Kenneth A. Listwak, left, and Francis J. Lawall, right, of Pepper Hamilton.
In complex Chapter 11 cases, practitioners often encounter legal issues that extend well beyond the Bankruptcy Code. The FirstEnergy bankruptcy case, which ultimately was decided by the U.S. Court of Appeals for the Sixth Circuit (Federal Energy Regulatory Commission v. FirstEnergy Solutions, (In re FirstEnergy Solutions), Case No. 18-3897 (6th Cir. Dec. 12, 2019)) is a good example of how a business failure led to a bankruptcy case which directly impacted the energy market, the federal regulation of that market, and the harmonizing of such regulations against the Bankruptcy Code’s goal of providing a “fresh start” to debtors. Ultimately, when faced with these competing interests, the Sixth Circuit exercised a balanced approach in an effort to ensure that policy from all sides was fairly implemented.
FirstEnergy Solutions Corp. (FES), purchased power on the open market for resale to retail customers, affiliates, and in the PJM spot market (a market that coordinates access to wholesale power over 13 states and Washington D.C., covering about 65 million people). Unfortunately, a shift in the regulatory scheme coupled with changing energy prices, led to financial turmoil for FES.
