This monthly newsletter provides updates on Ohio’s ongoing utility corruption scandal. Was this forwarded to you? Click here to subscribe.

FirstEnergy’s utility customers took heavy hits from severe thunderstorms and tornadoes last month. Nearly half a million of its Ohio utility customers lost power, with extended outages causing many to lose food and incur other expenses in addition to property damage due to the extreme weather. 

All of the company’s utility customers can also expect hits from higher energy bills next year after FirstEnergy’s pending rate case ends. On July 31, the company asked Ohio regulators to let it double the increased charges sought — from roughly $94 million per year to $190.3 million annually.

Yet state regulators still have not resolved multiple FirstEnergy cases involving millions of dollars and issues related to House Bill 6, the 2019 nuclear and coal bailout law at the heart of Ohio’s ongoing corruption scandal. And none of those cases will be decided before voters cast their ballots this fall.

Other recent developments include: 

• The State of Ohio settled potential criminal charges against FirstEnergy for $20 million, without stating how the figure was arrived at or making any provision for restitution to Ohio ratepayers.
• Federal prosecutors urged the Sixth Circuit Court of Appeals to uphold former Ohio House Speaker Larry Householder’s criminal conviction and 20-year sentence.
• Ohio regulators approved more than $100 million in challenged expenses for two 1950s-era coal plants for which subsidies are mandated by HB 6.

In the dark

Grid reliability is back in the spotlight after tornadoes and severe thunderstorms knocked out power to approximately 495,000 of FirstEnergy’s Ohio utility customers on August 6.

FirstEnergy Ohio President Torrence Hinton and other company executives provided a briefing on the company’s response to the Public Utilities Commission of Ohio after its September 4 meeting. “We haven’t had this amount of customers out for about 30 years,” Hinton said.

Restoring power took roughly a week, with outages lasting more than three days for more than 100,000 of those customers, data from the company show. 

The outages likely won’t count against the utilities’ reliability requirements for this year because of the extreme nature of the storms. 

Some Ohio lawmakers like House Rep. Dick Stein, R-Norwalk, have already expressed concern about reliability, although they have framed it as a consequence of retiring coal-fired power plants and have called for more electricity from fossil fuels or nuclear energy. 

However, the vast majority of electric grid reliability problems stem from bad weather and distribution issues. Those problems are likely to worsen as infrastructure ages and fossil fuel-driven climate change makes extreme weather more common.

“Without immediate and meaningful action, climate change will continue to cause extreme weather and drive up costs for all Ohioans,” 14 Democratic Ohio House representatives wrote in an August 14 letter, calling for regulators to address the effectiveness and reliability of the state’s current energy strategies, which are heavily depending on fossil fuels and nuclear power.

Read more:

Despite millions spent on service upgrades, Ohio utilities still miss reliability marks (Energy News Network)

About 1,000 power outages linger 7 days after storms (FOX 8 News)

Doubling increased charges

FirstEnergy asked the PUCO this summer to let it double its proposed increase for rates and riders for its three Ohio utilities to $190.3 million per year, compared with the $94 million sought just two months earlier.

The requested increase is “primarily due to lower current revenues, higher operating expenses and higher rate base balances” than estimated, said Santino Fanelli, FirstEnergy’s director for Ohio rates and regulatory affairs, in testimony filed with the PUCO on July 31.

Fanelli also said the requested increase reflects the use of actual cost and revenue data instead of estimates for the first five months of the rate case’s test year. A pending bill would give utilities more leeway in using estimates, and some advocates worry companies might pad them on the high side.

In late June the PUCO selected Blue Ridge Consulting Services to help it review financial data, management policies and other information. The commission’s staff will then likely prepare a report with recommendations. Ratepayers will also have a chance to comment at local public hearings, which have not yet been scheduled but will likely include a virtual session.

Read more:

FirstEnergy companies asking Ohio regulators for rate increases (WUXU)

Ohio ratemaking reform bill would give more favors to utilities, critics say (Energy News Network)

Slap on the wrist?

FirstEnergy agreed to pay $20 million to settle its state criminal liability related to HB 6, but it’s unclear how lawyers for the utility, the Ohio Attorney General’s office and the Summit County prosecutor’s office arrived at the number. 

The amount is just under one-third of the bribes the company admitted to paying when it settled federal criminal charges against it in July 2021. The law’s nuclear bailouts would have been $1.3 billion if they hadn’t been stayed and then repealed.

The agreement with the state acknowledges the company’s cooperation but does not require any compensation to ratepayers, said Ashley Brown, a former PUCO commissioner.

Spokesperson Steve Irwin at the Ohio Attorney General’s office framed the settlement as “an important step in bringing the disgraced corporate leaders who used their positions of power to betray FirstEnergy’s ratepayers and employees and the people of Ohio to account for their crimes.” Irwin noted that the company is required to provide evidence, access to witnesses and testimony in the pending cases against former FirstEnergy executives Chuck Jones and Michael Dowling and in a civil proceeding relating to HB 6. “FirstEnergy today is not the company it was five years ago,” he added, noting steps taken to reform the company’s internal ethics program.

FirstEnergy President and CEO Brian Tierney echoed the theme in a press release, saying the company is “a stronger organization today.” 

Others are more critical.

“It is really disappointing to see the Ohio Attorney General’s office let FirstEnergy off the hook for its crimes with what amounted to more of a wink-wink than a slap on the wrist,” said Dave Anderson, policy and communications manager for the Energy and Policy Institute. He contrasted the August settlement with the potential remedies spelled out in the Ohio Attorney General’s initial civil complaint in a 2020 case, where potential punishments included corporate dissolution of FirstEnergy and penalties of triple the damages caused by allegedly wrongful actions.

Read more:

FirstEnergy to pay $20M, avoid criminal charges in state pay-to-play investigation (Akron Beacon Journal)

Ohio Attorney General Dave Yost settles with FirstEnergy for $20 million (Ohio Capital Journal)

Regulatory cases continue

Ohio voters can’t expect a resolution to any of FirstEnergy’s four HB 6-related regulatory cases before casting their votes this fall. Nineteen candidates on the ballot for Ohio’s General Assembly are among those who voted for HB 6 in 2019.

An audit in one case isn’t due before the end of September, and no date for an evidentiary hearing has been set. Two other cases about how FirstEnergy spent money from two bill riders won’t get an evidentiary hearing until next February.

A fourth regulatory case about corporate separation is set to start its hearing on October 9, when early voting will be underway. That date may move, however, because several depositions won’t take place until November and December. Depositions are sessions where witnesses answer lawyers’ questions under oath before a hearing or trial.

Questions in some of those depositions will likely follow up on information from recently produced documents. Possible topics also include why FirstEnergy fired various individuals besides former executives Jones and Dowling in the wake of Householder and others’ arrests in 2020.

Read more: 

FirstEnergy exec was fired amid bribery probe after his daughter pitched a $44k/month contract, records show (Cleveland.com)

FirstEnergy’s chief ethics officer knew about $4.3 million payment the company said was a bribe (Cleveland.com)

Rubber stamping?

Ohio regulators have approved more than $100 million in challenged 2020 expenses for two 1950s-era coal plants. HB 6 lets the plants’ Ohio utility owners pass costs on to ratepayers through 2030. By then the total subsidies could be around $1 billion, according to RunnerStone, a consultant for the Ohio Manufacturers’ Association.

“Consumers once again got stuck with the bill,” said Ohio Consumers’ Counsel Maureen Willis when the August 21 ruling came out.

The PUCO found that while the auditor, London Economics International, made several recommendations and conclusions critical of the coal plants’ practices and spending, the firm hadn’t come straight out and said any amount should be disallowed.

Paul Arbaje, an energy analyst for the Union of Concerned Scientists, said the ruling “sets a disturbing precedent. Coal-fired electricity is not only terribly destructive to our climate and public health, but it’s also completely uneconomical and has been for a long time.”

Higher capacity prices in the PJM grid region will take effect next June and could offset some of next year’s coal subsidies under HB 6. However, critics say the old plants will still be a bad deal for Ohioans. And higher capacity prices will affect wholesale electricity prices across the regional grid footprint, likely raising energy expenses overall.

Read more:

Ohio coal plant subsidies still a bad deal for ratepayers despite growing generation demand, experts say (Energy News Network)

HB 6 coal plant charges mount up again in Ohio (Energy News Network)

Coal company got big payback from HB 6 (Energy News Network)

Federal court filings

Briefing has been completed in lobbyist Matt Borges’ appeal from his federal criminal conviction alongside former Ohio House speaker Larry Householder last year. The court has not yet scheduled oral argument.

Federal prosecutors filed their brief in the Householder case on August 26, arguing that the trial court got both Householder’s conviction and his 20-year sentence right. Three groups also filed a friend-of-the-court brief on August 30, countering Householder’s argument that bribes were campaign donations and a form of speech protected under the Constitution.

“The First Amendment provides no protection for the corrupt and knowing exchange of campaign contributions for official acts,” wrote lawyers for the Campaign Legal Center, the Environmental Law & Policy Center and the Brennan Center for Justice at New York University School of Law.

A July court filing in FirstEnergy’s deferred prosecution agreement case acknowledged the company has performed its obligations under that 2021 settlement, which resulted in a $230 million penalty. FirstEnergy must continue to cooperate in any other criminal cases the federal government brings relating to facts stated in that HB 6 case. However, the federal government has yet to bring criminal charges against any current or former FirstEnergy executives who allegedly made the bribes.

A separate case at the Sixth Circuit Court of Appeals involves FirstEnergy’s challenge to Judge Algenon Marbley’s May 6 ruling that the company must produce its internal investigation to lawyers in shareholder litigation. The appeals court docket includes friend-of-the-court briefs filed by several law firms and a malpractice insurance carrier, expressing concern about whether the ruling could erode attorney-client privilege.

Read more:

On appeal, DOJ affirms ex-Ohio House Speaker Householder took FirstEnergy’s $60 million ‘secret deal’ (Cleveland.com)

Scandal-tainted FirstEnergy demands appeal of ‘shockwave’ privilege ruling (Reuters)

FirstEnergy backed by dozens of law firms in ‘shockwave’ privilege appeal (Reuters)

HB 6 Updates: More bill charges on the way while cases continue is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.

The pair of 1950s-era coal plants bailed out under Ohio’s House Bill 6 law are likely to remain unprofitable even after a surge in grid operator payments to generators, experts say. 

The PJM Interconnection grid market makes capacity payments to line up power to meet expected demand in the years ahead. Aging, uneconomical coal plants are being retired at a time when data centers and manufacturers are starting to use more electricity, causing future power generation prices to rise.

But even record-high prices in PJM Interconnection’s recent capacity auction won’t cover the hundreds of millions of dollars in subsidies paid by ratepayers to cover Ohio utilities’ costs for the Ohio Valley Electric Corporation’s Kyger Creek and Clifty Creek power plants.

“Even with a super high price, OVEC is still going to be in the red,” said Neil Waggoner, Midwest manager for the Sierra Club’s Beyond Coal campaign.

The ratepayer subsidies are a result of HB 6, the 2019 state law at the heart of the largest corruption scheme in Ohio’s history. Republican legislative leaders have blocked all efforts to repeal the coal subsidies from coming to a floor vote.

This year alone, ratepayers are on track to pay nearly $200 million to prop up the two plants, one of which is in Indiana. By 2030, total ratepayer costs from the bailout could exceed $1 billion, according to RunnerStone, a consultant for the Ohio Manufacturers’ Association.

Starting next summer, the payments for generators to be ready to supply electricity when PJM Interconnection needs it will jump to about nine times the current rate for most of the grid operator’s service region. 

“Put simply, the market pays participants for the promise to produce electricity when called upon by PJM,” said Daniel Lockwood, a spokesperson for the regional grid operator. An auction sets the levels for each year’s capacity payments, and the payments go to generators that bid the clearing price or less.

A spokesperson for the power plants did not directly answer the Energy News Network’s question about whether both cleared the latest PJM auction, although he described the auction results as “positive.”

“The auction results were a positive development for the OVEC plants and are more broadly a signal to the market that additional generation resources are needed in the PJM region,” said Scott Blake, a spokesperson for American Electric Power and Ohio Valley Electric Corp. While the HB 6 rider charges depend on multiple factors, the impact of the 2025/2026 capacity pricing “is expected to be positive for customers,” he said.

AEP is OVEC’s largest shareholder, along with other utility companies in Ohio and other states.

HB 6’s OVEC subsidies currently require Ohio’s residential utility customers to pay between $1.30 and $1.50 per month, depending on whether their utility is owned by AEP, AES Ohio, Duke Energy or FirstEnergy, according to PUCO data from spokesperson Brittany Waugaman. Businesses pay for the rider, too. The HB 6 rider’s net total costs last year were more than $148 million.

Doing the math

While capacity payments will reduce the OVEC plants’ total costs to Ohio ratepayers, the revenue won’t, in itself, make the plants profitable.

Expert testimony from a Michigan case last year found the OVEC plants would need capacity payments averaging about $418/MW-day for several years to become economical. Last month’s record-high price that will take effect next summer was about $270/MW-day.

Economic analyst Devi Glick of Synapse Energy Economics testified in the case on behalf of the Sierra Club.

“To massively oversimplify the economics of the OVEC plants, there are two categories of costs and two categories of revenues,” Glick told Energy News Network. “Costs are on one side of the equation and revenues on the other.”

Based on then-current projections for costs and energy market revenue, Glick calculated what the plants’ capacity revenues would have to be for the equation to balance out.

Several caveats would apply, Waggoner acknowledged, including any differences from last year to this year that could affect projected energy revenues. Nonetheless, he noted, a significant gap would remain.

Glick’s estimate of about $418 as a break-even capacity price for the OVEC plants is realistic and may even be conservative now, said John Seryak, managing partner for RunnerStone.

“PJM is no longer paying for a coal plant’s full power capacity anymore under new rules it created just prior to this capacity auction,” Seryak explained. “That could mean that OVEC needs even higher-priced capacity and energy to be profitable.”

“Future energy market prices, OVEC’s future coal costs, and OVEC’s environmental compliance costs will also be important factors determining the extent of its losses or profitability,” Seryak continued. “All that said, we do not anticipate OVEC operating at a profit without further price increases.”

Meeting energy demand

Blake emphasized the OVEC plants’ role as a “reliable generation resource for our customers and for our region,” adding that the HB 6 rider “ensures that customers in Ohio receive electricity from OVEC for what it costs to produce it and the funds are used to pay down debt with no proceeds going to shareholders.”

That’s not exactly correct, said attorney Kimberly Bojko at Carpenter Lipps, who represents the Ohio Manufacturers’ Association in cases at the Public Utilities Commission of Ohio. “Customers pay the cost to operate and run OVEC and the power produced from OVEC is then sold into the wholesale electric market,” she said. Any revenue offsets the costs of HB 6’s coal subsidy.

The Ohio Manufacturers’ Association also has disputed the use of the HB 6 rider to pay down the OVEC plants’ debt in cases before the PUCO.

“By using ratepayer funds to pay down its debt, AEP Ohio is essentially shifting its bad debt to the Ohio ratepayers,” Seryak said. “It’s akin to if a person forced their neighbor to pay for their mortgage payment.”

“Customers pay for more than just OVEC’s debt, though,” Seryak added. “Customers also pay for losses in the energy market OVEC incurs. When this occurs, it means the electric grid does not need OVEC for reliability. Instead, OVEC is burning coal pointlessly at a loss and charging it to Ohio’s ratepayers.”

Ohio coal plant subsidies still a bad deal for ratepayers despite growing generation demand, experts say is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.

This monthly newsletter provides updates on Ohio’s ongoing utility corruption scandal. Was this forwarded to you? Click here to subscribe.

Ohio utility regulators will continue to consider four FirstEnergy cases related to HB 6 separately, despite requests by the utility, customer advocates, and others to combine the cases. Meanwhile, intervenors say the timeline set in two of the cases puts them at a disadvantage as they struggle to keep up with several hundred thousand pages of discovery documents.

Other recent developments in Ohio’s ongoing utility corruption scandal include: 

• Text messages show Gov. Mike DeWine played a more active role in soliciting money from FirstEnergy than was previously known.
• A former FirstEnergy executive plans to call both DeWine and Lt. Gov. Jon Husted as witnesses at his criminal trial.
• Former Ohio House Speaker Larry Householder is advancing a new argument on appeal from his criminal conviction in federal court last year.

Piecemeal approach continues at PUCO

The Public Utilities Commission of Ohio is sticking with a piecemeal approach to four HB 6-related cases despite requests earlier this month from the company and challengers asking for different degrees of consolidation.

FirstEnergy wanted issues in three HB 6 cases to be considered together next year, and would have split a fourth case over whether the company improperly used ratepayer money to subsidize affiliated businesses, including FirstEnergy Solutions’ unregulated coal and nuclear plant operations.

The Office of the Ohio Consumers’ Counsel, Ohio Manufacturers’ Association Energy Group and several other parties urged the PUCO to consolidate all four HB 6 cases. In addition to the corporate separation case, one case requires FirstEnergy’s utilities to show ratepayer money was not used for charitable or political purposes, and the other two deal with the company’s use of funds from two riders. 

Regulators stayed all four cases in mid-2022 after a request from the federal prosecutor’s office. Administrative Law Judge Jacky St. John ruled last week that the commission would not order further consolidation beyond its combination of the two rider cases when the stay was lifted in late February. 

“The Commission is vested with broad discretion to manage its dockets,” she wrote, adding that more delay was not warranted.

Critics see the decision not to combine the cases as a missed opportunity for a big-picture review of FirstEnergy’s operations and governance in the wake of HB 6.

“I don’t understand the logic,” said Ashley Brown, a former PUCO commissioner. “It’s hard to find any public policy or private interest not to consolidate.”

Multiple cases also require duplicative efforts and increase legal costs. “The commission is making us try HB 6 cases multiple times,” said Kim Bojko, an attorney for the Ohio Manufacturers’ Association Energy Group. 

The PUCO “seems like it’s still piecemealing it and kicking some of the can down the road, while trying to fast-track the rest,” said Dave Anderson, policy and communications manager for the Energy and Policy Institute. He noted the commission’s limited approach to addressing the HB 6 case began under former PUCO chair Sam Randazzo, who died from an apparent suicide this spring after criminal indictments in federal and state courts, plus charges of legal ethics violations.

Read more:

• Eye on Utilities: All hush-hush (Energy News Network)
• Freeze of regulator’s HB 6 cases could further harm Ohio consumers (Energy News Network/Eye on Ohio)

A ‘punitive’ schedule

The PUCO set schedules in its June 21 orders which call for testimony in the rider cases to be filed in early August, with an evidentiary hearing set to start later that month. 

Testimony in the corporate separation case must be filed in September, with a hearing to start in October. The PUCO also said it would move ahead in that case without an additional audit on the HB 6-related issues. A 2021 report by Daymark Energy Advisors found no major violations of corporate separation, but noted the company hadn’t gotten numerous documents for the time period relevant to HB 6. 

An independent audit still has not been completed in the political and charitable spending case. That case doesn’t have a hearing date yet. 

Several intervenors have raised concerns about the pace, noting that it’s still unclear when pre-hearing fact-finding will wrap up. The commission put that process on hold for a year and a half after federal prosecutors asked for a pause in state regulators’ investigations as they pursued criminal cases related to HB 6.

FirstEnergy still has not produced all the documents parties in the four cases asked for nearly three years ago, because the PUCO didn’t require the company to comply with earlier document requests when it stayed the cases.

From February through mid-June of this year, FirstEnergy produced roughly 725,000 pages of documents. “We just got another 500 pages last week,” with more still to come, Bojko said. Yet now she and other parties will have to file witnesses’ testimony in roughly six weeks without knowing whether they’ll have all the documents.

“It’s punitive,” Bojko said, adding that lawyers for intervening parties are still scrambling to try to review the materials they’ve recently gotten. In her view, factors that frustrate intervenors’ ability to prepare their cases will work to FirstEnergy’s advantage.

Maureen Willis, agency director for the Office of the Ohio Consumers’ Counsel, said the office is evaluating the PUCO’s approach to the cases. 

“OCC will continue to advocate for a fair process that allows all the facts to come out,” Willis said.

FirstEnergy spokesperson Jennifer Young declined to comment due to the ongoing nature of the proceedings.

Read more:

• Regulators’ foot-dragging on public records hides the full story behind Ohio’s utility corruption scandal (Energy News Network/Eye on Ohio)

Spotlight on DeWine and Husted

Newly revealed documents show Gov. DeWine played a larger role in soliciting money from FirstEnergy executives than was previously known.

FirstEnergy and its affiliates gave roughly $4 million to dark money groups supporting DeWine and Husted’s 2018 campaigns. Less than a month before the election, DeWine texted Chuck Jones, then CEO of FirstEnergy, to set up a call. Three days later, Mike Dowling, then a FirstEnergy vice president, texted Jones to let DeWine know $500,000 was going to a dark money group called State Solutions.

Other texts recently obtained by journalists show Husted trading statements about Ohio energy policy with Dowling in the summer of 2018. Documents produced earlier show Husted also performed “battlefield triage” to assure the appointment of Randazzo to chair the PUCO.

DeWine claimed he didn’t remember the call. Spokesperson Dan Tierney told the Energy News Network the texts “all document legal campaign fundraising and independent expenditures,” which have been previously reported. “The Governor follows all applicable campaign finance laws,” he added. Husted spokesperson Hayley Carducci did not respond to Energy News Network’s request for comment.

The newly produced documents don’t show a bribe or quid pro quo, and neither DeWine nor Husted has been named as a defendant in any criminal or civil cases relating to HB 6.

However, the timing so close to the election raises questions, Anderson said, because DeWine’s campaign staff likely knew FirstEnergy executives and the company’s political action committee would already have reached their limits for direct campaign contributions. Under federal campaign finance law, candidates are not supposed to coordinate fundraising or other activities with groups that make so-called independent expenditures in political races.

Read more:

• ‘Call Mike DeWine on the $500k:’ Governor’s text sparked dark money payment, texts show (Cleveland.com)
• Phenomenally corrupt or insanely incompetent? What is Ohio Gov. Mike DeWine’s deal? (Ohio Capital Journal)
• Text messages link DeWine to FirstEnergy dark money payment (Dayton Daily News)
• Gov. DeWine says he doesn’t remember text soliciting FirstEnergy for campaign cash (Toledo Blade) 
• New texts allegedly show Ohio Lt. Gov. Jon Husted leading FirstEnergy’s push for House Bill 6 (News 5 Cleveland)

On the witness list

Dowling, the former FirstEnergy vice president, listed both DeWine and Husted as potential witnesses in a June 18 filing in the state of Ohio’s criminal case against him, Jones and two companies that were controlled by Randazzo. The two also have received subpoenas in civil cases filed by FirstEnergy shareholders.

Others on Dowling’s witness list include former American Electric Power executives Nicholas Akins and Tom Froehle. AEP holds the largest interest among Ohio electric utilities in the two 1950s coal plants that ratepayers continue to subsidize as a result of HB 6. An estimate by RunnerStone for the Ohio Manufacturers’ Association found Ohioans will pay nearly $1 billion for those subsidies through 2030.

Jones was also named as a defendant in the case against Dowling, along with Randazzo and two companies he controlled before his death. The state is still pursuing charges against those companies, said Steve Irwin, press secretary for Ohio Attorney General Dave Yost.

Read more:

• Ex-FirstEnergy executive lists DeWine, Husted as possible witnesses in bribery trial (Columbus Dispatch)
• FirstEnergy VP Dowling plans to call DeWine and Husted to the stand in corruption trial (News 5 Cleveland)

Householder and Borges appeals

Former Ohio House Speaker Larry Householder wants to add an argument to his appeal of a criminal conviction in federal court last year. A June 11 filing argues Judge Timothy Black erred in instructing Householder not to talk about his ongoing testimony while he was still under oath during an overnight break on March 1 last year. Householder’s lawyers did not object to the instruction, and the judge told Householder he could otherwise talk with his attorneys.

The government has objected to allowing the extra argument, first raised months after Householder’s initial brief of more than 16,000 words was filed in late February. Even if the court doesn’t allow the extra argument, a June 21 filing said the government still needs another four weeks to file its response.

Briefing in lobbyist Matt Borges’ appeal from his criminal conviction in last year’s federal trial should wrap up by the end of this month, unless his lawyers ask for more time to reply to the federal government’s brief.

Householder is currently serving a 20-year sentence, and Borges is serving a five-year sentence. Their appeals are pending before the Sixth Circuit Court of Appeals.

HB 6 Updates: Ohio regulators continue piecemeal review is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.

This monthly newsletter provides updates on Ohio’s ongoing utility corruption scandal. Was this forwarded to you? Click here to subscribe.

Regulators cut most of FirstEnergy’s energy efficiency proposal when they modified and approved the company’s latest rider plan on May 15. The plan would have been the first time FirstEnergy offered energy efficiency programs to most residential ratepayers after 2019, when lawmakers passed House Bill 6. The nuclear and coal bailout law at the heart of Ohio’s ongoing corruption scandal gutted the state’s energy efficiency and renewable energy standards.  

Other new developments include:

• Ohio regulators’ approvals also include an extension and increases to one of the riders at issue in cases linked to HB 6.
• FirstEnergy must produce its internal investigation about the HB 6 corruption scandal to plaintiffs in shareholder cases, a federal court ruled. Yet the company still won’t give the reports to the Ohio Consumers’ Counsel and others in cases before the Public Utilities Commission of Ohio.
• Recently produced documents revealed more information about money flowing from FirstEnergy to dark money groups that supported Gov. Mike DeWine and Ohio Senate President Matt Huffman.
• State criminal cases against two former FirstEnergy executives are moving ahead, while government briefs are expected soon in the federal court appeals for former Ohio House speaker Larry Householder and lobbyist Matt Borges.

Efficiency proposal limited

Ever since the state’s infamous 2019 energy law gutted utility-run energy efficiency programs, Ohioans have been on their own when it comes to finding ways to conserve energy.

In a significant test of state regulators’ interpretation of that law, FirstEnergy recently proposed collecting money from ratepayers for a portfolio of energy efficiency programs, including rebates, energy audits, and educational campaigns to help residential and some business customers lower their energy use and monthly bills.

The Public Utilities Commission of Ohio last week mostly rejected the proposal, approving education programs plus financial incentives for low-income customers. Yet the order also concluded that HB 6 does not prohibit utilities from voluntarily offering such programs — a reversal from its position in a 2020 Duke Energy case under former PUCO chair Sam Randazzo.

“[T]he repeal eliminated the mandate that utilities run energy efficiency programs,” the May 15 order says, “leaving intact other important statutory provisions that allow for voluntary programming, if approved by the Commission.” 

Energy efficiency programs can save money on customers’ energy bills because it reduces the need for electricity. The need for less electricity also cuts greenhouse gas emissions that drive human-caused climate change. And lower demand reduces strain on the electric grid, which can bolster resilience and reduce capacity market costs.

Nonetheless, the regulators accepted arguments by the Office of the Ohio Consumers’ Counsel, the Retail Energy Supply Association and others that FirstEnergy’s broad program isn’t needed because competitive markets offer opportunities for energy efficiency. The Environmental Law & Policy Center, Ohio Environmental Council and Citizens Utility Board of Ohio had argued that utility-sponsored programs are cost-effective and allow for hassle-free energy savings.

Supporters hope a bipartisan bill to allow utility-run energy efficiency programs on a broader, voluntary basis will soon be back on track and get a vote by the full Ohio House of Representatives. Last-minute objections by a Koch-linked group delayed a vote last fall.

Read more:

• How a Koch-linked group stalled a bipartisan Ohio energy efficiency bill at the last minute (Energy News Network)
• Ohio ratemaking reform bill would give more favors to utilities, critics say (Energy News Network)

Rider renewed

The PUCO’s other rider approvals with changes include a charge for called a  Delivery Capital Recovery rider. The charge is meant to spur the utility to make capital investments in its infrastructure beyond charges that are already covered in its regular distribution rates. The PUCO’s modifications exclude charges for equipment which isn’t in service yet. Regulators also limited charges to particular categories used for federal regulatory reporting.

The ruling approves higher caps for annual increases. At the same time, the order also states charges for the DCR rider will be set back to zero once FirstEnergy’s new distribution rates take effect. The commission can consider the rider on “a more holistic basis,” the 163-page order said.

Earlier years’ charges for the DCR rider are at issue in one of the PUCO’s four HB 6-linked cases. The PUCO’s May 15 order refused to hold off on new charges until that case is resolved.

A 2021 audit report in that case found roughly a quarter of the DCR rider charges for earlier years were improper. Those charges include some linked to Cleveland entrepreneur Tony George, whose name came up multiple times in exhibits introduced at last year’s criminal trial of former Ohio House Speaker Larry Householder and lobbyist Matt Borges.

It’s unclear yet whether any parties to the newer rider case will ask for rehearing or file an eventual appeal.

Read more:

• New FirstEnergy rate plan starts June 1. How are customers affected? (Akron Beacon Journal)

New rate case

FirstEnergy plans to apply for new distribution rates on May 31, said spokesperson Lauren Siburkis. Standard rates for households using 1,000 kilowatts per month could increase nearly $6 for customers served by FirstEnergy’s Cleveland Electric Illuminating Company, according to a May 1 filing. Projected increases would be lower for customers in the Ohio Edison and Toledo Edison territories.

The company’s last full rate case was in 2007. The new case results from a PUCO order issued soon after Randazzo’s connections to the HB 6 scandal became public and he resigned from the agency in late 2020. A 2019 order while he was still chair would have let FirstEnergy avoid filing a rate case by any certain date.

Pending legislation calls for utilities to file full rate cases at least once every five years. Yet the House and Senate bills would still let utilities add extra charges between rate cases, while limiting fact-finding in matters before the PUCO. Other provisions in HB 260 cut back on requirements for notices about rate cases and could more generally limit groups’ ability to participate in those proceedings.

Read more:

• Ohio ratemaking reform bill would give more favors to utilities, critics say (Energy News Network)

What did the investigation find?

FirstEnergy should produce its internal investigation to plaintiffs in shareholder litigation, U.S. District Court Judge Algenon Marbley held on May 6. FirstEnergy hadn’t met its burden to show the two reports were protected by either attorney-client privilege or a doctrine to protect attorneys’ work product. The judge also agreed there was a substantial business reason for the reports, which weighs against a finding of privilege.

The Office of the Ohio Consumers’ Counsel has since repeated its request for FirstEnergy to produce the internal investigation in pending regulatory cases. The company refused, based on a PUCO ruling from three years ago. A hearing officer refused to allow a mid-case appeal of that ruling to the full PUCO on April 25.

“It is disappointing (but not surprising) that FirstEnergy continues its lawyered-up efforts to block public scrutiny of information that could provide much needed answers to consumers about the HB 6 scandal,” said spokesperson Merrilee Embs at the Office of the Ohio Consumers’ Counsel.

Read more:

• Judge rules FirstEnergy must share HB 6 probe OCC has been pushing to gain access for years (Akron Beacon Journal)

More dark money

Recently produced documents continue to shed light on FirstEnergy’s spending on dark money groups, consultants and more. Materials produced to Floodlight, the USA TODAY Network Ohio Bureau, the Ohio Capital Journal and the Energy News Network show an additional $2.5 million went from FirstEnergy to dark money groups that supported Gov. Mike DeWine.

DeWine’s office has denied knowing about the donations. The funding was in addition to more than $1 million of spending reported back in 2021.

Other recently produced documents show $300,000 went from FirstEnergy to a dark money group called Liberty Ohio in 2019 and 2020, Cleveland.com reported. Emails and text messages suggest the payments were meant to help Ohio Senate President Matt Huffman, who denied knowledge about the funding. As Senate President, Huffman has substantial control over which bills make it to the floor for a full vote.

Additional materials suggest some bills submitted to FirstEnergy in 2018 for a company called Jobob, Inc. were meant to secure payments for Dennis Kucinich, Cleveland.com reported. The time period coincides with when FirstEnergy was making separate payments through dark money groups to entities controlled by Householder.

Kucinich, a former Cleveland mayor and congressional representative, had recently lost a bid for the Democratic gubernatorial nomination. Earlier this year, he broke with his former party, attended the Conservative Political Action Conference and is now running as an independent congressional candidate. Kucinich has denied any financial relationship with FirstEnergy, including statements in a lawsuit against the Plain Dealer and Cleveland.com.

The invoices purport to be for consulting on blockchain technology. FirstEnergy spokesperson Jennifer Young said she could not comment on past consulting contracts due to ongoing litigation.

Read more: 

• FirstEnergy gave $2.5M to GOP governors’ dark money group backing DeWine’s 2018 bid (Columbus Dispatch)
• Ohio Gov. DeWine said he didn’t know of millions in FirstEnergy support. Is it plausible? (Ohio Capital Journal)
• FirstEnergy was billed $5,000 a month for bitcoin consulting that emails say came from Dennis Kucinich (Cleveland.com)
• FirstEnergy paid $2.5 million secret payment to nonprofit backing DeWine in 2018, new records show (Cleveland.com)
• Huffman denies raising dark money, despite claims from FirstEnergy lobbyists (Cleveland.com)

Criminal case updates

The federal government’s briefs in Householder’s and Borge’s appeals are currently due May 28 and May 22, respectively, unless further extensions are granted.

Householder’s arraignment on state court charges has been postponed until May 23. Technical glitches prevented Householder, who is at a federal prison in eastern Ohio, from participating remotely on May 13 to hear the charges against him and enter a plea.

The state’s other criminal case is also moving ahead against former FirstEnergy executives Chuck Jones and Michael Dowling, despite co-defendant Randazzo’s death last month.

State prosecutors have opposed Jones and Dowling’s motion to find that FirstEnergy was not a victim of their alleged crimes. In addition to its May 2 brief, a May 10 filing provided additional details about their alleged theft from FirstEnergy.

Lawyers from the office of Ohio Attorney General David Yost are working with local prosecutors on the case. Yost had been identified as a possible government witness in the criminal case against Householder and Borges last year.

Read more: Ohio AG Yost is prosecuting others in utility scandal, but he won’t discuss his own involvement(Ohio Capital Journal)

HB 6 Updates: FirstEnergy riders approved, with changes is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.

This monthly newsletter provides updates on Ohio’s ongoing utility corruption scandal. Was this forwarded to you? Click here to subscribe.

Attorneys representing FirstEnergy shareholders say the company is needlessly dragging out pre-trial discovery by taking “up to eight bites at every apple,” while the death of a key figure in the Ohio’s House Bill 6 scandal underscores a growing sense of urgency among plaintiffs and prosecutors to gather evidence and testimony before it’s lost to time.

Here are the key developments since our last newsletter:

• Sam Randazzo, Ohio’s former top utility regulator, was found dead of an apparent suicide soon after a second criminal indictment and an ethics complaint were filed against him. FirstEnergy admitted in 2021 that it bribed Randazzo, although he denied liability.
• A newly revealed company email shows FirstEnergy gave $1 million to a group that supported Lt. Gov. Jon Husted’s 2017 gubernatorial campaign before he eventually became Gov. Mike DeWine’s running mate and worked behind the scenes to win support for the HB 6 power plant bailout. 
• A special master in the HB 6 shareholder cases recommends letting discovery move ahead for fact witnesses but delaying depositions of experts until after an appeals court rules on whether the litigation should move ahead as a class action.
• Larry Householder, the former Ohio House speaker currently serving a 20-year sentence in federal prison, faces additional charges in state court, including allegations about criminal activity even after his arrest on the federal charges in 2020.

Regulator’s death leaves questions unanswered

Columbus firefighters found Randazzo’s body April 9 during a wellness check after he missed a scheduled court check-in. Randazzo had faced state and federal criminal charges, including allegations of corruption and embezzlement. He also was a defendant in the state of Ohio’s civil action, in which the Ohio attorney general took action to freeze various assets.

Randazzo also faced disciplinary charges for alleged ethical breaches that could have cost him his law license after nearly 49 years as an Ohio lawyer. When Randazzo failed to answer those charges, the Ohio Board of Disciplinary Conduct had said it planned to make a finding of default and refer the case to the Supreme Court of Ohio.

Randazzo’s death makes it less likely the public will ever know the full extent of what actions he may have taken at FirstEnergy’s behest, both during the HB 6 scandal and in prior years, as well as how those actions may have increased charges for FirstEnergy utilities’ customers. 

Read more:

• Gov. DeWine, Lt. Gov. Husted won’t comment on Randazzo’s death amid largest corruption trial in Ohio history (News5/Cleveland)
• Ex-Ohio utility regulator Sam Randazzo could face discipline for breaking attorney rules (Columbus Dispatch)
• The 911 call requesting a wellness check for Sam Randazzo that led to his body being found has been released (WOUB)

FirstEnergy’s ‘Golden Boy’

Lobbyist and HB 6 co-defendant Neil Clark, whose 2021 death was ruled a suicide, once referred to Ohio Lt. Gov. Jon Husted as the “Golden Boy” for FirstEnergy. Newly revealed company emails obtained by a group of news organizations shed light on the utility’s relationship with the politician, including a $1 million payment to a dark money group that backed Husted’s 2017 campaign for governor.

Husted has not been charged with wrongdoing relating to HB 6, and a spokesperson said his campaign was not affiliated with Freedom Frontier, the group that received the $1 million. The spokesperson has not responded to other questions about when Husted learned about the donation or the group’s support for his first gubernatorial campaign.

The payment by FirstEnergy raises more questions about his behind-the-scenes actions to help the company get a bailout for struggling nuclear and coal plants. Also: What was Husted’s role at the December 2018 dinner with FirstEnergy executives just before they firmed up payment arrangements with Randazzo weeks before he became chair of the Public Utilities Commission of Ohio? 

Read more: 

• FirstEnergy gave $1 million to boost Ohio Lt. Gov. Jon Husted’s campaign before scandal, document shows (Energy News Network)
• FirstEnergy gave $1 million through dark money group to back ‘Husted Campaign’ (Cincinnati Enquirer)
• Ohio Lt. Gov. Husted won’t say if he knew about $1M dark-money contribution (Ohio Capital Journal)

Shareholders — and the public — want answers

Even before Randazzo’s death, the special master in FirstEnergy’s HB 6 shareholder cases noted how delays risk the further loss of evidence. “As time moves forward, memories fade, and this problem will likely worsen,” Special Master Shawn Judge wrote in a March 15 recommendation to let factual discovery resume in those cases.

“Moreover, as time has passed, potential witnesses [have] been indicted and one witness, Neil Clark, even committed suicide,” Judge added. Randazzo, who was not a party to the case, had fought against providing more documents and information before his indictments and subsequent death.

Fact-finding in the proceedings has been on hold since December 1, after FirstEnergy asked for a stay while appellate judges review whether the court properly let the litigation move ahead as a class action. Although Judge wants factual discovery to move ahead, he recommended continuing a stay on expert discovery, which could be affected by the higher court’s ruling.

Judge Algenon Marbley still needs to approve the special master’s recommendation, as well as his rulings on other issues, such as production of FirstEnergy’s internal investigation report.

Objections by FirstEnergy and other defendants prompted shareholders’ lawyers to complain in an April 8 filing that FirstEnergy was taking “up to eight bites at every apple” throughout the case, leading to unnecessary delays. “FirstEnergy is burying the Court in paper, making it near impossible for it to render decisions in a timeframe that would allow the merits of this matter to be decided in a timely manner,” they wrote.

Attorneys are not supposed to file motions solely for purposes of delay, although lawyers have an ethical obligation to represent clients diligently within the bounds of the law. Resolving each round of objections, motions for stay and requests for reconsideration takes time. 

“We are unable to comment on ongoing litigation,” said FirstEnergy spokesperson Jennifer Young.

Meanwhile in state court…

A March 29 filing by Ohio Attorney General Dave Yost details how prosecutors allege that former FirstEnergy executives Chuck Jones and Michael Dowling, together with Randazzo and companies run by him, engaged in a “largescale covert scheme” starting in 2010 to criminally corrupt the chair of the PUCO, steal millions from a utility company and a group of large energy users, fake a contract to cover up a side deal in a ratemaking case, and tamper with government records for financial and lobbying disclosures.

A potential witness list in the case includes current and former PUCO commissioners and other current and former FirstEnergy executives and lobbyists. Others on the list include Gov. Mike DeWine’s counselor and former chief of staff, Laurel Dawson, whose husband lobbied for FirstEnergy and who apparently received a 198-page dossier that warned about the company’s ties to Randazzo before he was appointed to the PUCO. DeWine has supported Dawson even as she has declined to comment on Randazzo’s appointment. Dawson’s husband also is on the witness list.

Lawyers for Jones and Dowling have asked the court to delay a status conference in the case from April 19 until May 2. Both also asked the court to let them take part via Zoom if Judge Susan Baker Ross requires their attendance.

Former Ohio House speaker Larry Householder also now faces state criminal charges. While the charges arise out of the HB 6 scandal, they are distinct from the federal charges for which he is now serving a 20-year sentence.

Some of the indictment’s ten counts include claims that Householder continued to engage in criminal activity even after his arrest on federal charges in July 2020, including an alleged theft of $1.2 million from a campaign fund. Conviction on a related theft-in-office count could bar him from serving again in public office in Ohio if he winds up being released from federal prison.

In another twist, Dave Wondolowski, the grand jury foreperson who signed the Householder indictment, is known to have been a supporter of HB 6. Data from OpenSecrets also show the union Wondolowski leads gave $14,000 to Householder’s campaign in the 2019-2020 election cycle.

Read more: 

• DeWine’s adviser knew about a $4.3M payment to Randazzo. She isn’t answering questions (Columbus Dispatch)
• Editorial: Widen corruption probe (Toledo Blade)
• New charges filed against ex-Ohio House Speaker Larry Householder (Columbus Dispatch)
• Cuyahoga County grand jury foreperson lobbied publicly for House Bill 6. Why was he allowed to hear case against Larry Householder? (Cleveland.com)

HB 6 Updates: ‘As time moves forward, memories fade’ is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.