A watchdog group shows a pattern of electric utilities supporting charities whose leaders in turn back bills or agency action favorable to companies.
A new report by a utility watchdog group attempts to show a link between utility companies’ charitable giving and political agendas.
The Energy and Policy Institute’s report, released Tuesday, notes numerous cases in which recipients of gifts from utilities or their parent corporations subsequently provided legislative testimony or regulatory comments favorable to companies’ interests.
Additionally, although it was beyond the scope of the analysis, the report notes a huge jump in donations from FirstEnergy’s Ohio utilities last year, when more than $1 million in dark money went to support candidates supportive of a bill that will subsidize nuclear and coal plants at ratepayer expense.
The report uses public data and other sources to provide case studies of corporate giving and political support from 10 large electric companies.
Three companies with electric utilities in Ohio are among the 10 profiled: American Electric Power, FirstEnergy and Duke Energy. Other case studies in the report deal with Ameren, DTE Energy, NextEra, Southern Company, Dominion Energy, Arizona Public Service and Entergy. The report is based on data for the five-year period from 2013 through 2017.
“In Ohio, charities that represent low-income and minority communities have supported bailouts for power plants owned by AEP and FirstEnergy that would be paid for by those consumers, and consumers more broadly,” said Dave Anderson, policy and communications manager for the Energy and Policy Institute.
Examples noted in the report include testimony from groups like United Way of Central Ohio and the YWCA Columbus in support of AEP’s 2014 proposed plan with subsidies for coal plants, comments in 2013 from Cincinnati-area charities favoring a Duke proposal that would have increased electric revenues by 24%, and a Cleveland clergy group’s support in 2017 for an earlier version of a bill to subsidize FirstEnergy Solutions’ nuclear power plants.
“Clearly, not all of that utilities’ charitable spending is directly political,” the Energy and Policy Institute report added.
Utilities aren’t unique in getting political benefits from corporate giving. A team of American and Canadian researchers who analyzed 20 years of data for 1,398 Fortune 500 or S&P 500 companies found “a strong circumstantial connection between corporate donations and the participation of non-profits in the political and regulatory process.” The National Bureau of Economic Research published that report in December 2018.
Organizations sometimes note an energy company’s history of providing corporate donations when they testify or comment on policy matters. For example, the Energy and Policy Institute report notes that when a representative of United Way of Central Ohio spoke in favor of a plan that would subsidize the two 1950s-era coal plants in 2014, she stated that AEP had been “an excellent corporate citizen and steadfast supporter” of the organization, and that AEP Chair and President Nick Akins was co-chair for that year’s fundraising campaign.
That’s not always the case, however. The report recommends that various disclosures be mandatory for all charitable organizations that comment or testify in utility regulatory proceedings, “for the sake of transparency and so regulators and the public can factor in that information into their analysis of the testimony,” Anderson said.
The report likewise calls for utilities to disclose charitable contributions annually to state public utilities commissions, similarly to the way the utilities’ tax-exempt charitable foundations must already report information about grants to the Internal Revenue Service.
A history of receiving corporate donations could also affect the credibility of an organization, the report suggests. A group’s support for a utility proposal to raise rates might be at odds with a mission to help people in low-income groups, for example.
Corporate ethics problems can also arise if there is an explicit or implicit expectation that organizations will provide such support to their corporate donors, Anderson said.
“The AEP Foundation has an application and evaluation process in place to ensure our support has a meaningful impact on the communities we serve,” said AEP spokesperson Scott Blake. “The need and mission of the organization are among the criteria we look at, and our process only requires that the funds are used for the purpose outlined in the application.”
“FirstEnergy Foundation donations are reported consistent with all legal reporting requirements,” said Mark Durbin, manager of external communications for FirstEnergy Corp. He provided a link to the foundation’s giving guidelines. Durbin declined to respond to additional questions.
Reports filed with the Federal Energy Regulatory Commission show a huge jump in donations from FirstEnergy’s Ohio utilities last year.
“In 2018, we found a massive uptick in total ‘donations’ reported by FirstEnergy subsidiaries in Ohio, during the same year that a wave of dark money political spending by murky social welfare 501(c)(4) groups crashed over the state,” Anderson said. “Where exactly did those donations go? We asked, and so far FirstEnergy won’t say.”
The largest jump among those utilities’ donations is shown on Ohio Edison’s 2018 annual report to FERC. That year’s donations of approximately $15 million in 2018 were more than 250 times the amount reported for 2017. The FERC forms don’t provide details on who gets such donations.
The donations reported on annual reports to FERC “must include all payments or donations for charitable, social or community welfare purposes,” the agency’s rules say. Groups organized for “social or community welfare purposes” can include organizations that are tax-exempt under Section 501(c)(4) of the Internal Revenue Code.
Section 501(c)(4) groups are not required to identify their donors on annual returns with the Internal Revenue Service. Yet they are allowed to contribute to political action committees and other organizations that in turn take part in politics.
“As we’ve seen in Ohio with House Bill 6, a 501(c)(4) or similar entity like Generation Now, Inc. can spend millions of dollars supporting passage of a new law that financially benefits utility companies, without ever fully disclosing its funders,” Anderson said.