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This periodic 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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New developments in the saga surrounding House Bill 6, Ohio’s nuclear and coal bailout law, include:
- The Office of the Ohio Consumers’ Counsel and Ohio Manufacturers’ Association Energy Group want the Public Utilities Commission of Ohio to order financial restitution and penalties from FirstEnergy because it failed to track money from a bill charge. FirstEnergy’s money pool practices made the funds a possible source for HB 6 spending and other political activities.
- FirstEnergy has continued to fight against pre-hearing fact-finding efforts by the consumers’ counsel and others, and the PUCO has continued to block or allow delays in the production of witnesses and documents.
- Gov. Mike DeWine was briefed on the extensive ties between FirstEnergy and Sam Randazzo before appointing Randazzo as chair of the Public Utilities Commission of Ohio in 2019.
- The HB 6 corruption scandal is a prominent campaign issue with both Democratic gubernatorial candidates in the May 3 primary, although they differ in their approaches.
Asking for forfeiture
April 19 filings by the Office of the Ohio Consumers’ Counsel and the Ohio Manufacturers’ Association Energy Group ask the Public Utilities Commission of Ohio to order penalties and restitution from FirstEnergy’s utilities for millions of dollars that went into a money pool and could have funded HB 6 spending and other political activities.
The case deals with a so-called distribution modernization rider that FirstEnergy’s utilities collected from 2017 through mid-2019. The order said the PUCO would audit company spending of the money, but FirstEnergy resisted the consumers’ counsel’s efforts to get information in 2018. The Ohio Supreme Court held the charge was unlawful in June 2019, but refused to order a refund.
A few days before that court order came out, an interim report from Oxford Advisors noted that money went into a shared pool of funds and that dividends from the utilities to FirstEnergy had markedly increased in 2017 and 2018.
Former PUCO Chair Sam Randazzo and others canceled the final audit report in February 2020. A March 4 text by former FirstEnergy CEO Chuck Jones referred to Randazzo as overruling staff and others on “burning the final DMR [distributed modernization rider] report.” The PUCO finally ordered another audit at the end of 2020, five months after the first arrests in the HB 6 scandal.
This month’s filings by the consumers’ counsel and the Ohio Manufacturers’ Association Energy Group comment on the January 2022 audit filed by Daymark, which found that FirstEnergy failed to properly track the funds after they went into the money pool. Daymark could not rule out that the money was not used for HB 6 spending.
The OMA Energy Group argued that the report “raises a strong inference” not only that the money could have been used for HB 6, but also that FirstEnergy’s utilities “intentionally disguised the ultimate destination of these funds.” The consumers’ counsel stressed that FirstEnergy’s action’s thwarted the PUCO’s earlier order for periodic review “to ensure that such funds are used, directly or indirectly, in support of grid modernization.”
“Preliminarily, it seems that consumers were damaged up to $456 million,” before any added penalties, the consumers’ counsel’s filing said. Under Ohio law, triple damages could up the amount to nearly $1.4 billion. The PUCO also can assess forfeiture penalties of up to $10,000 per day, the OMA Energy Group’s filing said.
For its part, FirstEnergy argued that the unlawful rider was “unique in purpose and structure” and that Daymark should have found that the funds were used as authorized.
- FirstEnergy faces another audit as advocates and others press for broader investigations (Energy News Network and Eye on Ohio)
Discovery delayed or denied
The consumers’ counsel’s April 19 filing also asked for the “burned” final report and a chance to question Oxford Advisors under oath. The counsel’s initial motion was denied last fall by hearing examiner Greg Price, who stepped away from HB 6 cases last month after public records showed he had been involved in HB 6 matters before and after the law was passed. The Public Utilities Commission of Ohio had affirmed that ruling on March 9, but the consumers’ counsel asked the commission to “reverse course and end its impeding of lawful case preparation.” And now the consumers’ counsel wants an independent administrative law judge from outside the PUCO to rule on the issue.
Meanwhile, an April 7 order in a corporate separation case scheduled a hearing for Aug. 22. Yet the PUCO refused to extend the cut-off on pretrial fact-finding, called discovery, which Price set last year. The consumers’ counsel, the Ohio Manufacturers’ Association Energy Group and the Northeast Ohio Public Energy Council have asked the full commission to allow the discovery.
In yet another of the PUCO’s separate HB 6 cases, a hearing examiners’ March 11 order told FirstEnergy to provide the consumers’ counsel and others with thousands of documents that were turned over to the Federal Energy Regulatory Commission last year. The full commission scaled back that order to a narrow time frame on April 6 and told FirstEnergy to produce the materials by April 10. However, FirstEnergy then sought to drag turnover of the materials out through mid-June.
On April 20, a PUCO hearing examiner told FirstEnergy to produce all documents within the scope of the April 6 order by May 22. By then it will be more than 15 months since the consumers’ counsel first sought the materials, which are relevant to issues in all of the PUCO’s fragmented HB 6 cases.
“The PUCO claims it wants to follow the facts for its investigation of the FirstEnergy scandal. But the facts to follow must first be found,” said spokesperson Merrilee Embs at the Office of the Ohio Consumers’ Counsel. “Our efforts to find some of the key facts for investigating FirstEnergy are being delayed or denied. That needs to change.”
- FirstEnergy ordered to turn over HB6-related documents to customer watchdog in coming weeks (Cleveland.com)
- Judge orders FirstEnergy to turn over records tied to bribery scandal (Ohio Capital Journal)
Briefing warned DeWine about Randazzo
“Why is Randazzo so close to FirstEnergy?” asked the first page of a 198-page dossier provided to Ohio Gov. Mike DeWine before he appointed Randazzo to chair the Public Utilities Commission of Ohio. The materials came from J.B. Hadden, a lawyer who represented American Electric Power and has been on the board of two dark money organizations linked to AEP, one of which funneled roughly $900,000 to other dark money groups involved in the HB 6 scandal. Hadden also had been DeWine’s campaign treasurer from 2009 to 2015 and told the Ohio Capital Journal he had always been honest with the governor “when I think he needs to know something to aid in a decision.”
Randazzo’s position as counsel for a group of large industrial electricity users was “technically adverse” to FirstEnergy, the dossier noted. Yet “the FirstEnergy relationship has always seemed sacrosanct,” the dossier said.
Last winter, the PUCO did order a separate audit to look into Randazzo’s withdrawal of Industrial Energy Users-Ohio’s objections to FirstEnergy’s gambit to get a bailout in the case that ultimately led to the so-called distribution modernization rider. That took place around the time FirstEnergy and a company controlled by Randazzo amended a consulting agreement between them. Until the audit is done, however, the PUCO won’t let other parties conduct prehearing fact-finding relating to the arrangement.
- Former DeWine aide warned governor about utility regulator before the FBI raided his home (Ohio Capital Journal)
Corruption as a campaign issue
Democratic hopefuls to challenge DeWine both noted the HB 6 corruption scandal as a campaign issue during a candidates’ forum at the Columbus Metropolitan Club on April 19. The candidates differ in their approaches, however. Candidate Nan Whaley has called for a public accountability commission and closing of dark money loopholes. Candidate John Cranley has said he would fire all the PUCO commissioners and name new ones.
The May 3 primary for the governor’s and other statewide offices also includes races for the U.S. House of Representatives. On April 14 the Ohio Supreme Court again ruled that Ohio’s statewide maps are unconstitutional. But a federal court ruling on April 20 said it may impose the unconstitutional maps anyway if the state hasn’t enacted another plan by May 28.
- Dark money helped Ohio utilities subsidize coal plants, delaying action on climate change at ratepayers’ expense (Eye on Ohio and Energy News Network)
- Ohio federal court plans to intervene without legislative redistricting plan by May (Ohio Capital Journal)
- Dem Gov interviews: Nan Whaley on vaccines, guns, dark money, and abortion (Ohio Capital Journal)
- Dem gubernatorial interviews: Cranley talks ‘energy dividends,’ guns, health and wealth (Ohio Capital Journal)
So, who paid the bribes?
A March 24 order by U.S. District Judge John Adams repeated his refusal to pause proceedings in one of several shareholder derivative cases involved in a proposed settlement announced this winter. That ruling came the day after an affidavit in that case named former FirstEnergy CEO Chuck Jones and former vice president Michael Dowling as having “orchestrated FirstEnergy’s payments to public officials in exchange for favorable legislation and regulatory action.”
For now, it appears that depositions in the case will likely move ahead. Those proceedings let lawyers for parties question witnesses under oath before trial. The proceedings could shed more light on just where the bribery money came from, although protective orders often shield discovery materials in shareholder cases from the public unless and until they’re filed with the court.
FirstEnergy also announced a $37.5 million settlement of ratepayer class action cases stemming from HB 6, CEO Steven Strah announced during the company’s first-quarter earnings call on April 22. If approved, the settlement would resolve cases where FirstEnergy argued last fall that HB 6 somehow protected the company against ratepayer claims based on FirstEnergy’s role in corruption behind the law. Other cases seeking damages for lost value of shares continue.
Additionally, an April 21 ruling by the Federal Energy Regulatory Commission rejected a protest by Public Citizen and approved FirstEnergy’s sale of shares to investment firms Blackstone and Brookfield with representation on the company’s board of trustees. The arrangement was initially announced last fall. FERC rejected protests when FirstEnergy sold an interest in the company with board representation to investor Carl Icahn.
- Attorneys: FirstEnergy ex-CEO planned payments in Ohio scandal (Associated Press)
- FirstEnergy agrees to $37.5 million settlement to resolve ratepayer lawsuits over HB6 scandal (Cleveland.com)
- Federal ruling clears way for activist investor Carl Icahn to control two voting seats on FirstEnergy’s board (Cleveland.com)