November 21, 2003
Board of Directors
76 South Main Street
Akron, Ohio 44308
Dear FirstEnergy Board member:
On behalf of the 100,000 dues-paying members of Ohio Citizen Action, I am writing to persuade you of your unfortunate duty to insist on the resignation of Peter Burg as Chairman of the Board and Chief Executive Officer.
Wednesday’s devastating report by U.S. Energy Secretary Spencer Abraham and Canadian Minister of Natural Resources Herbert Dhaliwal must prompt your review of Mr. Burg’s leadership, and of your own responsibilities -- fiduciary, legal and ethical -- in such circumstances.
There is a clear consensus among business leaders and others that the cause of the multi-billion dollar scandals of recent years -- Enron, WorldCom, ImClone Systems, Global Crossing, Qwest, Harken Energy, Halliburton Company, Arthur Anderson -– was a wholesale breakdown in accountability. Management ended up serving its own interests at the expense of everyone else -- board, shareholders, regulators, employees, retirees, customers, and neighbors.
Similarly, all the same interests have been damaged by the pattern of Mr. Burg’s decisions.
I don’t need to rehearse the history fully, from Davis-Besse to the Arthur Anderson misstatements of earnings, to the service failures in New Jersey, to the blackout, to the Robert Tongren/FirstEnergy scandal this fall, to a dozen class action lawsuits, a drop in its stock price and higher borrowing costs, to the brink of junk bond status, which is where you are today.
This fall, when the Tongren/FirstEnergy scandal broke in Columbus, customers learned that of the $9 billion awarded FirstEnergy in stranded cost payments, more than half were demonstrably overcharges. A detailed analysis had shown this at the time of the legislation, but then-Consumers’ Counsel Robert Tongren suppressed the study, and later tried to destroy all copies of it. He signed-off for consumers on a deal granting FirstEnergy more than twice what it was entitled to. Tongren has, of course, now lost his job for this.
Knowing FirstEnergy’s precarious finances, where would it be without the roughly $1 billion in overcharges each year? We all know the answer: FirstEnergy would be under water.
In other words, the only thing that has been keeping FirstEnergy afloat has been overcharging their customers. Not safe efficient power generation. Not reliable distribution. Not customer service.
And what of the future? What is Mr. Burg’s plan to repair FirstEnergy’s balance sheet?
More overcharges. His lobbyists are down in Columbus now, demanding that the Ohio Public Utilities Commission approve -- in advance -- over $3 billion in further overcharges to their customers through 2008. And to slip this giveaway through, FirstEnergy wants the Commission to OK it by New Years Day, instead of taking the usual nine months.
This is not our idea of good business leadership, and it shouldn’t be yours either.
It may be tempting to follow Mr. Burg’s example and isolate each blunder, deny responsibility, call it a "challenge," and try to figure out a way to skate by it. In this way of thinking, "success" is defined as being able to skate by as many blunders as possible.
As a board, however, you should have higher standards. You should be asking, "Why is there no end to the blunders?"
Other companies are not condemned in newspapers around the world, as yours was yesterday. Other companies do not come within 3/8-inch of warped cracking steel of contaminating the largest freshwater system in the world, as yours did last year. Other companies do not survive solely because they are able to wangle billions in customer overcharges from state regulators, as yours has for years.
Many different people from all walks of life have tried to talk to Mr. Burg about these problems.
On Davis-Besse, for example, there are many alternatives to the damn-the-torpedoes-full-speed-ahead approach he has followed. The company could close Davis-Besse permanently, sell Davis-Besse to a company that knows how to operate it safely, convert Davis-Besse to gas or coal, or build a new gas or coal plant. Unfortunately, Mr. Burg won’t even discuss alternatives with anyone.
Whether it’s the four Congresspeople who wrote him last fall, or the 27,000 customers who have written letters to him, or the Three Mile Island families who offered to meet, or the dozens of physicians and nurses who have written to him -– Mr. Burg has refused to talk with any of them.
Mr. Burg is clearly not up to the leadership demands of the job he currently holds.
Whether you have verbalized it publicly or privately, I suspect you already know this. It is time to call the question.
If what has happened so far is not enough to prompt you to do your duty, then there never will be enough and observers must conclude that there is no accountability in your company whatsoever.
I would be happy to discuss this with you personally. You can reach me at (216) 861-5200, firstname.lastname@example.org.
Cleveland Program Director
To FirstEnergy Board members:
Dr. Carol A. Cartwright, Anthony J. Alexander, H. Peter Burg, Robert B. Heisler, Jr., Robert L. Loughhead, Russell W. Maier, John M. Pietruski, Robert N. Pokelwaldt, Paul J. Powers, Catherine A. Rein, Robert C. Savage, George M. Smart, Jesse T. Williams, Sr., Dr. Patricia K. Woolf, Paul T. Addison, William T. Cottle