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AEP, FirstEnergy subsidies now at risk from FERC; DOJ investigating SunEdison


The Public Utilities Commission of Ohio unanimouslyapproved modified, yet controversial eight-year subsidy plans from AEP Ohio andFirstEnergy Corp.'sutilities designed to guarantee income for primarily coal-fired generation.Opponents of the plans and related settlements have said they amount to"handouts" ranging from $1.9 billion for AEP Ohio, the trade name ofAmerican Electric Power Co.Inc. unit Ohio PowerCo., and almost $4 billion for FirstEnergy. "Although the non-signatoryparties have raised numerous concerns regarding the stipulation, we arepersuaded that the stipulation, as a package, benefits ratepayers and thepublic interest," PUCO said in its March 31 order.

For the U.S. to reach its climate goals, thedeadline for constructing the last gas-fired power plant is coming up shortly —if not already past — according to a report by the Center for SustainableEnergy. Gas has a significant near-term role in reducing dependence oncoal-fired power and helping the transition to intermittent renewable sources,said lead author Steve Weissman, a senior policy adviser for the clean energygroup. But to reduce greenhouse gas emissions to a target of 80% below 1990levels by 2050, the nation must ultimately eliminate almost all use of fossilfuels, including natural gas, he said.

Despite fire sale pricing, coal companies stillstruggle to attract buyers, but Royal Energy Resources Inc. has emerged as one of thefew eager to bank on the right coal assets. Royal COO Ian Ganzer said his companyis trying to get ahead of the curve and evaluate where there might still bevalue in coal. He said there are not currently many buyers in the market, soRoyal is carefully combing the sector for certain coal assets the companybelieves are distinguished from coal that struggles to move in today'soversupplied market.


* Morgan Stanley Research North America expects FERCto review and ultimately reject the income guarantees that Ohio regulatorsapproved for AEP Ohio and FirstEnergy. The implications of such a rejectionwould be limited for AEP but "fairly meaningful" for FirstEnergy at$7 per share. Morgan Stanley Research also revised its 2016 EPS estimate forFirstEnergy at $2.74 and lowered its price target to $41 per share from $45 pershare.

* The U.S. Department of Justice is investigatingSunEdison Inc.'sfinancing activities related to the now-terminated acquisition of and alsointercompany transactions involving the company and its yieldco vehicles,TerraForm Power Inc.and TerraForm GlobalInc. The DOJ is also seeking information on the "conduct of aformer nonexecutive employee who is alleged to have committed wrongdoing inconnection with the Vivint termination negotiations," SunEdison said in afiling.

* Although industry response has improved in recentyears, the North American bulk power system must bolster coordination andcommunication and streamline incident reporting when dealing with potentialphysical attacks and cyberattacks, according to a new report from the North American Electric ReliabilityCorp.

* SouthernCo. is a step closer to completing its $431 million acquisition of PowerSecure International Inc. after the deal cleared antitrustlaws. The acquisition is expected to close by the end of the second quarter.

* The Florida Supreme Court a solar power-related ballotmeasure backed by the state's utilities to go on the November ballot. Votersin the state will now have the opportunity to vote on whether to amend theFlorida Constitution with the ballot measure's language, which would enshrinethe right for consumers to own or lease solar equipment installed on theirproperty to generate power for its own use.

* President Barack Obama and Chinese President XiJinping remain committed to signing the Paris accord on climate change April 22despite concerns over the U.S.'s ability to meet its end of the deal, TheNew York Times writes.

* While much of the attention has been focused onEntergy Corp.'s NewYork state-based James A.FitzPatrick nuclear plant, the facility's neighbor — — is also"losing a lot of money'' and could someday face an early closure, ThePost-Standard of Syracuse, N.Y., reports. NineMile Point is owned jointly by Exelon Corp., EDF Group and Long Island Power Authority.

* The Kansas Corporation Commission approvedWestar Energy Inc.'srequest to increase its transmission delivery charge by $25 million resultingin an additional $4 per month on residential customer bills starting April 1.


* As banks near a reassessment of their credit lines to U.S. oil and gasproducers, analysts at Raymond James expect an average 20% to 30% reduction insuch facilities forcing companies into loans with tougher covenants orbankruptcy filings, TheWall Street Journal writes.

* California regulators are working to minimizemethane emissions from the state's gas utilities, which recently reported atotal of 229 leaks on their gas storage systems. Responding to state statutorymandates to reduce methane emissions, the California Public UtilitiesCommission, in collaboration with the California Air Resources Board, recentlyproposed more than two dozenrecommended practices encompassing leak prevention, leak detection,leak repairs, training, record-keeping and other procedures.

* Marathon Petroleum Corp. has completedthe drop down of its inland marine business to for $600 million worth of MPLXequity at $26.09 per unit, with 98% of the equity in the form of common unitsand the rest as general partner units.

* SCANA Corp. subsidiary d/b/a PSNC Energy is seeking an annual rate increase of $41.6million in North Carolina to recover costs to operate and expand itspipeline system among other things.

* An environmental organization has turned to FERCto fight a natural gas pipeline crossing the U.S.-Mexico border, proposed by anEnergy Transfer PartnersLP affiliate, which the group worries would harm the region'stourism industry. The Big Bend Conservation Alliance has for months to reroutethe Trans-Pecos intrastate pipeline in an attempt to mitigate the project'spresence in "one of the last remaining open spaces in the country,"as the group's Executive Director Mattie Matthaei described the area.

* Irving Oil Ltd. COO Mark Sherman compared 's proposedC$15.7 billion Energy East pipeline to other major infrastructure projects suchas the Trans-Canada Highway that have the potential to be "game-changersfor the country," Canada's GlobalNews reports. TransCanada recently asked the Quebec Superior Court torejectan injunction on the 4,600-kilometer pipeline, which will transportapproximately 1.1 million barrels of crude oil per day from Alberta andSaskatchewan to the refineries of Eastern Canada and a marine terminal in NewBrunswick.


* CONSOL Energy Inc. has its Buchanan Mine in southwesternVirginia and certain other metallurgical coal reserves to Coronado IV LLC for , including $402.8 millionin cash CONSOL received at the closing.

* Continuing a contraction at the country's largestcoal mines, Arch CoalInc. announced that it is reducing staff at its Black Thundermine in Wyoming by about 15%, citing "persistent weakness in the thermalcoal" market. The announcement comes on the same day the confirmed areduction of 235 workers at its North Antelope Rochelle mine, also in Wyoming.

* Foresight Energy LP said it has approval from the U.S. MineSafety and Health Administration to temporarily seal the entire Deer Run Mineto reduce or eliminate oxygen flow paths into the mine as part of itscontinuing efforts to extinguish the combustion event, which began in March2015.

* Activists gathered outside Japan's Embassy in theU.S. to protest against the country's support for domestic and overseas coalprojects with more protests planned in Tokyo and Jakarta. "Groups willcontinue to put pressure on Japan to end its fossil fuel financing in the leadup to Japan hosting the G7 summit in May," a statementfrom Friends of the Earth said.

* Walter Energy Canada Holdings Inc. has beengranted an extendedstay under its Companies' Creditors Arrangement Act "tocontinue its sale and investment solicitation process for the company'sassets." Walter Energy Canada is a holding company for theCanadian and U.K. operations of Alabama-based

* Some members of the Republican Party such as Rep.Hal Rogers of Kentucky's Fifth District are already working on diversifyingtheir coal-dependent state's economy so unemployed miners can be retrained andcontinue to earn their livelihood, former Princeton City Schools administratorNoel Taylor wrote in an op-ed published in TheCincinnati Enquirer.


* The upward trends in the price of natural gas andcrude oil over the past one to two months created expectations that rig countshave finally fallen farenough to prompt an upward price response. However, migration ofrigs to core acreage and the recent increase in hedging activity imply thatproduction declines in the U.S. could be limited.

* Participation in the Regional Greenhouse GasInitiative could provide an established and straight-forward path for Pennsylvania to comply withthe U.S. Environmental Protection Agency's Clean Power Plan.

* Daily power prices are likely to at markets acrossthe United States on Friday, April 1, as traders look to rebounding demandforecasts after the weekend break for support.

* Reversing the prior-month trend, gross natural gasproduction in the U.S. nudged slightly higher in January, supported by risingoutput from Pennsylvania, West Virginia and Oklahoma, according to a from the U.S.Energy Information Administration. Meanwhile, total crude oil production continuedto slip despite rising output from Texas.

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"The comprehensive resolution, including thefirst ever criminal charges for false statements to FERC, demonstrates theseriousness with which we take conduct which undermines environmentalcompliance and the fair regulation of energy markets," U.S. AttorneyCarmen Ortiz said inannouncing guilty pleas and fines totaling $8.5 million in an investigation ofclaims that a Massachusetts power plant operator tampered with emissionscontrol equipment and reported false information to regulatory agencies.

Theday ahead

*Early morning futures indicators pointed to a lower opening for the U.S. equitymarkets. To view more SNL equity market indexes, click here.To view more SNL Energy commodities prices, click here.