Did you hear about last month’s appeal by FirstEnergy Solutions to the United States Department of Energy? It may have been one of the most unusual requests that was ever directed to a Cabinet-level Department of the United States government.
FirstEnergy, a struggling coal and nuclear energy producer of electricity, asked the Energy Department to declare a national emergency and order its customers to pay it above-market prices for its power. In theory, the federal government possesses the authority to do so under the Great Depression era Federal Power Act, derived from an earlier law that was first enacted in 1920.
Why did FirstEnergy need this support? Its coal and nuclear generated electrical power plants have been struggling to compete against less expensive and cleaner energy facilities. So FirstEnergy appealed for direct price intervention by the federal government, asserting that the insolvency of nuclear and coal plants would constitute a national energy emergency.
Department of Energy Secretary Rick Perry declined to grant the request. And how did FirstEnergy respond?
Instead of intensifying its political lobbying activities in hopes of a direct government intervention, the struggling company reached an agreement with the creditors of its nuclear and coal division. Although the firm is not yet on stable footing, it appears to be negotiating a path through its period of financial distress.
So let’s score one for free market capitalism. Although it must have been tempting for the Presidential administration of the United States to respond to the appeal of a struggling coal energy producer, it opted instead for a non-interventionist market based response.
That’s not to say, of course, that all of the parties acted in a perfectly consistent manner. FirstEnergy did issue the original appeal for a highly questionable government declaration of a national emergency. And it did take Secretary Perry more than one week to express skepticism about the request.
Eventually, though, the private corporation and the government entity both embraced a free market strategy. Their decisions represented an unremarkable, conventional conclusion to a remarkable, unconventional appeal.