FirstEnergy must pay rail firms for breaking coal contract

FirstEnergy Corp. can’t use federal environmental standards as an excuse to break its contracts with several railroads that were supposed to be hauling coal to now shuttered power plants, an arbitration panel ruled.

Ohio-based FirstEnergy disclosed on Wednesday that the arbitration panel disagreed with the company’s claim that standards limiting emissions of mercury and air toxics from power plants excused its obligations under its rail transportation contracts with CSX Transportation and BSNF Railway Co.

The decision, made on April 12, has brought the companies to the settlement table in order to avoid having the arbitration panel determine the extent of FirstEnergy’s damages.

They’ve “agreed in principle to resolve all claims” in return for FirstEnergy paying the railroads $109 million over the next three years.

FirstEnergy also reminded investors on Wednesday that this isn’t the company’s only rail contract dispute.

It is also dueling with Norfolk Southern Corp. and BNSF on another transportation contract that also is in arbitration, albeit at a much earlier stage in the process. There, too, the parties are trying to work out a settlement, FirstEnergy said.

Still, if that doesn’t work out, or if the CSX/​BNSF settlement doesn’t go through, FirstEnergy reiterated that the amount it might have to pay out in damages might force FirstEnergy Solutions, the subsidiary that operates most of the company’s power plants, into bankruptcy.

FirstEnergy declined to comment further on the development, saying that company leaders instead will provide more details on Friday when FirstEnergy holds an earnings call with analysts.

Anya Litvak: or 412-263-1455.

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