2021 Shareholder Address
2021 Annual Meeting of Shareholders
May 18, 2021
Steve Strah
Thank you, Don, and good morning, everyone.
Though I’d much prefer to see you in person, I’m glad that this virtual meeting allows us to gather safely, so I can update you on our progress over the past year and our outlook for the future.
In 2020, our company continued its strong operational and financial performance and advanced our regulated growth strategy. We also established new goals for key areas of our business that support our commitment to meeting customers’ future energy needs and building shareholder value.
As you know, we also faced unprecedented challenges. Our employees demonstrated flexibility and resiliency in adapting to the COVID-19 pandemic while continuing to serve our customers safely. At the same time, our Board of Directors implemented significant senior leadership changes last year after our internal investigation, prompted by the Department of Justice investigation into Larry Householder and House Bill 6, uncovered actions inconsistent with our policies and our internal Code of Business Conduct. This included removing five executives and hiring experienced senior leaders from outside FirstEnergy who share my commitment to highly ethical leadership critical to moving the company forward.
As part of these leadership changes, I was named CEO and appointed to the Board in March. It’s my privilege to continue leading the company as we navigate our current challenges and position our business for long-term stability and success. As we work to move FirstEnergy forward, my priorities are:
- Protecting the safety and health of our employees and the public,
- Ensuring ethics, accountability and integrity are ingrained in our culture and form the basis of a best-in-class corporate compliance program,
- Driving performance and enhancing value for shareholders through FE Forward, which will transform this company into an industry leader,
- Enhancing and upgrading our energy infrastructure, so our customers benefit from electrification, grid modernization, renewable energy integration and other innovative technologies, and
- Accelerating the diversity of our workforce so we reflect the communities we serve and advance our culture of inclusion and belonging.
Together, our Board and senior leadership team are also taking steps to restore trust with our stakeholders as we continue to cooperate with ongoing governmental investigations. Our goal is to take a comprehensive and transparent approach with a range of stakeholders to resolve the various regulatory matters under review. As we mentioned on our first quarter earnings call, we have also begun discussions with the DOJ, including the possibility of FirstEnergy entering into a deferred prosecution agreement. However, at this time, we cannot predict the timing or outcome or the impact of a possible resolution with the DOJ.
As we move forward, we are intently focused on the future of our company. And we believe a successful future requires a transformation in our company’s culture of compliance. Building a strong compliance program and strengthening our commitment to ethics and integrity are key to the transformational effort. At this time, I’m going to invite our vice chair of the Board of Directors and executive director, John Somerhalder, to share his vision for a culture of compliance that is built upon the highest standards of ethics and integrity. John?
John Somerhalder
Thanks, Steve, and hello, everyone.
Since joining FirstEnergy, I’ve been working closely with senior leadership to advance the company’s priorities, strengthen our governance and compliance functions and rebuild our relationships with external stakeholders.
Today, I’ll focus my brief remarks on the efforts of the Board and leadership team to build a best-in-class compliance program. Our vision is a comprehensive and centralized compliance model that is underpinned by a strong culture of ethics and integrity. As we work toward this vision, we have identified opportunities for several improvements in key areas, such as governance, risk management, training and communications, concerns management, and third-party management. As Steve mentioned, we’ve also hired strong new leaders, including Hyun Park, who serves as our senior vice president and chief legal officer. Additionally, in April we welcomed Antonio Fernández as our vice president and chief ethics and compliance officer. He heads our new centralized compliance department and leads a staff dedicated to making our vision a reality.
Both Hyun and Antonio are instrumental in embedding compliance, ethics, accountability and integrity into our company’s culture, beginning with the Board of Directors and senior leadership. Our Board, including the subcommittee of the Audit Committee, is working in lock step with Hyun, Antonio, me and our entire senior leadership team to support this effort. Together, we’re working to create an environment where not only our words, but our actions, align with our core values and behaviors. Success in this area is vital to our path forward as a company.
Now, I’ll turn the meeting back over to Steve.
Steve Strah
Thank you, John.
Transforming FirstEnergy also requires us to be efficient, resilient and innovative.
Toward that end, our FE Forward program is designed to re-evaluate our business practices and processes and make improvements to how we make decisions. We have identified more than 300 opportunities to automate processes, take a more strategic approach to operating expenditures, and to modernize experiences for our customers and our employees. We are reviewing these ideas and developing detailed, viable plans, as we prepare to implement many of them starting this year.
At its core, FE Forward is designed to support near-term financial resiliency and flexibility while opening new opportunities for long-term growth. We expect that efficiencies in capital and O&M expenditures realized through the program can be strategically reinvested into our business. There, they will support our investments in a smarter and cleaner electric grid that benefits our customers and communities.
Continuing to strengthen our transmission and distribution business is central to our forward-looking strategy and will remain so as we work to transform our company. Last year, we successfully invested nearly 3 billion dollars in projects designed to improve reliability and support our customers’ evolving energy needs. As we continue these efforts in 2021, we are confident our regulated growth opportunities are focused on electrification, hardening infrastructure against increasingly severe storms, and transitioning to a carbon-neutral economy.
On the regulatory front, FirstEnergy's Board and senior leadership team have taken proactive steps over the past several months to resolve regulatory proceedings and reduce uncertainty with our Ohio utilities. These actions include a partial settlement with the Ohio Attorney General to stop collection of decoupling revenues and the company's decision not to seek recovery of lost distribution revenue from Ohio commercial and residential customers. We also took steps to credit our Ohio utility customers approximately 27 million dollars, which comprised revenues collected through the decoupling mechanism authorized under Ohio law, plus interest. These decisions are consistent with the requirements approved under House Bill 128 and address the related rate impact of House Bill 6 on our customers.
Becoming a more diverse and sustainable company is also important to our transformation. Our updated strategic plan identifies a series of bold companywide goals targeting improvement in many key areas of our business and supporting our vision for the future.
For example, building a more diverse and inclusive workplace is an important part of our forward-looking strategy. Especially in the wake of our country’s response to racial injustices, we are focused on accelerating our D&I progress. By 2025, we will aspire to achieve a 30% increase in racially and ethnically diverse employees, both companywide and at the supervisor-and-above leadership level. We believe this effort will give rise to more fresh and innovative thinking and ultimately enable us to better serve the wide range of diverse communities in our service area.
We’re also creating a more sustainable energy future through our commitment to be carbon neutral by 2050. More near-term, we will achieve a 30% reduction in greenhouse gas emissions within our direct operational control by 2030.
We believe this greenhouse gas reduction goal aligns with our electric utility industry peers and our company’s long-term strategy. We have chosen a challenging near-term 2019 baseline, as opposed to a more traditional 2005 starting point. And to reflect our transformation as a regulated utility, we’ve included emissions associated with our transmission and distribution operations as well as our generation.
Our climate strategy outlines the steps we’ll need to take to achieve our carbon neutral and greenhouse gas reduction goals. For instance, we’ll responsibly replace aging transmission assets that emit greenhouse gas. We’ll also convert our light-duty and aerial truck fleet to electric and hybrid alternatives. Our goal is 30% electrification of the fleet by 2030 – and 100% electrification by 2050. To make progress, every new vehicle purchased for the fleet is now electric or hybrid moving forward.
In addition, we plan to complete a thoughtful and timely transition away from our two coal-fired plants in West Virginia no later than 2050. We’re working to ensure a balanced approach to this transition that considers our investors and employees, as well as the communities in which our two coal plants operate. More near-term, we intend to construct a solar generation source of at least 50 megawatts in the state, for which we’ll be seeking approval later this year.
These and other new companywide goals outlined in our updated strategic plan will help lay the groundwork for continued progress in the coming years.
I am so proud to be part of such a talented and dedicated group of employees. Delivering the energy to power our customers’ lives is an important responsibility at any time, but it has been especially vital during the pandemic – and will continue to be critical as the economy recovers.
Because of our employees’ resilience and determination, we have continued to implement our long-term growth strategies and remain confident about the significant investment opportunities in the years ahead. Our leadership team is committed to making FirstEnergy an industry leader that delivers exceptional value to our customers and shareholders.
We are eager to make progress on our transformational journey and achieve the goals that we’ve set to become a more resilient, innovative, diverse and sustainable company. Thank you for your continued support as we work toward our vision for the future of FirstEnergy.