2020 Shareholder Address
May 19, 2020
Charles E. Jones
President & Chief Executive Officer, FirstEnergy
2020 Annual Meeting of Shareholders
Thank you, Don, and good morning, everyone. Thanks for joining us. I hope everybody listening this morning is safe and healthy.
I want you to know that I’d much prefer to have this meeting in person like we normally do, but to ensure everyone’s health and safety, we decided that this virtual format was best. I hope to resume our traditional annual meetings next year.
My goal today is to review our significant achievements during 2019 and the early part of this year, but I’d first like to cover our response to the COVID-19 pandemic and the impact of this public health emergency on FirstEnergy. Overall, I’m confident we will continue to manage well through these unprecedented events and move forward from a position of strength.
We operate critical infrastructure, and that means the work our employees do is considered essential. But as we continue to maintain our vast electric system and provide the energy our customers and communities need, my number one priority is to help keep our employees, their families and our customers safe.
We’ve taken significant steps to protect the health and safety of our employees while continuing to focus on the critical work we do to keep power flowing to our 6 million customers.
We successfully transitioned over 7,000 employees – more than half of our workforce – to work from home. For our employees unable to work remotely, we’ve implemented preventive measures to keep them safe on the job. This includes increasing cleaning and disinfecting measures, requiring temperature checks and masks, relocating reporting locations to sites conducive to social distancing, and adjusting work schedules. We have also positioned utility crews so they are working with the same small group of people each day and consistently using the same vehicle and the same equipment to limit exposure to the virus.
In addition, we have secured protective equipment like surgical masks, and other supplies such as thermometers, for our operating companies, regulated generation plants and other work groups. We’re also deploying COVID-19 antibody screening kits to further support our existing medical assessment and workplace-return processes.
We continue to remain flexible and adjust work plans as needed to minimize the spread of this virus and protect our workers. That involves implementing precautions recommended by medical experts and complying with state and federal health directives as they emerge. It takes careful planning and consistent communication on everyone’s part, and I’m proud of our entire team for the resiliency they’ve shown and the great job they’ve done over the past few months. I think the protective measures we’ve put in place are working very well. We’re going to continue to put health and safety first and do what’s necessary to deliver the energy our customers need to persevere through this crisis.
As states have begun opening back up, FirstEnergy is following a slow and measured Workplace Return Plan that will enable business operations to resume in a safe, healthy and productive manner. Because our team has adapted so well to working remotely and working under the preventive measures we’ve established, I can tell you that there’s no urgent need to ask our employees to report back to work all at once. We are taking our time with this process, and following the lead of medical experts by easing slowly and safely back into more normal operations.
The COVID-19 pandemic has required much from us as a company, but we know it has also greatly affected the families and communities we’re privileged to serve. To support those facing financial hardship during this difficult time, we have discontinued power shutoffs for past due customers and waived reconnection fees for those whose power was shut off prior to the health emergency. In addition, the FirstEnergy Foundation has contributed a half million dollars to foodbanks in our service area and accelerated approximately 1.5 million dollars in matching contributions to United Way agencies to help them more quickly provide support to individuals and families in our communities.
In terms of the impact to FirstEnergy, we are well positioned to manage through the economic slowdown, and we believe our distribution and transmission investments will continue to provide service reliability for our customers and stable and predictable earnings for our shareholders. The diversity and scale of our operations gives us the flexibility to shift our investments, if needed, and continue deploying capital throughout the system.
While we are keeping a close eye on our supply chain, we do not anticipate significant disruptions. In part, this is because more than 80 percent of our purchases are American-made products from American companies, so we’ve avoided many of the global supply chain issues other companies are facing right now.
In reviewing the pandemic’s effect on electricity usage trends, we have seen increases in residential usage, driven by the Stay at Home orders. And though our commercial and industrial customer load is expectedly down, we were already seeing reduced industrial sales due to the manufacturing recession, before the pandemic.
Our rate structure provides a measure of stability even during these turbulent times. About two-thirds of our base Distribution revenues come from residential sales while 28 percent are from commercial customers and about 7 percent come from the industrial sector. In addition, about 80 percent of commercial rates and 90 percent of industrial rates aren’t directly tied to energy consumption but are derived from customer and demand charges. On top of that, about 20 percent of our retail load is on a decoupled rate structure in Ohio.
The combination of the diversity of our footprint, our customer base, our stable and constructive regulatory environments, and our rate structures positions us, perhaps uniquely, for stability during the pandemic. It also demonstrates the benefits of our company’s transformation to a fully regulated model.
With annual capital investments of up to 3 billion dollars for the foreseeable future, we’re expanding the scale and scope of our regulated operations to achieve long-term, customer-focused growth.
Through our Energizing the Future program, we continue to upgrade and modernize our transmission system to improve the reliability, resiliency and security of FirstEnergy’s sizeable portion of the U.S. power grid. As you know, we’ve seen significant performance improvements that benefit customers in our ATSI region, including a 47 percent reduction in equipment-related transmission outages. Earlier this year, we expanded Energizing the Future eastward to our New Jersey territory, where we have planned a 175 million dollar investment.
On the distribution side, we are continuing to work toward our vision for the grid of the future by building a smarter communications network and replacing or upgrading aging equipment across our service territory.
In Pennsylvania, our utilities are in the second phase of our Long-Term Infrastructure Improvement Plans, or LTIIPs. This 572 million dollar investment through 2024 builds on previous improvement plans and is designed to reduce the frequency and duration of outages. The LTIIPs continue to support the right investments for our customers and provide reliable returns without lag for our shareholders.
Our Ohio utilities are implementing our three-year Grid Modernization program that includes deploying 700,000 smart meters and installing distribution automation equipment. As part of this grid modernization effort, we’ve also filed proposed time-varying rates that would give our customers the opportunity to save money by shifting their electricity use to off-peak periods.
In New Jersey, JCP&L filed an electric rate plan with the BPU in February to support service reliability enhancements made in recent years and recover costs incurred to restore power following severe storms. The discovery phase of the case has begun, and we anticipate the litigation schedule will provide the opportunity to discuss favorable settlement. We also recently reached an agreement to transfer JCP&L’s portion of the Yards Creek plant to LS Power, and we expect that transaction to close in the first half of 2021, pending necessary regulatory approvals.
In Maryland, our EV Driven program is underway to help reduce auto emissions in the state and make electric vehicle charging more accessible, convenient and affordable. And in West Virginia, we’ll file our required Integrated Resource Plan in December. The IRP updates our plan to provide our West Virginia customers with adequate and reliable generation resources that reasonably balance cost and risk.
In late February, FirstEnergy Solutions and its subsidiaries emerged from bankruptcy as an independent company called Energy Harbor. FirstEnergy Solutions’ emergence from bankruptcy marked the final step in FirstEnergy’s successful efforts to become a fully regulated utility – with primarily transmission and distribution operations and a solid plan for sustained, customer-oriented growth.
Over the past year and a half, I believe we have taken other important steps to create a more innovative, diverse and sustainable corporate culture. In our strategic plan, we articulate a clear, five-year vision that addresses the needs of our diverse customer base. In addition, we published our Climate Report and our Corporate Responsibility Report to demonstrate our commitment to transparency and accountability on ESG efforts. Later this year, along with an update to our strategic plan, we will continue to increase our transparency and accountability, in part, by defining and assessing the ESG issues that matter most to us and our stakeholders. We also plan to announce a climate strategy that addresses the risks and opportunities associated with climate change and a lower carbon future.
We continue to expand the diversity of our team and build an engaging and inclusive workplace where employees feel valued, motivated and empowered to drive FirstEnergy’s success. In recognition of our efforts, we earned consecutive second year designations on the DiversityInc Top Utilities List and the Bloomberg Gender-Equality Index. And we were also recently named to Forbes magazine’s 2020 list of the Best Employers for Diversity.
In closing, I’m proud of all that we accomplished in 2019 and the early part of this year. These achievements build on our strong track record of consistently meeting or exceeding our commitments to shareholders for the past five years, including one of the strongest growth rates in the industry. I’m confident we will continue our forward trajectory of sustainable, customer-focused growth that delivers value to our stakeholders.
I want to thank our dedicated employees, who have risen to every challenge we’ve faced over the past year – from completing our transition to a fully regulated utility to safely serving our customers during the COVID-19 crisis. Because of their resiliency and determination, we are well-positioned for future success.
Now, I would like to take a few questions from the audience.