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FirstEnergy Solutions granted preliminary approval to void coal plant contracts

FirstEnergy Solutions Corp. has received bankruptcy court approval to reject its sales contract with two Ohio Valley Electric Corp.-operated coal plants.

Bankruptcy Judge Alan Koschik on May 11 granted FirstEnergy Solutions', or FES's, request for a preliminary injunction tied to its share of the multiparty power purchase agreement with Ohio Valley Electric Corp., or OVEC, The (Cleveland) Plain Dealer and Dayton Daily News reported.

FES has a 4.85% sponsoring company stake in the OVEC-operated Kyger Creek and Clifty Creek coal plants through subsidiary FirstEnergy Generation LLC.

FES and its subsidiaries on March 31 filed voluntary petitions for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Ohio. FES and FirstEnergy Generation on April 1 filed a complaint for declaratory judgment and preliminary and permanent injunction against the Federal Energy Regulatory Commission, as part of their request to void several long-term power purchase agreements, including the sales contract with OVEC.

OVEC filed a complaint with FERC prior to the bankruptcy petition asking the commission to rule that the "anticipated breach" of the intercompany power agreement, or ICPA, "would amount to a termination of FirstEnergy's purchase obligation in violation of the filed rate doctrine and ICPA."

The current term of the agreement runs through June 30, 2040. FES has said it could save $58 million annually through rejecting the contract.

The U.S. District Court for the Northern District of Ohio in an April 5 order rejected OVEC's attempt to withdraw the FirstEnergy subsidiaries' motion from bankruptcy court.

"The Court finds that FERC and the Bankruptcy Court have concurrent jurisdiction over the ICPA," the order stated. "Thus, FES must seek approval from both FERC and the Bankruptcy Court to reject the ICPA."

FERC has not yet ruled on the request.