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Low exposure to natural gas power generation hurts First Energy

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Generation mix is an important aspect of power generation

Power producers around the world use various primary sources of energy to produce electricity. Primary sources of energy are the sources of energy found in nature in its native form. Running a diverse generation capacity ensures reliability in power output and prevents cost overruns from price fluctuations in a particular source.

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First Energy’s power generation mix

As of September 30, 2014, First Energy Corporation (FE) owns a generation capacity of 17,858 megawatts (or MW). Coal forms the dominant capacity for First Energy, as it does for most American power companies. Coal-fired power plants form 57% of First Energy’s total generation capacity.

First Energy’s 9% exposure to natural gas-fired power generation is quite low. This hurts First Energy, as producing electricity from natural gas provides a competitive advantage for power producers. Due to the high supply of natural gas following the shale boom, natural gas prices have seen a drastic fall in the last five years.

Among the power companies that are part of the Standard & Poors depositary receipt (or SPDR) Utilities Select Sector (XLU), Entergy Corporation (ETR), NRG Energy (NRG), and Xcel Energy (XEL) have a high proportion of natural gas-fired power plants.

Regulated capacity vs. competitive capacity

A major part of First Energy’s capacity is part of the competitive power generation. With 14,068 MW, or 79%, of First Energy’s capacity belonging to competitive power generation, the rest of the capacity serves its regulated generation.

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