It has been three years since Ohio lawmakers first introduced the power plant bailout legislation that is now at the heart of the largest corruption case in state history.
Since House Bill 6 passed in 2019, an FBI investigation has revealed a $60 million bribery scheme, leading to extensive admissions by FirstEnergy — a utility company central to the scandal — and guilty pleas from three defendants in a federal criminal case.
Beyond that, though, accountability has been slow to come, and HB 6, which also gutted the state’s clean energy standards, remains on the books.
Just as the Intergovernmental Panel on Climate Change’s latest report notes how vested interests have blocked progress on climate change mitigation, the HB 6 scandal shows how utility, fossil fuel and nuclear interests have framed Ohio energy policy, even when that policy conflicts with voter preferences on renewable energy.
By definition, corruption involving public officials undermines democracy. It lets the expectation of financial gain, increased power or other benefits take priority over public officials’ duty to act in the best interests of the public they are supposed to serve. And it circumvents voters’ rights to participate in shaping public policy.
The alleged corruption behind HB 6 also undermines public trust in the integrity of state government, critics have said.
“In Ohio, in the wake of HB 6, we’re seeing just how tied together energy issues are with the state of our democracy,” said Neil Waggoner, Ohio senior campaign representative for the Sierra Club’s Beyond Coal campaign. In his view, the scandal didn’t just bail out nuclear and coal plants or roll back clean energy standards. “It’s a direct assault on government accountability and transparency.”
Even after the corruption was exposed in 2020, the state’s elected leaders didn’t fully investigate and fix the problem, Waggoner continued. Instead, key people involved in HB 6 stayed in office. House Speaker Larry Householder, who was arrested by the FBI in July 2020, won re-election and remained in office until June 2021. In fact, all 45 lawmakers who backed HB 6 and were up for election in November 2020 won their races.
“They dug in and fought to maintain the status quo,” Waggoner said.
“That’s all part of this broader question of why is it that we give outsized influence to special interests in our politics,” said Matthew Hodgetts, an expert on environmental politics at Case Western Reserve University in Cleveland. A small number of very wealthy individuals and corporations “have basically monopolized climate policy for generations now.”
And, he adds, “they are very open about what they are doing.”
As of 2020, Ohio, with the seventh largest population, used the fourth largest amount of electricity among all the states.
Roughly 81% of Ohio’s net electricity generation comes from fossil fuels, with another 15% from nuclear. Just 4% comes from renewables other than hydropower.
Prior to 1999, Ohio had a regulated electricity market, where utilities provided both generation and distribution. A 1999 law called for a deregulated electricity market, but transition plans postponed the growth of that market. Then a 2008 law set the stage for a competitive market to take off. The same law also established Ohio’s initial clean energy standards.
Ohio utilities were active in state politics and campaign giving before then. FirstEnergy and related parties reported more than $200,000 in campaign donations for five of the 10 years from 2000 to 2009. American Electric Power gave more than $100,000 for five years in that same time range.
By 2010, however, utilities’ generation affiliates faced competition. Expansion of the natural gas sector from fracking and horizontal drilling increased that pressure. Meanwhile, costs for renewables were falling.
Reported campaign contributions from utility, nuclear and coal interests jumped substantially. FirstEnergy gave more than $560,000 in 2010 and nearly $785,000 in 2012. Combined giving from the utility, coal and nuclear industries exceeded $3.3 million in 2018.
But reported campaign donations don’t tell the whole story.
The Supreme Court’s 2010 decision in Citizens United v. Federal Elections Commission set the stage for even higher levels of unreported political spending through for-profit or nonprofit dark money organizations.
“What’s interesting is the line we try to draw between what are legitimate contributions and a bribe. There is no clear line,” said Ashley Brown, a former PUCO commissioner who headed the Harvard Electricity Policy Group.
People often understand a bribe to mean giving something of value in exchange for policy action. But most companies who make political contributions likely expect favorable treatment from officials they back, Brown noted.
FirstEnergy and others who gave to dark money groups stood to gain a lot from HB 6. The law earmarked about $1 billion in statewide ratepayer subsidies for two former FirstEnergy nuclear plants over the course of six years. The subsidies were repealed in 2021. Yet they arguably helped advance the bankruptcy for FirstEnergy Solutions (now Energy Harbor) after other efforts to get coal and nuclear plant bailouts fell short. FirstEnergy also benefitted from recession-proofing provisions that pegged revenues to 2018 levels.
Other Ohio utilities also benefited. HB 6 codified subsidies for two 1950s-era coal plants, known as the OVEC plants. Those subsidies have cost roughly $240 million since 2020 began, while adding approximately 23 million tons of greenhouse gases to the air.
The Ohio House eventually expelled Householder in June 2021. He faces a trial on criminal charges next year, along with lobbyist Matt Borges, who previously chaired the Ohio Republican Party. Two other individuals and the dark money group Generation Now filed guilty pleas. Another co-defendant, lobbyist Neil Clark, died of an apparent suicide last year after writing a tell-all book that, among other things, claims Ohio Gov. Mike DeWine received a $5 million bribe from FirstEnergy.
FirstEnergy has also implicated the former chair of the Public Utilities Commission of Ohio, Sam Randazzo. DeWine was apparently told that Randazzo had close ties to FirstEnergy before the appointment in early 2019. Randazzo’s anti-renewable stance was well known.
Randazzo denied wrongdoing but resigned in November 2020, days after FBI agents searched his home. Before then, Randazzo helped shape HB 6. And he steered the PUCO’s actions on calls for repeal and a full regulatory investigation.
The regulatory response has continued to be a piecemeal approach, with no comprehensive audit of FirstEnergy’s activities by state regulators. A lack of transparency and limits on challengers’ ability to conduct pre-hearing fact-finding have raised ongoing concerns.
Dominated by dark money
The crimes alleged in the HB 6 scandal focus on bribery, money laundering and conspiracy by public officials and others as part of a corrupt racketeering enterprise. Misuse of nonprofit social welfare organizations was part of the alleged crimes.
Spending lots of money in politics is not itself a crime. Under Citizens United, corporations can spend almost unlimited amounts on political issues or advocacy, as long as the spending isn’t coordinated with a candidate’s campaign.
Yet the line between what’s coordinated and what’s not can get blurry. Money can go through multiple organizations before it’s spent for ads or other activities. And there’s limited, if any, reporting on the financial backers of different groups. Any reporting that does happen often comes more than a year after elections.
These circumstances make it nearly impossible for voters to be fully informed about which business interests are pushing different agendas. There’s also little accountability for many misleading political ads. Ads to thwart a referendum on HB 6 touted a bogus Chinese conspiracy, for example.
In some instances, FirstEnergy subsidiaries or other HB 6 backers gave money directly to Generation Now, the group at the center of the bribery scandal. In other instances, the companies funded groups, such as Partners for Progress, which in turn gave to Generation Now. Once Generation Now or any other group got money, it could spend the funds directly or send them to other organizations in the subsidy saga, such as the Growth & Opportunity PAC.
For-profit organizations that operate as dark money groups don’t have to publicly name their sources of revenue and spending. Hardworking Ohioans and Ohioans for Energy Security were two such groups in the HB 6 scandal. Both now seem to be defunct.
Nonprofit social welfare organizations functioning as dark money groups don’t have to publicly disclose their funders, either. The Internal Revenue Service does require those organizations to publicly report grants to other groups. However, reporting often occurs more than a year after elections occur.
The time frame can be even longer for newly formed groups. Generation Now was set up in February 2017, but its first IRS report wasn’t filed until October 2019. And, like a game of whack-a-mole, an identified group can duck out of sight after transferring funds to another organization.
Given such complications, Energy News Network and Eye on Ohio could trace only about $3 million out of an estimated $15 million behind HB 6 as of March 2020. The Department of Justice’s July 2020 complaint identified approximately four times that amount.
Common Cause Ohio, the Brennan Center for Justice and Voters’ Right to Know have advocated for legislative fixes. For example, any group’s “independent” ad might be required to identify the group’s top three financial backers as an ad airs or is sent out. That could help somewhat, but would still require detective work if the backers themselves are other dark money groups.
Advocates for dark money spending sometimes argue for a right to anonymous speech, while supporters of transparency argue there’s no absolute right, especially when it comes to influencing elections.
Citizens United left the door open for requiring disclosures about dark money group funders. But last year’s decision in Americans for Prosperity v. Bonta may have closed that door most of the way. The 6-3 ruling held that any disclosure requirements must be “narrowly tailored” to meet a “sufficiently important” government interest. The majority also accepted the challenger’s claim without requiring any actual showing of a burden on free speech, Justice Sonia Sotomayor noted in her dissent.
“Nobody knows where that money is coming from. So there’s a lack of accountability,” said Ohio Rep. Juanita Brent, D-Cleveland Heights.
And lobbyists for companies and others that fund dark money groups often want to stay in the shadows.
“FirstEnergy Corp. used the 501(c)(4) corporate form as a mechanism to conceal payments for the benefit of public officials and in return for official action,” a company statement admitted in July 2021.
Many politicians also have little incentive to require detailed reporting on dark money.
“You’re not going to hold the purse strings accountable because you’re dependent on the money,” said Brown, the former PUCO commissioner.
Leaders in the Ohio General Assembly also pressure individual legislators to vote as the leadership wants. The HB 6 complaint alleges that Clark warned one lawmaker that “people who vote against Householder lose a lot,” such as committee chair positions, the ability to move their own bills ahead, and financial help from the party caucus. That financial help generally includes access to donor and registration lists.
Rigging the system
If enough people are dissatisfied with elected representatives, they can theoretically vote them out of office. But gerrymandering has effectively ensured one-party rule in Ohio’s legislature, making it difficult for voters to hold politicians accountable for unpopular policy actions.
“It’s believed that they can get away with it, because they’re so secure in those districts,” said Ohio Sen. Nickie Antonio, D-Lakewood. Since 2013, Republicans have enjoyed supermajorities in both houses of the General Assembly, while also holding the governor’s office.
In statewide elections over the past decade, roughly 54% of Ohioans have voted Republican, compared to 46% Democrat. Yet mapmaking practices such as “cracking” and “packing” have given Republicans veto-proof majorities of nearly 76% in the Ohio Senate and about 64% in the Ohio House.
Ballot measures in 2015 and 2018 amended the state constitution to set up a redistricting commission. The goal was to use a transparent process to reflect statewide voter preferences without undue advantages for either party.
Yet so far the Ohio Supreme Court has four times rejected the GOP-dominated redistricting commission’s maps for the Ohio General Assembly. April filings by commission members argue they should not be held in contempt for a last-minute switcheroo of slightly tweaked versions of the earlier unconstitutional maps for ones developed by independent mapmakers.
When districts lean strongly for one party over another, challengers may find it hard to justify spending time and money to flip legislative seats. At the time of Householder’s arrest, for example, no opponent had filed to run against him in the November 2020 election. Write-in candidates filed to run afterward. Yet Householder still got 71% of the vote.
It’s unclear what will happen with Ohio’s gerrymandering crisis. For now, bills for a complete repeal of HB 6 remain stalled at the Ohio legislature. And although the nuclear subsidies are gone, proposed repeals of nearly $288,000 per day for coal plant subsidies have stalled since October. AEP Ohio, Duke Energy, AES Ohio and the Ohio Valley Electric Corporation all testified against both bills. One of the two subsidized 1950s-era plants isn’t even in Ohio.
“We are watching democratic erosion unfold,” said Hodgetts at Case Western. “And yet we seem helpless to stop it. … At the end of the day we ended up at a place where the politics is really not driven by the people.”