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Eye on Utilities: November 2021

Preview text (for Mailchimp): We’re here to help you keep track of Ohio’s HB 6 scandal. 

This monthly newsletter provides updates on Ohio’s ongoing utility corruption scandal and is a joint project of Eye on Ohio, the nonprofit, nonpartisan Ohio Center for Journalism, and the nonprofit Energy News Network. The next edition will be sent on Tuesday, December 14

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By Kathiann M. Kowalski

The month’s developments include:

  • Continued fallout and questions about what the Public Utilities Commission of Ohio is doing in the wake of corruption claims linked to former PUCO chair Sam Randazzo.
  • A Catch-22 and other glitches for challengers in regulatory cases linked to House Bill 6, but a settlement with FirstEnergy on “significantly excessive earnings” based on an unlawful rider charge.
  • New insights into business-as-usual political spending by FirstEnergy and its former subsidiary, FirstEnergy Solutions (now Energy Harbor).
  • Progress in the legislature on restoring some limited energy efficiency benefits after HB 6, while utilities fight against ending the law’s coal plant subsidies, which could reach $1.8 billion by 2030.
  • Passage of a federal infrastructure bill funding a wide range of programs, including some clean energy and grid modernization initiatives, while also providing money for noncompetitive nuclear plants and carbon capture for fossil fuels.

Full speed ahead?

The Office of the Ohio Consumers’ Counsel renewed its call  for an independent audit of FirstEnergy’s charitable and political spending, along with a request for independent oversight, on October 26. Two days later, a PUCO hearing examiner said a ruling would be put off until a review of any “relevant and probative evidence proffered in the comments” that are now due on November 29.

OCC’s motion seems to reflect growing public distrust of the PUCO as an independent regulatory agency. And the hearing examiner’s response raises questions about whether the PUCO intends to find out the full story behind FirstEnergy’s political and charitable spending, or stick to its initial approach of basically letting FirstEnergy investigate itself.

The October 28 ruling also presents OCC and other challengers with an apparent Catch-22: Present “relevant and probative evidence” that FirstEnergy and its utilities improperly used ratepayers’ money, but do it without all the facts that an independent audit would provide — or even all the documents and testimony that challengers have said they need. OCC’s request for a mid-case appeal on certain efforts to get that information likewise remains outstanding.

Read more: FirstEnergy’s admissions feed critics’ call for big-picture regulatory oversight and review (Energy News Network)

Seeking full disclosure?

In a related case, a PUCO hearing examiner ruled last month that FirstEnergy didn’t have to produce its report showing why former CEO Chuck Jones and others were let go last year. The report and other materials could have shed more light on alleged wrongdoing by those persons and the company, as well as by Randazzo. FirstEnergy has admitted it paid $4.3 million to a company linked to Randazzo shortly before his appointment to the PUCO. 

During a November 4 pre-hearing conference for a Maryland case, however, Public Service Commissioner Odogwu Obi Linton said that FirstEnergy and its Potomac Edison subsidiary must nonetheless answer questions about the report and provide documents from its investigation. The ruling may make it harder for the PUCO to shield the materials from scrutiny as the Ohio Consumers’ Counsel pursues further action.

Pay no attention...

Dennis Chack, who had texted with Jones about Randazzo’s efforts for FirstEnergy, was a senior vice president for the company and had previously headed its Ohio operations. Before FirstEnergy let him go last year, Chack also had been president and manager of Suvon, a FirstEnergy subsidiary formed after HB 6 passed and known as FirstEnergy Advisors. 

On October 14, the Ohio Supreme Court reversed a ruling by Randazzo and other PUCO commissioners that had approved Suvon’s power broker application in April 2020. The PUCO’s “barebones order” didn’t explain how the company met relevant legal requirements. Moreover, the PUCO didn’t give the Ohio Consumers’ Counsel or the Northeast Ohio Public Energy Counsel any chance to get documents and information from the company, or any hearing on their objections on corporate separation and other issues, the court noted.

On November 3 the PUCO let Suvon withdraw its application and closed the case.  The day before, FirstEnergy Advisors had argued that the PUCO should take that action and let it submit a new application, thus providing a “fresh start” and avoiding  “any appearance of impropriety” from texts between Jones and Chack about “talking with Sam on energy license.” In other words, when the company refiles its application, FirstEnergy will want the PUCO to ignore evidence relevant to alleged corruption, despite FirstEnergy’s lawyers including that evidence with its November 2 filing.

By ruling the very next day, the PUCO did “exactly what the [Ohio] Supreme Court said not to do,” said former PUCO commissioner Ashley Brown, who now heads up the Harvard Electricity Policy Group. The commission gave FirstEnergy “exactly what it asked for—no record, no nothing. They dismissed the case without even giving the opponents an opportunity to be heard on remand.”

The Office of the Ohio Consumers’ Counsel and NOPEC now want the PUCO to broaden its corporation separation audit of FirstEnergy, pointing to the Chack and Jones texts as apparent evidence of both a violation of the separation rules and improper communications with Randazzo about a pending case. Additionally, the filing notes, although a September report found no major violations of corporate separation rules,  PUCO staff had told auditors bidding on that work not to investigate HB 6 spending.

Read more: FirstEnergy foray into energy brokering raises issues of fair competition. (Energy News Network)

Texts detail how Ohio regulator gave FirstEnergy inside help. (AP)

Seeking reform

Expect PUCO reform to be on some candidates’ agendas next year. On November 4, Cincinnati Mayor and Democratic gubernatorial hopeful John Cranley suggested firing all current PUCO commissioners and naming new ones, as well as reforming processes within the commission and restoring Ohio Consumers’ Counsel funding that was cut several years ago.

The Energy Jobs and Justice Act introduced this fall likewise proposes reforms at the PUCO. The bill would also require refunds of charges later held unlawful. HB 429 was referred to the Ohio House Public Utilities Committee on October 12. No hearings have yet been held.

Meanwhile, Randazzo remains on the hook financially in the State of Ohio’s civil case arising out of HB 6. On October 25, Judge Chris Brown refused to stay, or suspend, an order that let the state attach his assets -- including a now-infamous pink 2002 Porsche --  unless Randazzo puts up an $8 million bond pending his appeal from that order. 

Read more: “You’re fired.” Dem gov. Candidate Cranley promises to clean house at PUCO.” (Ohio Capital Journal)

Ordinary expenses?

Filings in the bankruptcy case for FirstEnergy Solutions shed new light on the extent of company spending for HB 6 lobbying and other political matters and show that such payments were treated as “commonplace.”

Filings by Akin, Gump, Strauss, Hauer & Feld, LLC said the firm’s lawyers and advisors knew about FirstEnergy Solutions’ spending for HB 6 lobbying and other political purposes, but denied being aware of any illegal activity. Roughly $2.8 million of the law firm’s nearly $68 million in fees for the bankruptcy case was for Ohio-related lobbying and political activities.

The company’s lawyers didn’t seek prior approval from the bankruptcy court for various political expenditures, even though the firm at one point charged for preparing an unfiled motion for that purpose.

Read more: Bankruptcy court overseeing Energy Harbor case didn't pre-approve $500K political donation. (Columbus Dispatch)

House Bill 6 lobbying: Push by lawyers, others on FirstEnergy Solutions’ team detailed in filing. (Columbus Dispatch)

Still spending on politics

FirstEnergy itself has had a long history of lobbying and campaign contributions. Indeed, Brown at the Harvard Electricity Policy Group, described the company as a “giant lobbying firm that runs a utility as a sideline.”

FirstEnergy did not report spending on Ohio campaigns from June through September of this year. Nonetheless, the company still shelled out half a million dollars on lobbying at the federal level from July through September, suggesting that lobbying is still central to the company’s business.

FirstEnergy’s lobbying in Congress has focused on the bipartisan infrastructure framework, grid modernization, clean energy issues, and other matters. A company spokesperson would not provide detail on what positions the company pushed for on those issues.

Among other things, the $1 trillion infrastructure bill passed on November 5 includes funding for energy- efficient weatherization, electric vehicles, and grid modernization, which could advance a transition to clean energy. The bill also authorizes $6 billion for noncompetitive nuclear power plants, as well as expanded funding for carbon capture technology from fossil fuels.

Read more: FirstEnergy and AEP still spending big on lobbying

Coal subsidies costing more

Ohioans can now expect to pay up to $1.8 billion by 2030 for HB 6’s coal subsidies to two 1950s-era power plants, according to an updated analysis by RunnerStone for the Ohio Manufacturers’ Association. Representatives of AEP Ohio, Duke Energy Ohio, AES Ohio and the Ohio Valley Electric Corporation testified against getting rid of those subsidies on October 27.

There is bipartisan support for bills to eliminate the subsidies, but not momentum. House Bill 351, is sponsored by Republicans Laura Lanese and Reggie Stoltzfus; however, comments by House Speaker Bob Cupp and House Majority Leader Bill Seitz raise questions about how far the bill will progress. Meanwhile, the Ohio Senate has yet to schedule more committee hearings on its bipartisan bill to get rid of the subsidies.

Read more: Ohio’s solar project queue on pace to surpass coal capacity this decade. (Energy News Network)

Energy efficiency after HB 6?

HB 6 supporter Seitz and HB 6 foe David Leland have nonetheless teamed up as primary sponsors of a bill to let utilities offer voluntary energy efficiency programs in the wake of HB 6.

HB 389’s potential benefits for consumers can’t be estimated until utilities propose specific programs. However, savings would almost certainly fall short of what Ohio ratepayers would have had without HB 6, due to a lower annual target and other provisions. Hearings in October raised additional concerns, such as paying incentives to utilities for energy efficiency programs, as well as lost distribution revenues.

Read more: Report: Ohio and other states losing millions from rollbacks of energy efficiency standards (Energy News Network)

Money back

In yet another case, FirstEnergy will refund $306 million to consumers over a five-year period in a settlement announced on November 1. Earlier PUCO rulings on its utilities’ “significantly excessive earnings” hadn’t figured in millions of dollars from an unlawful credit support rider. The PUCO will likely approve the unopposed settlement.

Critics have questioned whether the rider was a source of some of the roughly $60 million that FirstEnergy and its current and former affiliates spent on House Bill 6. Refunds under the new settlement agreement won’t be for the credit support rider itself, but only for some of the excessive profits FirstEnergy’s utilities reaped as a result. The Ohio Supreme Court reversed the PUCO’s earlier order favoring FirstEnergy last December. And earlier this year, lawmakers repealed an HB 6 provision that had let FirstEnergy’s utilities average among its three Ohio utilities in making the excessive earning calculations.

Read more: FirstEnergy agrees to give more than $300 million in customer refunds under settlement. (Cleveland.com)

FirstEnergy refunds renews calls for PUCO reform. (Statehouse News Bureau)

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