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To: Glenn Petersen who wrote (582)11/19/2003 4:14:39 PM
From: Sam Citron  Respond to of 973
 
OT Shorted 500 FE 33.33 on this news.

Interesting question of whether the legal system will work in this case to internalize the externalities caused by their mistakes. Even if no fines are imposed, it would seem to me that FE might be named in private lawsuits as the proximate cause of damages related to the blackout. The jury will be out on this interesting liability issue for some time. Meanwhile, I would expect FE to operate in paranoia mode, which should have the effect of substantially raising their compliance costs from a state of obvious laxity to extreme vigilance. JMHO, of course. My first short position since Martha Stewart. <g>

Tentative plan: begin to cover at 26.
bigcharts.marketwatch.com



To: Glenn Petersen who wrote (582)11/20/2003 10:15:47 AM
From: Sam Citron  Respond to of 973
 
UPDATE - Blackout suits against FirstEnergy face tough road [Reuters]
Wednesday November 19, 6:14 pm ET
By Nichola Groom

(Adds lawsuits already filed against FirstEnergy)
NEW YORK, Nov 19 (Reuters) - Businesses and consumers could find it hard to sue FirstEnergy Corp. (NYSE:FE - News) for losses suffered during the Aug. 14 blackout, legal experts said, even though a report on Wednesday said problems at the company were the primary cause of the outage.

Following a three-month investigation, the report by a joint U.S.-Canadian task force laid most of the blame for the blackout, which left 50 million people without power, on FirstEnergy's equipment, practices and decisions.

The report cited "inadequate situational awareness" by employees of the Akron, Ohio-based utility, who were unaware that line-monitoring software was not functioning. Another factor was the company's failure to trim trees that short-circuited three of its high-capacity power lines in Ohio, the report said.

So far, just three lawsuits seeking damages related to the blackout have been filed against FirstEnergy, a spokeswoman said.

But while legal experts expect the number of suits to increase, they said power companies like FirstEnergy have protections in place that will require potential plaintiffs to go beyond simply proving that the company acted negligently.

"They have pretty substantial protections against lawsuits based on interruption of power and interruption of service," said David Stahl, a partner at the Chicago law firm Eimer Stahl Klevorn & Solberg. "If a plaintiff can sue at all for business interruption losses, it will have to show gross negligence or willful negligence or something approaching malice. Simple negligence is not enough."

One Wall Street analyst said he had not seen anything in the report indicating such egregious actions on FirstEnergy's behalf.

"I don't think there is anything in here that would lead you to conclude that it was their intent to destabilize the system," said Jefferies & Co. analyst Paul Fremont, who has a "buy" rating on FirstEnergy shares. "It is one thing for there to be a problem. It's another to prove that the company was negligent."

In addition, even though the report points the finger at FirstEnergy, one attorney said it would still be difficult for plaintiffs to prove the company was solely responsible for the massive outage.

"Even if the report shows that FirstEnergy did something wrong, there are still going to be difficulties for someone pursuing a case against them to show that someone else down the line was also not at fault," said Konrad Cailteux, a partner with the law firm Weil, Gotshal & Manges LLP.

Helping the case for FirstEnergy, Cailteux said, are statements from both the U.S. Department of Energy and the Federal Energy Regulatory Commission saying they did not plan to punish FirstEnergy for its role in the blackout.

FirstEnergy's stock reacted negatively to the report, falling more than 2 percent to a session low of $33.20 before closing at $33.29. The shares were pummeled in August following the blackout, falling as much as 16 percent on news that its transmission lines were targeted as a possible source of the outage. But the stock has since more than recovered those losses.

biz.yahoo.com



To: Glenn Petersen who wrote (582)4/6/2004 7:07:36 AM
From: Glenn Petersen  Read Replies (2) | Respond to of 973
 
Report: Ohio utility could have averted '03 blackout

chicagotribune.com

By Richard Perez-Pena
New York Times News Service

April 6, 2004

An Ohio power company should have prevented last summer's blackout across a wide swath of North America by intentionally cutting off electricity to most of the Cleveland area, U.S. and Canadian officials said Monday.

In their final report on the Aug. 14 blackout that darkened much of the Midwest, the Northeast and Ontario, a panel convened by the two national governments put much of the blame on FirstEnergy Corp., in whose eastern Ohio territory the collapse began.

The inquiry found that not only did FirstEnergy not "shed load," or shut off some customers as a preventive measure, the company apparently did not have a plan for doing so on short notice.

"We believe that if FirstEnergy had shed as much as 1,500 megawatts of load in the Cleveland-Akron area" then the blackout "would have been a local Ohio problem," said Alison Silverstein, senior energy policy adviser to the U.S. Federal Energy Regulatory Commission, which was one of the investigators.

FirstEnergy's problems became acute about an hour before the blackout, but Silverstein said the cascading failure could have been prevented until about three minutes before the blackout began.

Power companies cut off electricity fairly frequently to prevent an isolated problem from spreading, but they are loath to do so on a large scale. Federal officials say that without written rules for blacking out a wide area, doing it quickly would have been difficult and chaotic.

"Had we blacked out Cleveland, it may or may not have prevented the event," said Chuck Jones, senior vice president for energy delivery at FirstEnergy, one of the nation's largest utilities.

Jones said the international investigation had glossed over the problems created by a rise in long-distance power transmission in recent years.

He said power being shipped from southern Ohio to Ontario, across FirstEnergy's territory, was one cause of the company's problems the day of the blackout.

"We take exception to the idea that you should interrupt local customers in favor of long-distance transactions," he said.

Jones declined to respond point by point, saying FirstEnergy is "looking forward." He noted that most of the report's recommendations involve industry-wide practices that the company supports.

The report does not fully explain why the cascade spread from Ohio to Michigan to Ontario to New York, while other areas were spared.

The U.S.-Canadian panel offered 46 specific recommendations, starting with writing into federal law the rules that are supposed to ensure reliable power supplies, so that there are penalties for utilities that violate them.

Until now, the rules--governing everything from how closely utilities monitor their transmission lines to how much information they share with other regions--have been drafted by an industry group, the North American Electric Reliability Council, and no one has any power to enforce them.

Rules not explicit, report says

Some of those rules also need to become more explicit, the report says. For instance, there is no rule about trimming vegetation around power lines, and there should be. The blackout happened in part because several major power lines in Ohio sagged into trees, shutting them down.

Investigators found that FirstEnergy and the regional agency that oversees it, the Midwest Independent Transmission System Operator, violated several of the reliability council's rules, including failure to warn their neighbors of a mounting crisis.

When asked if the conditions at FirstEnergy existed at many other utilities, Jimmy Glotfelty, director of the U.S. Department of Energy's Office of Electric Transmission and Distribution, said, "I would hope that the answer is no," but conceded that he did not know.

Accountability issue softened

The panel dropped a recommendation it had included in its interim report, that the chief executives of energy companies be required personally to sign their reliability reports.

Most of the report goes over topics already covered in an interim report in November. The primary failing, both documents say, was that both FirstEnergy and the regional agency overseeing it had woefully inadequate computer systems for monitoring their equipment, so that they did not know how severe the problems were until it was too late.

But the conclusion that FirstEnergy should have blacked out the Cleveland area was a new element in Monday's report.

The panel also altered its view of a crucial technical issue, the role of reactive power--and, indirectly, energy deregulation--that has been the subject of heated debate. Reactive power (as opposed to what engineers call "real" power, which actually turns on light bulbs and toasters) is an essential component of electricity that helps electrical equipment keep working.

Alternate theory cited

Some academic energy analysts, and FirstEnergy, itself, have contended that a lack of reactive power was a central cause of the blackout. They speculated that it resulted from market conditions created by deregulation--increasing long-distance energy transactions, and the rise of independent power producers, power companies that run power plants in other utilities' service areas.

In its November report, the panel noted that problems with reactive power should have been entirely manageable. In contrast, Monday's report states plainly that "failure to maintain adequate reactive power support" was a major contributor to the crisis.

But the panel blamed those problems squarely on FirstEnergy, noting that FirstEnergy had even removed from service, for routine maintenance, some of the equipment it used to generate reactive power.

Copyright © 2004, Chicago Tribune