaining the defense establishment, and saving jobs. Don’t coal miners and nuclear operators deserve the same consideration?

We have our own opinion on the reasonableness of the rescue plea, but its reasonableness is not the issue. Do we want to create a capitalist system in which the capitalists win when they are right and the public loses when they are wrong?

The whole purpose of electricity deregulation was to remove the risk of bad judgment from the consumer and put it on the producer. If that was the wrong move, then we need to re-regulate, not make ad hoc rescue decisions. If it was the right move, then stick with it. That is the real choice. By Leonard S. Hyman and William I. Tilles.

With natural gas production in the US surging since 2007, the US became a net exporter of natural gas in 2017. And this is just the beginning. Read… Momentous Shift in US Natural Gas, with Global Consequences

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  63 comments for “FirstEnergy Seeks US Gov Rescue. Who Should Pay for Bad Decisions by Capitalists? Not the Capitalists, Obviously

  1. Paulo says:

    regarding statement: “The whole purpose of electricity deregulation was to remove the risk of bad judgment from the consumer and put it on the producer. ”

    Does anyone really believe this statement? It has been my experience with deregulation that the primary goal is to open up a captive market for private profits. Initially, this is sold as a savings for the consumer and a way to lower costs. However, over time workers are squeezed, unions are decertified, and costs go up for ratepayers. This is all done to funnel profits and dividends to shareholders. The myth of consumer choice is non-existent. Is it really possible for communities to obtain power from another provider? Not likely.

    I have seen this done in BC Canada with ferry services, Hydro electricity, and extended health care facilities. Once the public service is privatized, the condition is politicized and almost impossible to fix without a crisis mobilizing a change in Govt. By then the damage is done. The public always bears the cost through reduced service and higher costs. Meanwhile other people got rich and made off like bandits.

    Good luck on the fix.

    • Dave says:

      With all due respect to the poster, long distance telecom used to be prohibitively expensive pre deregulation. Likewise, transportation. Not all deregulation is a bait and switch and some competition can be helpful to move forward.

      • Sinbad says:

        Long distance telecom got cheaper because of technical advances.

        • Gibbon1 says:

          Yes. You went from being able to carry a few thousand voice channels in a microwave relay to hundreds of thousands in a fiber optic cable. I remember a picture comparing a foot diameter cable (bundles of twisted pair cables) with a thin fiber optic cable made of plastic and glass.

          Deregulation had zippo to do with that.

        • Normal says:

          “Long distance telecom got cheaper because of technical advances.”

          And those advances came from Bell Labs, a monopoly.

    • Jus7me says:

      Excellent diagnosis, Paulo.And a good article, Gentlemen.

    • John says:

      It seems to work pretty much the same on both sides of the border. I do not think shareholders benefit quite as much as management. But yes, they both contribute heavily to the problems, and should be vulnerable to clawbacks and imprisonment if its appropriate.

    • Scott says:

      One of biggest reasons to support deregulation of electricity was to avoid the situations that are occurring in South Carolina, Georgia and Mississippi, where ratepayer-funded power plants went well over budget, with the costs passed on to the consumer. Given that cost overruns are often included in their rate bases, the utilities have no incentive to control capex, if anything they are incentivized to overspend. The runaway costs of nuclear power plants in particular contributed to the push to avoid repeats in states like New Hampshire.

    • BTilles says:

      Hi Paulo,

      We agree with most of your observations regarding the neoliberal intent of deregulation, iften called rent seeking.
      However, the statement you quote refers to a fundamental industry shift as to who would bear the financial risk of new power plants. The traditional answer was to let the franchise owning utility build power generating facilities with the understanding that consumers will pick up the tab no matter how large. (Look at Southern Company’s $25 billion wholly regulated, nuclear boondoggle for example). Now regulators are far less willing to simply give utility managers a carte blanche so to speak.

    • Nick Kelly says:

      Have to disagree with you about ferry service, as I have with many including family members who refer to BC Ferries as ‘privatized’.

      Which PRIVATE party owns any portion of BC Ferries? Where can you or I buy a share in this company?
      The province owns all the shares. It’s a type of Crown Corporation. The switch to this model was just a different vehicle for government ownership.
      Maybe they thought holding it at a pretend arm’s- length would help in the union negotiations that tend to stalk public transit because the union knows the province has the money.

      I don’t know but ‘a rose by any other name would smell as sweet’
      Or stink, if you like.

      It’s a bit ironic that this spray paint job is blamed on it having been privatized, because if it ACTUALLY was privatized i.e., sold to a private business (it would likely sell for a dollar) the fares would have to double.
      BC Ferries receives hundreds of millions from the BC coffers, which it would not get if it was severed.

      As for health care facilities, where private business does operate, and a big part of BC’s extended facilities were recently sold to Chinese insurer Anbang, (since seized by the Chinese govt. for questionable practices) I tend to agree with you.
      This is especially to be scrutinized because the elderly customer is almost literally captive and vulnerable to hardship resulting from ‘cost savings’ needed to pay dividends.

    • I always thought that the purpose of deregulation was to give consumers choices, consumers could negotiate with any provider on the grid. Then buying electricity is like a mortgage refi from a shaky lender. When the paper on a few bad loans is called the mortgage industry implodes and USG steps in. Or when that alternate power source shuts down and their is no additional capacity the grid shuts down because the wire is for everyone. I don’t see that they have any choice or a lot of states which voted 45 will be changing their vote.

  2. Rates says:

    Impossible. I’ve seen commenters here swearing with their life that “creative destruction” runs through America.

    Wait I think he mentioned that while talking about Private Equity.

    No PE here? Moving on.

    • Wolf Richter says:

      The problem is a government bailout. Not “creative destruction.”

      • wkevinw says:

        Bankruptcy law is pretty good about doing this without catastrophic destruction. FDIC has reasonable practices when it takes a bank over. I think one action is to “fire” certain officers of the corporation. Certain stakeholders lose a certain amount of money, certain others keep theirs.

        Something like this seems to always be possible.

        Keep operating, kick out the people who are responsible for the bad decisions. Restructure the financials.

        Rinse, repeat. At some point the whole thing will expire if it’s not competitive, but you do not need to cause market/financial/economic catastrophe to have a bankruptcy.

        A lot of the banks and other financial firms should have had this process visited on them ~2008. Sheila Bair wanted to, but they wouldn’t listen, so she quit. The whole world would have been a better place if this had happened.

        • Gibbon1 says:

          Should be a bankruptcy rule that claws back any bonuses awarded to officers 2-6 years prior to bankruptcy. Anything more recent than 2 years is 100% clawed back. A linear percentage out to 6 years.

        • BTilles says:

          Hi wkevinw,

          You make several good points re the banking system and chapter 11. However, a bankruptcy typically affects the liability side of the balance sheet via debt restucturing or whatever. Utilities can and have gone bankrupt. But, there is never any thought given to the electric company’s assets ceasing to produce and deliver power.

          Think of it another way. If GM goes under tomorrow, you still have lots of vehicular alternatives. If the power company suddenly goes away, the typical consumer has zero alternative (excepting residential solar/storage).

      • Rates says:

        I was being sarcastic Wolf. There’s still way too many people living under the cave who thinks that America is a capitalist country. Our “capitalists” always look for a bailout when SHTF.

  3. Bobber says:

    Nuclear power and financial trouble seems like a bad combination to me. This should be a highly regulated industry, and there should be stiff capital requirements, like banks.

    • BTilles says:

      Hi Bobber,

      The companies that own and operate nuclear facilities in the US tend to be financially fairly healthy. FE’s nuclear facilities were all constructed under traditional, cost of service pricing regimes. Which as you know means heavily regulated. But management’s ill fated decision to make these competitive businesses (i.e. chase far higher profits) sealed their fate.

      • Bobber says:

        Management’s of power facilities should not be compensated with stock. Then they won’t be tempted to take risks with nuclear power.

        • ScottS71 says:

          Being very naive in this area, I always thought Nuclear power was the cheapest supply; but ive never read what the finacials look like over the life of a facility (without the likes of a melt down). China is gearing up to install lots of nuclear plants, from what i read years ago.

  4. Ed says:

    On the subject of deregulation of power generation, here’s how it worked out for Texans:

    Power generation and delivery are natural monopolies. People often argue that power generation is not, but I don’t think that’s quite true. Deregulating is just another way to pry more profit out of captive consumers.

    • Kent says:

      I worked for Houston Lighting and Power back in the ’80’s. I work for county government in Florida now. County government is a model of efficiency compared to the HL&P of the time. There were entire floors of people who did nothing but figure out where the party would be that night.

    • BTilles says:

      Hi Ed,

      Technically, a natural monopoly exists only when the product, typically a service. would be far more expensive if competition were permitted due to unnecessary (from society’s view) duplication of capital intensive facilities.

      At present, the distribution networks in Texas and elsewhere still fit the definition. Since windpower has crushed the economics of power generation in the region, we have to conclude that power generation has ceased to be a natural monopoly in most cases.

      • ScottS71 says:

        This is great news. I always thought wind couldnt compete with coal and other cheap fossils.

        • BTilles says:

          Hi Scott,

          Wind is rather inexpensive vs coal and nuclear but it produces intermittent power, that is, the wind frequently is strongest (producing the most MWs) at night and in the spring season when power demand is typically lower.

        • ScottS71 says:

          Hi and thanks. So are wind companies profitable given this inconsistent input/efficiency? Could we run the country on Wind (with storage) more cheaply than fossil fuels? Ive learned, only cheap, is what we care about.

  5. Mugsy777 says:

    When government is controlled by lobbyists it doesn’t matter whether it results in deregulation or bailouts….whatever is in the self interests of the crony capitalists will be the governments decision and the costs of the decision is shouldered by the customers and taxpayers…..there is no free enterprise capitalism anymore.

  6. Sporkfed says:

    It seems like First Energy’s business model was to get large enough to fail
    causing a lot of pain. Spread the consequences across enough
    Congressional districts and you now have allies in Congress.

    • BTilles says:

      Hi Sporkfed,

      From our view, FE simply made a very big corporate bet on nuclear and coal fired electric power generation, often ourchased via M&A. Fracking, and the appearance of relatively inexpensive natural gas made their big bet uneconomic. For us, the rest is sort of deatails.

    • Kent says:

      There is no reason for any pain to be had except of course for those who speculated on the organization’s success. Liquidate management, shareholders, bond holders, and other creditors and sell off the assets to the highest bidder. They can continue generating electricity the entire time. Capitalism at its finest.

      • BTilles says:

        Hi Kent,

        The fact that you’re getting in touch with your inner Mellon (Andrew) is fine. However, while you’re liquidating everything who’s responsibility is it to keep the lights on during the inevitable, protracted bankruptcy litigation? In our view, utility assets will keep operating regardless of ownership. Our society and way of life demands it.

        • Paulo says:

          Great responses to my first shoot from the lip comment, (apology here), but more importantly, thank you BTilles for replying and keeping us on track about the theme……’solution’.

          Yes, people will need the lights on while the litigation clogs up the news. It brings to mind the scary/ominous image on the drive past McMinnville/Satsop enroute to the Pacific coast in WA/OR States. The Whoops situation was a forerunner. Maybe it’s just me, but the image of an abandoned nuke cooling tower is scary stuff.

          a very interesting read

          So, on my quiet Easter morning walk with my dog I thought about a new solution, but this time taking a play from a common capitalist promise game plan.

          Corporation aka known as Pric

          The State can form the corp and issue every citizen ten free shares. When the private power plant goes under pick up all assets, (no claims included), on facilities, tools, and structures. Make sure the gates are immediately locked to ensure no tools or equipment goes missing. Fire all management, but offer effective managers the option of hiring on at a state civil servant salary levels, temp contract subject to performance review/progress. Complete or mothball respective facilities after acquiring them at $.15 on the dollar…(or less). The coal plants could be converted to NG, provided there is a NG pipeline available. The nukes could either be mothballed as per WHOOPS, or repurposed; theme parks, recycling centres, whatever. :-)

          Any resulting power could be sold at cost, + a number to cover fiture needs and maint.

          Seriously, the Whoops success repurpose is here:

        • BTilles says:

          Hi Paulo,

          Re Whoops. The Washington Public Power Supply System derisively known as “whoops” after attempting construction of five nuclear power plants resulting in one of the largest muni bankruptcies in US history.

    • c smith says:

      Absolutely. Former FE CEO Tony Alexander basically ran the company into the ground after the AYE deal. I have to believe he knew it was a hopeless cause by then. A Trump election just bought them some more time before facing the executioner.

  7. Boatwright says:

    Old business model:

    Plod along as a tightly regulated monopoly. A visit to the corporate offices would reveal engineers and the billing dept. running the business, the officers and directors living comfortable, pillar of the community lives. Dividends paid to little old ladies and pension funds @ a steady 3%; same with the bonds. Officers at their desks @ 9:00, a short nap before home @ 5:00. Weekly golf with the rest of the Rotary on Thursdays. Boring but reliable.

    New business model:

    Whoopee!!!! Let’s borrow a bundle, pay ourselves 7 figure “salaries”, summers on the northern lakes, winters in the Bahamas, golf, 5 car garages, golf,yachts, golf. Oh I forgot to mention golf.

    What could go wrong?

  8. RD Blakeslee says:

    Internal vignette: Mon Power, a West Virginia subsidiary of FirstEnergy, attempted to buy a coal-fired power plant from FirstEnergy. The strategy was to shift the bad economics of the plant to the subscribers in West Virginia, which more loosely regulates public utilities than Ohio does, where FirstEnergy is regulated.

    To its credit, the WV Public Service Commission denied MonPower’s application and the power plant is now shut down.

    • BTilles says:

      Hi RD,

      Thanks for the observation. In a way, you’ve perfectly summed up what’s going on here–“shopping” for a more favorable regulatory outcome, this time looking to the ostensibly supportive US Energy Department as opposed to state regulators.

  9. 2GeekRnot2Geek says:

    Several months ago FirstEnergy started a radio advertising campaign in PA for state support (subsidizing a losing business proposition) of TMI or they would have to shut it down.

    Best guess right now is PA State govt said no. The people in general were against it, the state budget has a projected 1B+ shortfall this year, and it’s shaping up to be a a rough election year this November after the PA SC redrew our oh-so gerrymandered voting districts.

    • BTilles says:

      Hi 2Greek,

      Other states like NY and IL have voted to subsidize aging nuclear plants. However, this represent the conflation of at least three separate issues: grid reliability, zero carbon power generation, and to our minds most importantly, the loss of high paying jobs and taxes in rural areas. This becomes a social welfare issue hiding under the mask of energy policy.

      • 2GeekRnot2Geek says:


        Thanks for the info, I wasn’t really thinking along those lines. There are 5 Nuclear plants in PA and all 5 are owned by Excelon.

  10. Leonard Hyman says:

    Long distance telephone prices were high because the regulator and telephone co used LD profits to subsidize local telephone service, not because LD costs were so high. Deregulation, by allowing consumers to find another LD company, removed the ability to use LD rates to cross subsidize local rates. The incumbent LD company and the competitive ones used the same technology.

    One of the big arguments before electric deregulation was whether one group of consumers (industrials) might be subsidizing another (residential) via regulated rates. Once everyone had to pay the same price for power, that got rid of the argument. I always had my doubts about that argument because I thought that industrial customers got everything they wanted either from regulators directly or via lobbying. Why would they want to pay market rates?

    As for whether, policy makers really believed that they were putting risk on generators and taking it off consumers, yes they really did but they never considered the implications for cost of capital of the move to unregulated generation. Cost of capital probably rose by one third. Thus the savings from more efficient competitive generation had to exceed the increase in capital costs. Not sure that it did. Another reason, maybe , for the problems at FES.

  11. Max Power says:

    At about $2.7/mmbtu natural gas prices in the US currently are considerably lower from any other non-intermittent energy sources, as well as from natgas prices in other parts of the world. If you are a utility without a heavy reliance on natural gas coupled with combined cycle power generation plants it is quite difficult for you to survive in this environment.

    The big question I think is how long will natgas prices stay this low.

    • BTilles says:

      Hi Max,

      Last year at a conference I heard a utility analyst decribe the long term competitive relationship between natural gas and renewables as a “cage match” to the death. Technology costs are declining and gas is plentiful.

      • Max Power says:

        I think it’s much more difficult to compare the two than what most people think becuase people often try to compare them using nameplate capacity kWh price. That’s way too simplistic an approach. When you add their availability factor to the equation (and what you have to do with renewables to compensate for their much lower availability factor), you realize that at the current US gas price it is probably darn near impossible for renewables to ever catch up.

        In Europe for example though it might be very different as even pipeline-fed natural gas costs at least twice than what it does in the US. That probably helps explain why Europe generally has more renewables on the grid than the US. It’s all a matter of economics.

  12. cdr says:

    The above comments all seem like over-analysis.

    FirstEnergy runs into financial trouble. Like everyone else who gets into this position, it looks for a way out that offers gain. Since it’s big and has more angles to play than most companies in similar situations, it claims to be a victim that needs to be protected from an evil not of its making.

    It does this with a straight face and with all the appearance of a victim wrapped in the American flag it can muster. It will get pushy if needed.

    FirstEnergy is trolling for suckers. The first level of sucker is someone who takes them seriously. The proper response is to giggle a little and tell them to p*ss off. Not analyze their problems. This adds credibility to the situation they claim to be suffering from.

    Hopefully, nobody with public money or law making ability falls for it.

  13. kiers says:

    I will personally set up a slide deck and pitch this deal to…..Toshiba or Hitachi!. I can’t wait to think what’ i’ll do with my bonus! busy busy busy….

  14. Wolf Richter says:

    Update: FirstEnergy put FES into bankruptcy over the weekend. Chapter 11 filing in federal court in Akron, Ohio.

    And FirstEnergy will try to put pressure on the government to come up with a bailout of shareholders and bondholders.

    • BTilles says:

      FirstEnergy Solutions bankruptcy filing was in the US Bankruptcy Court for the Northern District of Ohio. The petition was filed late Saturday night. (Who knew you could have that much in Akron on a Sat. night?).

      In the company’s prepared statement, FirstEnergy’s CEO, Charles Jones, emphasized that none of the company’s regulated electric utility customers would be affected by this action.

  15. the blame-e says:

    To be honest, I’ve had a belly-full when it comes to bailouts. Enough is Enough. No more bailouts.

  16. Leonard Hyman says:

    Now that the deed is done, keep in mind that the competitive power business has a long history of financial failures and bankruptcies. These were highly leveraged commodity producers with high fixed costs, serving a slow growing market. They could not control entry. They l accepted any price above variable cost, in order to survive. They can improve their lot only by promoting an oligopoly which permits price fixing (the UK solution) or by eliminating competition (regulation). The railroads never earned cost of capital until the number of competitors fell to four or so. Ditto for the airlines. Is that the choice, oligopoly or re-regulation? Maybe.

  17. Cal says:

    California’s last nuclear power plant, Diablo Canyon, sits atop a cluster of earthquake faults just upwind from San Luis Obispo.

    The Democrats’ “What do we do with this clown” Gavin Newsom, ex mayor of San Francisco and current Lieutenant governor, voted from his sinecure on the California State Lands Commission to extend its license. All part of the California state governments’ control by the fossil fuel and nuclear industry.

    Ever wonder why there is no oil extraction tax in California? Jerry Brown’s family owns huge amounts of Occidental Petroleum stock in a blind trust. PG&E basically owns the legislature.

  18. MD says:

    Ahh neoliberalism…doing what it was exactly designed to do in enrichening corporate stockholders at the expense of all others.

    Delivering ever-more pared-back services at ever-greater costs (gotta keep those fund managers happy!)

    A rout to nowhere.

    Truly a bankrupt(ing) ideology, responsible for third-world levels of wealth inequality.

    Change required, or true third-world status within 20 years for the foolish societies that cling to its ridiculous outdated dogma, invented by financial speculators entirely for financial speculators, and backed up by lies about ‘trickle down’.

  19. MaryR says:

    Until the spent fuel nuclear waste problem is solved, the cost equation for nuclear power plants will never work. Nevada’s Yucca Mountain was closed as a nuclear waste dump, around 2012, as the people’s of Nevada and nearby states fought receiving nuke waste from the rest of the country.

    After all, Nevada and to a lesser extent, New Mexico, were already bombed by nuke tests from the 1940’s forward without any warning to the people of th e dangers.

    On a side note, the US dumped 47,000+ (Correct!) barrels of “low level” radioactive nuke waste between 1946 and 1970, a mere 30 miles off of San Francisco at the Farallon Islands. If these are leaking, as expected, what about the salmon, crab, and other seafood we humans eat from these polluted waters? What about the explosion of cancers in the nuclear era? What is the true cost?

    Now look at the Fukushima nuclear plant, with continuing pollution from stored highly radioactive nuke waste tanks, leaking into the ocean for years after the meltdown.

    These “externalities” are never included in the cost accounting for nuclear plants. NO nuclear is the only safe option.

    We the people should have a vote on every single proposed nuclear power plant; given a vote, my bet is NO plants would be built in YOUR neighborhoods or mine.

    Somehow our government regulators do not account for these costs and permit projects to be built, and also extend licenses for years beyond the safe life of these plants. Are they in the pockets of the nuke power industry? What do you think?

  20. tag says:

    Let them sink and file for chapter 11, there should be no more remorse to any business that fail. Failling is part of life it makes you a better person.

  21. Chorddog says:

    Truly an interesting and provocative article. Both Messrs. Hyman and Tilles have left helpful replies. Regarding money, finance and investing, what is the take-away for the equities investor, now, regarding utility stocks in general? I’m old enough to remember the WPPS “whoops” default. It hurt thousands of retail muni bond investors, unless the bonds were part of an insured UIT portfolio.
    On the equity side, the watershed event happened in 1983, when Public Service Indiana canceled construction of Marble Hill nuclear plant. PIN chairman Hugh Barker made the case to Indiana’s URC that the rate payers should bear the burden of the $2.8 billion already sunk into a project that would never produce electricity, claiming it as part of the costs and risks of doing business. Gov. Robert Orr basically said: No, the company has to pay for this mistake. The company is the shareholders. So the dividend was eliminated, the stock fell from $18 to $11, and was the 4th most active on NYSE.
    1983 was the year investors realized that utility stocks were no longer the “blind faith” dividend income stream for widows and orphans.
    Now we have FirstEnergy nuclear and coal plant “units” declaring bankruptcy over the weekend, their bonds in default.
    FE common stock didn’t even hiccup on Monday. FE is up 10% YTD and up 6% for the past 12 months. FE stock is due to go ex-div on May 4th for $0.36/shr, a quarterly payout that yields over 4% to stockholders.
    So again, what is the money and finance take-away implication for investors?
    Are we “okay” to hold FE stock, even though its electricity producing “units” are bankrupt?
    As an investor, the PIN shareholder disaster of 1983 and First Energy’s plant default, while different, are comparable events.
    Have the rules of the game changed so much that we don’t have to worry about these things?
    This leads to a broader question.
    Should we just stop worrying about a stock market that has gained 400% in 9 years?
    Will the equity markets be “orchestrated” in the same way as interest rates?
    Will the Fed, with just 5% down, buy options on E-mini S&P 500 futures, and back-stop a market crash?
    Why wouldn’t the Fed do just that?
    It’s a cakewalk compared to the economic and political nightmare of 2008.
    I am by no means a stock market bull. I’m a bear.
    I’m just trying to determine how much of a bear.

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