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The monthly Eye on Utilities newsletter provides updates on Ohio’s ongoing utility corruption scandal and is a joint project of the Energy News Network and Eye on Ohio, the nonprofit, nonpartisan Ohio Center for Journalism.

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This past month’s developments in the ongoing saga surrounding House Bill 6, Ohio’s nuclear and coal bailout law, include:

  • The Office of the Ohio Consumers’ Counsel continues to face hurdles in getting information and documents at the Public Utilities Commission of Ohio. Nor does the PUCO’s order of an additional audit last month make matters easier for the consumer advocate and others.
  • Just as news breaks that one of two HB 6-supported coal plants may have to close under federal rules for coal ash ponds, Gov. Mike DeWine backs off on support for HB 6’s coal plant subsidies.
  • A federal judge dismissed a shareholder case against American Electric Power, characterizing company statements about environmental, social and governance matters as “puffery.”

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Where did the money go?

An independent audit report can’t say just what FirstEnergy did with more than $457,000 collected under a rider that was eventually held unlawful. Daymark noted that FirstEnergy used other bill riders to recover $1.7 million spent on grid modernization projects from 2017 through 2019. And the unlawful rider money went into a joint pool that hadn’t been audited in the past five years. 

The lack of tracking leaves open the possibility that FirstEnergy could have used rider money from that joint pool as a source for nearly $60 million spent by the company and its subsidiaries on dark money efforts to pass and preserve HB 6.

The audit report’s findings also suggest “pure negligence on the part of the Commission,” said former PUCO commissioner Ashley Brown, who now heads the Harvard Electricity Policy Group. Basic regulatory principles require a mechanism to make sure any special charges actually get used for a specific purpose. “It really is Regulation 101,” he said.

Before the report’s release, a PUCO staff filing opposed the Office of the Ohio Consumers’ Counsel’s efforts to question an earlier auditor, Oxford Advisers, about a draft that was allegedly “burned” at FirstEnergy’s behest. Hearing examiner Gregory Price put off ruling on the issue until at least late February, when witness testimony is currently due in a corporate separation case. The Consumers’ Counsel wants the full commission to rule on those and other matters.

The “burned” report remains relevant. FirstEnergy has long resisted the Consumers’ Counsel’s efforts to find out where the money went. Emails released last year show that the PUCO has let both its staff and utilities comment and suggest revisions to at least some supposedly independent audits before they are finalized. Any agency or company efforts to shape or suppress an earlier version of the audit may cast doubt on regulators’ independence and adherence to the law.

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Frustrations in fact finding

The Consumers’ Counsel faces additional fact-finding frustrations in the PUCO’s HB 6-related cases, including privilege claims by FirstEnergy, inability to get all materials related to firings of company executives in 2020 and 2021, and delays in getting documents requested months ago.

The Consumers’ Counsel has asked for full commission review of several of the Ohio hearing examiner’s rulings. Meanwhile, a January 6 order by the Public Service Commission of Maryland reversed a November ruling that had ordered FirstEnergy to provide that state’s consumer advocate agency with the internal report that led to the company’s firing of former CEO Chuck Jones and former vice president Michael Dowling.

A December 15 order by the Public Utilities Commission of Ohio did expand the scope of an ongoing case to include a “side agreement” relating to FirstEnergy’s earlier bailout case when former PUCO Chair Sam Randazzo represented Industrial Energy Users – Ohio. But the PUCO won’t start its investigation right away. And it has frozen other parties’ fact-finding efforts on the issue, called discovery.

PUCO Chair Jenifer French said the purpose was not to interfere with the U.S. Attorney’s criminal investigation or a state court case brought by Ohio Attorney General Dave Yost. The “side agreement” allegedly deals with action taken by Randazzo and FirstEnergy in the company’s bailout case more than four years before HB 6 was passed. However, it was apparently part of a long relationship that led up to a $4.3 million payment to Randazzo shortly before he became PUCO chair. Advocates want to probe that relationship to learn which improper or unlawful actions may have wound up costing ratepayers more.

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On second thought…

Earlier this month, Ohio Gov. Mike DeWine said he would support ending the HB 6 coal subsidies for two 1950s-era coal plants known as the OVEC plants. The move marks a switch from July 2020, when he said he still backed the law. DeWine also told Cleveland.com he would no longer accept political contributions from FirstEnergy.

DeWine’s professed shift may have little practical effect. The U.S. Environmental Protection Agency plans to deny one of the plants an extension for complying with rules for coal ash ponds. The OVEC plant in Indiana apparently told the EPA it would likely shut down if it didn’t get more time to meet the rule. And lawmakers in the General Assembly haven’t taken action since hearings last year on bills to axe the coal subsidies. FirstEnergy also said it would dial back political contributions and increase transparency under the deferred prosecution agreement announced last summer.

DeWine also said he’s open to possible PUCO reform — as long as the governor still picks the regulators. DeWine already faces criticism for having put former PUCO Chair Sam Randazzo in a position to allegedly do FirstEnergy’s bidding at the commission. And PUCO reform and ethics issues have already been made campaign issues by his likely Democratic opponents, former mayors John Cranley of Cincinnati and Nan Whaley of Dayton.

Meanwhile, applications for an open PUCO slot are due January 20. On December 30, DeWine appointed David Wondolowski of the Cleveland Building and Trades Council to the PUCO Nominating Council. The union supported House Bill 6. Wondolowski, who is also on the Cuyahoga County Board of Elections, was criticized last fall after stating at a campaign event for former Cleveland mayoral candidate Kevin Kelley, “when we win this election on Tuesday, we’re going to kick the shit out of the media.”

Wondolowski’s immediate predecessor on the nominating council was Mark Totman of the International Union Operating Engineers Local 18. That union gave more than $350,000 to Generation Now, a dark money group that pled guilty in the pending criminal case against former Ohio House Speaker Larry Householder. 

“Presumably, there are representatives from the labor community who aren’t allies of FirstEnergy that DeWine could have appointed,” said Dave Anderson, policy and communications manager for the Energy and Policy Institute.

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Assets in motion

Attorney General David Yost continues efforts to attach assets under a court order issued last year by Judge Chris Brown in the Franklin County Court of Common Pleas. A December 23 filing by Yost’s office compared movement of funds from the sale of Randazzo’s Florida condominium to parking a car somewhere else to avoid having it repossessed. And the brief noted, “electronic funds move much faster than any car.”

The court has yet to rule on that and other objections to a magistrate’s order entered in December. The ongoing disputes could affect whether the state can eventually collect against Randazzo if it wins its case against him for alleged corruption related to HB 6 and FirstEnergy.

Class actions

Class action cases continue against FirstEnergy. An amended complaint in a state court ratepayer case now aims to find out whether FirstEnergy and its subsidiaries used money from ratepayers “to fund illegal efforts to pass HB 6.” Other relief sought includes damages related to a loss of public confidence and other costs incurred as a result of the alleged HB 6 conspiracy.

Meanwhile, yet another shareholder case alleges violations of federal securities laws by FirstEnergy and various current and former officers. That case is pending in the U.S. District Court for the Southern District of Ohio.

Judge Sarah Morrison dismissed a shareholder case against American Electric Power in late December. The case had alleged misrepresentations relevant to the company’s dark money spending and HB 6. AEP’s lawyers argued that company statements pledging transparency about lobbying and political spending were “‘textbook’ puffery,” and the judge agreed.

The ruling contrasts sharply with the Securities and Exchange Commission’s announced intent to ramp up enforcement related to companies’ statements about environmental, social and governance matters.

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Revoke the charter?

Move to Amend Ohio and other groups began the new year by asking Attorney General David Yost to revoke FirstEnergy’s corporate charter because of its conduct related to HB 6. Chances that the groups’ letter will cause FirstEnergy to lose its corporate charter are nearly nil. Nonetheless, the letter fits into the Move to Amend Coalition’s larger efforts to get a constitutional amendment to reverse court rulings that have let corporations give to dark money groups with practically no limits, said spokesperson Greg Coleridge.

Case closed

U.S. Bankruptcy Judge Alan Koschik ordered the bankruptcy case for FirstEnergy Solutions (now Energy Harbor) closed on December 22. Closing the case ends the bankruptcy chapter in the saga of FirstEnergy’s former subsidiary, even as questions about Energy Harbor’s involvement in HB 6 continue. Rulings in 2020 largely insulated the former parent company from cleanup and closure costs for the Davis-Besse and Perry nuclear power plants. Some of those costs could fall on taxpayers if Energy Harbor later becomes insolvent.

Kathi is the author of 25 books and more than 600 articles, and writes often on science and policy issues. In addition to her journalism career, Kathi is an alumna of Harvard Law School and has spent 15 years practicing law. She is a member of the Society of Environmental Journalists and the National Association of Science Writers. Kathi covers the state of Ohio.