Ohio-based FirstEnergy Corp. reported yesterday that it expectssecond-quarter net income for the entire corporation to take a hitof about $80 million as a result of the supply constraints andsubsequent market volatility in late June that sent spot prices fora MWh of power soaring into the thousands of dollars.

First Energy, whose electric utility subsidiaries include OhioEdison, Pennsylvania Power, The Cleveland Electric Illuminating Co.and The Toledo Edison Co., was among the handful of utilities thatfiled 8-K reports with the Securities and Exchange Commission (SEC)Monday giving a sneak preview of anticipated second-quarter lossesthat lay ahead, and even potential third-quarter shortfalls.

In its 8-K report, FirstEnergy estimated it will incur arecovery shortfall of about $53 million, or 24 cents per commonshare, because last month during record heat in the Midwest andSouth and generating unit outages it was forced to buy “significantamounts of power on the spot market at prices that substantiallyexceed the amounts expected to be recovered from retail customers.”

The East Central Area Reliability Council (ECAR) has reportedthat prices for a MWh of power jumped to as high as $10,000 latelast month.

The company’s trading arm, FirstEnergy Trading and PowerMarketing, may incur about $27 million, or 12 cents per share, incredit losses as a result of a power marketer, Federal Energy SalesInc. of Ohio, defaulting on its contract to supply power, accordingto the 8-K report. “This exposes Trading to potentially significantcredit losses and substantial costs to replace contracts that maynot be fulfilled by other marketers,” the company told the SEC,adding that Trading has filed suit against Federal Energy Sales andwill file suit against others should they default.

PacifiCorp, a Portland, OR, utility, is anticipating a 30%plunge in second-quarter earnings, largely due to the market eventsof last month. It’s been reported that the company, which alsofiled an 8-K yesterday, lost a minimum of $13 million in tradingduring the last couple weeks of June. In addition, Illinova Corp.,whose primary subsidiary is Illinois Power, is expected toexperience a significant earnings decrease due to the unprecedentedpurchased power prices and an extended outage at its Clintonnuclear power station, said Standard & Poor’s.

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