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Operating costs at FirstEnergy plants set to retire run above market prices

Operating costs at two large coal-fired power plants that FirstEnergy Corp. subsidiary FirstEnergy Solutions Corp. plans to retire are higher than wholesale power market prices, according to an S&P Global Market Intelligence analysis.

FirstEnergy Solutions on Aug. 29 announced plans to shut down 4,042 MW of coal- and oil-fired generating capacity located in Ohio and Pennsylvania in 2021 and 2022, citing a "market environment that fails to adequately compensate generators for the resiliency and fuel-security attributes that the plants provide." The plants operate in the PJM Interconnection market.

The announcement came just over a week after the U.S. Environmental Protection Agency released its Affordable Clean Energy rule, a replacement to the Clean Power Plan that the agency predicts would modestly improve the outlook for U.S. coal.

All four plants cost more to operate than regional wholesale power prices averaged in 2017.

The retirements include FirstEnergy Solutions' two largest coal plants. The 2,510-MW Bruce Mansfield plant in Beaver County, Pa., which began operating in 1976, generated nearly 7.7 million MWh in 2017 at a cost of $33.24/MWh. Prices for power at the PJM Western Hub averaged $29.73/MWh in 2017, according to the S&P Global Market Intelligence analysis, meaning FirstEnergy likely lost money when Bruce Mansfield ran. The plant in 2017 had a capacity factor of 34.96%, the percentage of all possible hours that it operated. FirstEnergy plans to retire the plant in June 2021.

The company will also deactivate W.H. Sammis units 5-7 in Jefferson County, Ohio, by June 2022. Together, the three units total 1,490 MW of capacity, and the oldest began operating in 1967. In 2017, the units generated roughly 5.4 million MWh at a cost of $36.44/MWh, nearly $7/MWh above the PJM Western Hub's average day-ahead price in 2017. The three units together had a capacity factor of 41.3% in 2017.

The two plants are major customers of Murray Energy Corp. In 2017 alone, they purchased nearly 4.8 million tons of coal from mines owned by Murray. According to a previous analysis, Murray owned mines produced 57.3 million tons of coal in 2017.

FirstEnergy also plans to retire two peaking oil plants, the 13-MW W.H. Sammis IC adjacent to the Sammis plant, and the 29-MW Eastlake CT in Lake County, Ohio, located at the site of the already-retired Eastlake coal plant. The two peakers, which came online in 1972 and 1973, respectively, have only rarely been used in recent years.

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