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The cities of Cincinnati and Columbus have dismissed their state court claims against FirstEnergy and Energy Harbor for the companies’ actions relating to House Bill 6, the nuclear and coal bailout law at the heart of a $60 million corruption case in Ohio.

“The dismissal was the result of negotiations with the defendants, the court’s ruling in our favor, and the partial repeal of HB 6,” said Andrew Garth, city solicitor for Cincinnati.  

The Dec. 2 dismissal does not include any admission of wrongdoing by FirstEnergy or Energy Harbor. The joint filing was made “with prejudice,” meaning the cities cannot bring the same claims against the companies at a later time.

“The city’s claims were essentially resolved in December 2020 when the Franklin County Court of Common Pleas granted our motion to enjoin FirstEnergy and [Energy] Harbor from collecting the illegitimate fees that were authorized by House Bill 6,” Garth explained. “Additionally, the Ohio General Assembly subsequently passed legislation repealing the portions of HB 6 that were the basis for the city’s claims.”

Those portions were the ratepayer subsidies for two nuclear plants now run by Energy Harbor, which was formerly a FirstEnergy subsidiary known as FirstEnergy Solutions.

“Our lawsuit had the specific purpose of stopping FirstEnergy from collecting the rider payment that would have cost Columbus ratepayers $25 million,” said Meredith Tucker, a spokesperson for the city attorney’s office. “We won the suit, therefore they are not able to collect that money.”

The cities also will receive money to reimburse some of the lawyers’ fees and other litigation costs, Garth and Tucker noted.

The total nuclear plant subsidies for the whole state of Ohio would have been roughly $1 billion over the course of six years. House Bill 128 repealed the nuclear subsidies earlier this year, as well as recession-proofing provisions that would have let utilities guarantee revenues. So, the claims in the case have become moot.

Other parts of HB 6 remain in force, including subsidies for two 1950s-era coal plants, known as the OVEC plants. Those subsidies could total $1.8 billion by 2030. Ohio’s clean energy standards also remain gutted.

Moving ahead?

In a consolidated case, the office of the Ohio attorney general wants to move ahead with legal fact-finding procedures, or discovery, against FirstEnergy, Energy Harbor and others. As far as Energy Harbor and FirstEnergy are concerned, the civil racketeering case has been mostly idle since February.

“After all, FirstEnergy has effectively admitted its guilt in federal court,” Ohio Attorney General Dave Yost said in a Dec. 1 tweet. “Time to get to the rest of the facts!” 

The state’s lawyers are still willing to postpone discovery against former Ohio House Speaker Larry Householder and former Ohio Republican Party Chair Matt Borges. They are the only two defendants in the federal criminal case filed in July 2020 who have not pled guilty or died.

Over the summer, the state’s lawyers added former FirstEnergy CEO Chuck Jones, its former head of external affairs Michael Dowling, and former Public Utilities Commission of Ohio Chair Sam Randazzo and companies linked to him to the case.

As of Dec. 13, no criminal charges have been filed against those individuals by either the federal or state governments. Yet filings in response to the state’s motion suggest both Energy Harbor and FirstEnergy expect new criminal charges against at least some of them.

“Unindicted Defendants Are Entitled to Protection,” said Energy Harbor’s Nov. 23 filing. Its lawyers added that the Ohio attorney general has “purposefully foreshadowed imminent criminal proceedings against at least some of the Defendants.”

Concerns about interfering with defendants’ rights to defend themselves “apply equally where criminal proceedings are imminent or reasonably foreseeable,” which could especially be the case for defendants added most recently, the filing said. 

“These individuals were added as defendants precisely because of allegations connecting them to HB 6,” FirstEnergy’s Nov. 19 brief said. The company’s lawyers added that “it ignores reality to suggest that these individuals … would not ignore the Fifth Amendment if subjected to discovery requests.”

Jones and Dowling also don’t want the case to move forward, arguing there is a “very real threat of a criminal prosecution against some defendants,” which could affect key witnesses and evidence. Randazzo’s lawyer argued there is no evidence of Randazzo’s wrongdoing, but said assertions from the government suggest criminal charges could be forthcoming.

“Can there be any legitimate debate that additional, criminal proceedings are under consideration?” the brief said.

FirstEnergy entered into a deferred prosecution agreement with federal prosecutors in July. As of Dec. 12, Energy Harbor had not yet been indicted for any criminal charges in connection with HB 6. Both remain potentially liable to claims by the state of Ohio and others. 

The grant of a stay in any civil proceedings is discretionary, the Ohio attorney general’s office argued in reply. Corporations don’t have a right against self-incrimination. And “the indicted and unindicted natural defendants cannot be used as blanket shields,” the Dec. 6 brief said. Also, discovery is moving ahead in some shareholder litigation in federal court.

As of press time, Judge Chris Brown had not yet ruled on the issue.In a related development, Ohio’s 10th Circuit Court of Appeals denied Randazzo’s effort to get around Brown’s earlier order requiring a bond from Randazzo while he appeals the state’s attachment and garnishment of various assets. The Dec. 7 ruling limits Randazzo’s ability to dispose of assets that might pay a judgment against him if the state prevails in its civil racketeering case.

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The Public Utilities Commission of Ohio should conduct a big-picture, in-depth review of FirstEnergy’s spending and governance in light of the company’s admissions last month about former PUCO Chair Sam Randazzo, critics say.

“It’s not a debate anymore whether the company engaged in corruption,” said Howard Learner, executive director of the Environmental Law & Policy Center. “The company did so. With this pervasive corruption, the PUCO needs to mind the store in order to protect the public interest and to protect consumers.”

On July 22, FirstEnergy admitted it used nonprofit entities “to conceal payments for the benefit of public officials and in return for official action.” A federal court filing on the same day details multiple interactions with and payments to former House Speaker Larry Householder, who faces criminal charges for an alleged $60 million conspiracy to pass and defend House Bill 6. That nuclear and coal bailout law gutted Ohio’s clean energy standards.

The federal court filing also details FirstEnergy’s dealings with Randazzo. The former PUCO chair helped shape HB 6, and his companies received approximately $22 million from FirstEnergy entities from 2010 through 2019. According to the filing, FirstEnergy increased those payments in 2015 in exchange for Randazzo having his longstanding client, Industrial Energy Users-Ohio, drop opposition to an earlier nuclear and coal bailout plan.

FirstEnergy paid the last $4.3 million shortly before Randazzo became PUCO chair in 2019. “In return, [Randazzo] would perform official action in his capacity as PUCO Chairman to further FirstEnergy Corp.’s interests,” the filing said. That included work on HB 6 and “other specific FirstEnergy Corp. legislative and regulatory priorities, as requested and as opportunities arose.”

Ohio Attorney General David Yost has now sought to add Randazzo, two of his companies, and former FirstEnergy executives Chuck Jones and Michael Dowling to a state court civil action. But questions remain about how FirstEnergy routed the money, what amounts may have come from ratepayers, and how to prevent future abuses.

“What’s really needed is a more comprehensive investigation — at least of FirstEnergy’s operations and spending related to these various corruption schemes in Ohio, which seem to fall most directly under the PUCO’s venue,” said Dave Anderson, policy and communications manager for the Energy and Policy Institute.

‘The taint of corruption’

Soon after Randazzo resigned from the Public Utilities Commission of Ohio last November, the Environmental Law & Policy Center asked the PUCO to conduct new proceedings in several FirstEnergy cases.

“FirstEnergy’s payment of $4 million to former Chair Sam Randazzo shortly before he took over as chair of the commission is simply wrong as a matter of law, wrong as a matter of fairness, wrong as a matter of common sense,” Learner said. “It tainted PUCO’s decision-making process and injected serious concerns of bias or at least the appearance of bias.”

In the wake of FirstEnergy’s admissions, the cases “should be reopened and reexamined to remove the taint of corruption,” Learner said.

Asked if the PUCO would reconsider that ruling or conduct a broader inquiry now, spokesperson Matt Schilling noted that the commission had already denied the Environmental Law & Policy Center’s motion on Dec. 30.

A FirstEnergy spokesperson declined to comment for this story. Neither Randazzo nor an attorney believed to represent him responded to requests for comment.

Former PUCO commissioner Ashley Brown, who now heads up the Harvard Electricity Policy Group, said the multiple cases Randazzo acted in are now “contaminated.” The chair has significant control over the commission’s agenda, he added.

Schilling also noted that the PUCO already has several ongoing cases looking at FirstEnergy’s political spending or HB 6. Each case is very limited, however.

“The commission has routinely stated, ‘[while we are] aware of reports containing allegations against FirstEnergy Corp. regarding its conduct in the passage of HB 6 and the subsequent referendum, we are determined to act in a deliberate manner, based upon facts rather than speculation, and with due consideration to the limits on our statutory authority over FirstEnergy Corp. and over the political and charitable activity of all public utilities in this state,’” Schilling said.

“The administrative law judges have said a few times during prehearing conferences they have no intentions of interfering with or getting ahead of a DOJ criminal investigation,” Schilling added.

However, last month’s federal court filing has arguably resolved the criminal claims stated in it against FirstEnergy. Under its deferred prosecution agreement, FirstEnergy must honor several commitments, including payment of a $230 million fine and various corporate governance matters to be performed over a three-year period. So far, Ohio Attorney General Yost has only filed civil claims in state court.

Randazzo’s “decades-long history of advocating against clean energy” raised concerns even before Gov. Mike DeWine appointed him in 2019, and decisions during his tenure confirmed those “deep biases against renewable energy and energy efficiency,” said Miranda Leppla, vice president of energy policy for the Ohio Environmental Council.

“Given the egregious bribery claims as part of the deferred prosecution agreement, there are serious questions about the former PUCO chair’s influence over each case he presided, which are possibly tainted by corrupt ties to FirstEnergy,” Leppla continued. “There should be a full investigation of each and every one of the rulings to ensure there was no corrupting influence and to restore the public’s trust in state government.”

A ‘piecemeal approach’

After the arrests of Householder and others last summer, the Office of the Ohio Consumers’ Counsel renewed calls for a full investigation into how FirstEnergy spent a no-strings-attached rider from its earlier bailout case, along with a detailed review of whether any ratepayer money was spent for political and charitable activities, or on HB 6.

Instead of forcing FirstEnergy to hire an independent auditor, PUCO hearing examiner Gregory Price first took the “baby step” of telling FirstEnergy to show that it didn’t improperly use consumer money or violate any laws or PUCO orders in activities related to HB 6. The PUCO finally ordered a full audit of the no-strings-attached rider on Dec. 30.

Meanwhile, on Sept. 30, 2020, FirstEnergy had filed an affidavit from Santino Fanelli, its director of rates and regulatory affairs, categorically denying that its utilities had “included, directly or indirectly, any H.B. 6 costs in any rates or charges paid by ratepayers in Ohio.”

The Ohio Consumers’ Counsel wanted Fanelli to answer questions under oath last October, but FirstEnergy fought against it and the questioning didn’t take place until March. Even then, Price ruled that Fanelli didn’t have to answer questions about the no-strings-attached rider, because that charge was part of a separate PUCO case.

“Taking this piecemeal approach means we aren’t getting a full picture of the utility’s operations,” Leppla said. “As a result, the PUCO may very well overlook, or completely miss, certain pieces of this unprecedented and complex scandal.”

Parts of the puzzle already suggest that the big picture would indeed be complex.

On Aug. 3, the PUCO announced in one of the pending cases that FirstEnergy’s utilities had improperly charged customers for about $6.6 million out of $24.5 million under review there. The audit also found that roughly $7.4 million of expenses had improperly been listed as capital costs and shouldn’t be part of the company’s rate base for future ratemaking.

FirstEnergy finally supplemented its filing on Aug. 6. But it only admitted to a “total revenue impact” of $14,534, for “pole attachment rates.”

Other amounts from the last $4.3 million paid to Randazzo’s company would have bumped up the base on which customers pay FirstEnergy’s utilities an approved rate of return. However, FirstEnergy’s filing said, caps on those charges had already been reached. In other words, the company apparently used a regulated rate category to hide part of a bribe, which would have bumped up customer charges if FirstEnergy hadn’t already maxed out recoverable amounts for the category. And the company seems to suggest it shouldn’t matter to the PUCO as long as customers didn’t pay more.

“We do now have a document — an audit — that shows that FirstEnergy, through various accounting tricks, improperly allocated questionable spending to accounts that allowed them to either recover or attempt to recover certain expenses from ratepayers,” Anderson said.

On the flip side, the PUCO audit only looked at specific charges and riders. And much of FirstEnergy’s spending remains shrouded in mystery.

“You can look at the deferred prosecution agreement, in which FirstEnergy admitted to paying $22 million to Randazzo’s firm,” Anderson said. “It’s quite a washing of money going from $22 million to $14,000, and a lot of complicated stuff happening in between.” In other words, most of the $22 million is still not accounted for.

Other pending cases are looking into separate riders and charges with varying degrees of detail and scope. On July 23, however, FirstEnergy’s lawyers asked the PUCO to extend the calendars in four cases by 90 days, presumably to allow for settlement talks.

“This is money that consumers deserve to have back in their pockets and that FirstEnergy has been holding anywhere from four to nine years now,” Consumers’ Counsel attorney Christopher Healey said during an Aug. 2 prehearing conference.

Price rescheduled the hearing for those cases for the end of November, with monthly status updates before then. A resolution is unlikely before next year.

“They seem to be just piecemealing things and going very slowly with it,” Brown said. “You can’t compartmentalize this stuff.” In his view, the PUCO also should consider FirstEnergy’s compliance history for purposes of determining its utilities’ allowable rate of return.

“I can’t speculate on how the staff or commission will analyze future applications,” Schilling said.

‘The kindest thing’

FirstEnergy’s Aug. 6 update to the utilities commission also claimed it didn’t know about the improper charges noted there before July, despite its blanket denial last September.

“The kindest thing you could say about the FirstEnergy board is that they’re negligent,” Brown said. In his view, the PUCO should exercise more oversight over the company and its utilities’ governance.

FirstEnergy’s agreement with the Department of Justice does call for it to review its corporate policies and accounting procedures to make sure it complies with federal law and “to ensure the maintenance of fair and accurate books, records, and accounts.” Those reforms are supposed to include a review of lobbying and consulting contracts, as well as independent audits and periodic reviews.

On paper, FirstEnergy’s existing policies and procedures should already have prevented the activities it admitted to, Brown said. And the July 22 filing specifies that the deferred compensation agreement with the federal government does not bind “any state or local law enforcement or regulatory agency.”

Technically, the PUCO’s authority extends to utilities that provide regulated utility services to customers in return for a monopoly for a designated area. In this case, that would be FirstEnergy’s three wholly-owned subsidiaries, Ohio Edison, Toledo Edison and the Cleveland Electric Illuminating Company. However, FirstEnergy has full control over those companies, and multiple activities are coordinated through other FirstEnergy affiliates, such as the FirstEnergy Service Company.

And precedent exists for such oversight, Brown said. Back in 1985, the PUCO made Columbia Gas add more Ohioans and more independent directors to its board. The commission had found the company “stalled and delayed” on switching to lower-cost natural gas suppliers instead of its own more expensive affiliates.

“We intend to serve as critics of the utilities we regulate. Our objective is to ensure quality at a fair price,” PUCO Chair Thomas Chema wrote in the agency’s annual report for 1986. Later in that report, he noted the commission’s view “that the reorganized Board would pursue prudent, independent good management” with more independent, outside directors.

FirstEnergy’s utilities are now separated from FirstEnergy Solutions, now known as Energy Harbor. However, the July federal court filing shows that corporate actions aimed to help that former generation affiliate even after the utilities theoretically had separate boards. And FirstEnergy Solutions’ bankruptcy arguably helped FirstEnergy.

The PUCO’s “entire purpose is to ensure Ohioans have access to fairly priced, reliable utility services,” Leppla said. “It is squarely in their purview to be undertaking an investigation into FirstEnergy’s conduct as to whether that’s happening, especially after finding out that the public utility bribed public officials and regulators.”

“In light of all the indictments and revelations regarding FirstEnergy’s illegal corporate activities, the PUCO absolutely should be minding the store … when it comes to corporate governance,” Learner said. “It’s not a theoretical matter. There has been illegal action that has been found and admitted to at the highest levels of FirstEnergy.”

FirstEnergy’s admissions feed critics’ call for big-picture regulatory oversight and 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 story is part of a collaborative journalism project produced by the Energy News Network and Eye on Ohio, the Ohio Center for Investigative Journalism. Funding is provided by the Cleveland Foundation, the George Gund Foundation, and the Accountability Project at American University’s Investigative Reporting Workshop.

Dark money loopholes remain in Ohio law, despite last month’s surgical repeal of part of the law at the heart of a $60 million corruption scandal. Meanwhile, more evidence has emerged in recent months, detailing the flow of money by groups engaged in the House Bill 6 scandal and showing close ties between current and former utility lobbyists and Gov. Mike DeWine, as well as various lawmakers.

“We need to learn from our mistakes,” said Catherine Turcer, executive director of Common Cause Ohio, a group that advocates for more transparency and accountability in politics. She noted that the House Bill 6 case is just the latest in a line of corruption scandals that have rocked state politics in the past two decades.

Read more: Utility and fossil fuel interests still ahead in Ohio under House Bill 6

A federal complaint released last July alleged an unlawful conspiracy to elect lawmakers who would favor Rep. Larry Householder as House speaker, secure passage of House Bill 6 and defend it against a referendum. A court filing by FirstEnergy in March admits that millions of dollars went from one of its subsidiaries either directly or indirectly to Generation Now, the primary dark money group at the center of the alleged scheme, or to other entities alleged to have played roles. Some funds were paid at the direction of FirstEnergy Solutions, the document claims.

In addition to promptly repealing the whole law, legislators should have pursued action to prevent such a situation from happening again, Turcer said. Instead, “there was not any indication in place during the summer of a path of how to make sure we don’t create a space for misdeeds.”

Read more: FirstEnergy’s transparency pledge clashes with ongoing actions

Efforts by FirstEnergy and others to make political contributions through dark money organizations — 501(c)(4) nonprofits and some political for-profits that are not required to disclose their donors — have touched numerous entities with connections throughout the Ohio government, according to data from various sources.

The Accountability Project is a national database that collects records of federal campaign contributions, grants from nonprofits, expenditures by political action committees and more. The database also identifies shared addresses and other links among individuals and organizations.

Among other things, the database reveals that Generation Now’s address shown on a 2017 corporate filing was the same as that for co-defendant Jeff Longstreth and his business JPL & Associates. JPL & Associates was shown as the president and secretary on an October 2019 IRS filing by Generation Now.

The Accountability Project information also indicates that in 2018 Generation Now and JPL & Associates did business at a Capitol Square office tower. The same suite address was used at various times that same year for Friends of Larry Householder, the Committee to Elect Bill Roemer, Harris for Ohio and  Barhorst for Ohio.

In earlier years the same suite address had been used by the Coalition for Growth and Opportunity, which received money from an American Electric Power-funded group. The office suite is unoccupied now, but at some earlier point the suite also had been the office address for a bespoke tailoring business. (The company moved out of the space years ago, Eye on Ohio and the Energy News Network learned.)

Nonetheless, utilities and fossil fuel interests seek to continue to tailor Ohio energy policies to their benefit. Among other things, most candidates elected in 2018 whose campaigns got money from the alleged HB 6 scheme were reelected in 2020. Their incumbent statuses would have given them a bump, according to Dave Anderson, policy and communications director for the Energy and Policy Institute. Federal filings indicate substantial additional spending for the last election cycle as well, he added.

FirstEnergy and its political action committee reported more than $1.1 million in campaign donations for 2019 and 2020, primarily to Republicans, the National Institute on Money in Politics reports. Nearly half a million of that went to candidates in Ohio.

Those reported amounts don’t include spending by any dark money groups the company or other energy companies with utilities in Ohio might have donated to. The Growth & Opportunity political action committee had spent money in early 2020 to influence several Ohio primaries, Anderson noted.

Close ties

DeWine signed HB 6 into law within hours of its passage in July 2019. Even after HB 6 passed, close ties have remained between utilities and fossil fuel interests, on the one hand, and leadership in Ohio’s legislative and executive branches.

Since the federal complaint was released last July 21, DeWine has stood by Dan McCarthy, whom he appointed as his director of legislative affairs in early 2019. As a lobbyist at the Success Group in Columbus, McCarthy had long been active in state politics and has contributed to a variety of campaigns, as data from the Accountability Project shows.

McCarthy was a registered lobbyist representing FirstEnergy in 2017 and 2018, when the events alleged in the HB 6 conspiracy began, according to data from the Ohio Lobbying Activity Center. He also was president of Partners for Progress, the FirstEnergy-funded “Energy Pass-Through” organization that allegedly funneled millions of dollars into efforts to pass and preserve HB 6.

The bio released by DeWine’s office when he appointed McCarthy in 2019 shows that he had previously managed several political campaigns in addition to working for the Success Group. McCarthy resigned from Partners for Progress before assuming his current government position. 

His former Success Group colleague McKenzie Davis was a director for Partners for Progress through at least 2019, according to a November 2020 IRS filing by the group. The report also shows R. Scott Davis as president and secretary, and lawyer Michael Van Buren at Calfee, Halter & Griswold in Cleveland as treasurer. 

The IRS filing showed that $13 million went from Partners for Progress to Generation Now in 2019, plus additional amounts to other organizations for “political campaign intervention,” lobbying and “educating the public about utility options.” Funds from two of those dark money groups supported DeWine’s campaign, as well as an unsuccessful campaign by his daughter Alice DeWine, the Cincinnati Enquirer has reported.

Other lawyers at Van Buren’s firm represented FirstEnergy in cases before the Public Utilities Commission of Ohio, including one begun after news of the HB 6 scandal broke, for the purpose of determining if funds from FirstEnergy’s utility ratepayers were spent on HB 6 activities. Attorneys from Jones Day are now counsel in some of those cases.

“It looks a bit different when the lawyers who defend you work for the firm that was part of that political spending,” Anderson said. Van Buren and a colleague did not respond to an inquiry about the reason for the change.

On call

FirstEnergy was not the only utility with ongoing links to the governor’s office. An October 2019 email recently released by Common Cause Ohio last month shows that the DeWine-Husted campaign held a weekly finance call, even though they’re not up for reelection until next year. The call list included multiple people with ties to utilities and fossil fuels, including FirstEnergy lobbyist Josh Rubin of the CJR Group, Duke Energy Business Services lobbyist Chip Gerhardt of Government Strategies Group, and Ohio Coal Association lobbyist Richard Hillis of Governmental Policy Group. The Governmental Policy Group’s address has been used by several political action committees throughout the years, Accountability Project data show.

Also on the DeWine-Husted finance call list was J.B. Hadden, who has been president of Empowering Ohio’s Economy, one of the dark money groups that had also paid money to Generation Now. As of last summer, American Electric Power had contributed a total of $8.7 million to Empowering Ohio’s Economy since 2015, including $700,000 in 2019, according to company spokesperson Scott Blake. “We will continue to legally and ethically advocate on behalf of our customers and our company,” Blake said.

AEP’s vice president for external affairs, Tom Froehle, also has been a board member of Empowering Ohio’s Economy, dating back to 2016, Blake confirmed.

Froehle and AEP Director of Government Affairs Maria Haberman met with Householder in February 2020, after HB 6 was law but before the scandal broke last summer, Anderson noted. Householder’s calendar didn’t indicate what the meeting was about.

As for Empowering Ohio’s Economy, its 2019 tax filing showed more than half a million dollars going to Generation Now. Donations to several other organizations included a $25,000 contribution to the Ohio Governor’s Residence & Office Fund, which is yet another dark money group. It has spent nearly $200,000 on meetings at the residence “to promote better and more efficient government.”

Another $2 million went from Empowering Ohio’s Economy to another dark money group, Open Road Path, in 2019 “to promote economic and business development within Ohio.” Hadden did not respond to a request for additional information for this article.

Regulatory connections

Anne Vogel, former managing director of AEP’s government affairs office, became DeWine’s assistant director for energy and natural resources starting in March 2019. By July, HB 6 was passed. 

In December 2020, Vogel became a finalist to replace Sam Randazzo as chair of the Public Utilities Commission of Ohio. Randazzo resigned the day after a FirstEnergy government filing stated that the company had paid $4 million in early 2019 to an entity apparently linked to Randazzo. After criticisms surfaced about last December’s list of PUCO nominees, DeWine ultimately asked for additional names and appointed Jenifer French to the post.

The PUCO nominating council likewise has connections to utilities and fossil fuel interests. Chair Michael Koren was a registered lobbyist for FirstEnergy through 2019. He chaired the committee that nominated Randazzo for the PUCO in 2019. Ohio Lobbying Activity Center data shows Koren also has been a lobbyist for Columbia Gas and Boich Companies, which made its fortune in the Generation Now industry.

Randazzo’s calendar for the time he was PUCO chair shows multiple meetings with people from utility companies or their parent corporations, as well as with coal fleet lobbyist Michelle Bloodworth. 

“I am unaware of any meeting in which a commissioner held a discussion of pending proceedings,” said PUCO spokesperson Matt Schilling, noting that meetings otherwise “could have been regarding any number of general energy or commercial transportation matters relative [to] the delivery of adequate, safe and reliable utility service.”

Nonetheless, the Energy and Policy Institute’s Anderson said, the absence of detailed notations in the calendar presents “definitely a lot of potential conflicts.”

Accountability Project data also shows that AEP’s Froehle, Randazzo and Scott Elisar, the PUCO’s current legislative and policy director, all had worked at the same law firm, McNees, Wallace & Nurick. The firm has long represented Industrial Energy Users-Ohio, which has pushed for limiting clean energy standards, and whose members have long enjoyed favorable rates from utilities.

Still ahead

Dark money loopholes made the alleged HB 6 scheme possible. “Dark money is a breeding ground for corruption,” former U.S. attorney David DeVillers said when the indictment was filed last July. The federal investigation continues, although the pandemic delayed some grand jury proceedings, he told the Ohio Consumers’ Counsel Governing Board on March 16. In-person meetings of the grand jury have recently resumed, he noted.

“[For] a lot of these cases that have been on the back burner, you can expect to see a lot more indictments coming,” DeVillers said.

This year, House Bill 13 aims to address some dark money issues. A hearing will be held in the coming week, so there’s at least some potential for lawmakers to take action this session. But so far, Turcer said, “it’s just that they have completely dragged their feet.”

In Ohio, utility and fossil fuel influence reaches beyond bailout bill 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 story is part of a collaborative journalism project produced by the Energy News Network and Eye on Ohio, the Ohio Center for Investigative Journalism. Funding is provided by the Cleveland Foundation, the George Gund Foundation, and the Accountability Project at American University’s Investigative Reporting Workshop.

Utilities, fossil fuel interests and nuclear plants are still reaping advantages over clean energy in Ohio, despite last month’s repeal of part of the law at the heart of an alleged $60 million corruption scandal.

A federal complaint released last July alleged an unlawful conspiracy to elect lawmakers who would favor Rep. Larry Householder as House speaker, secure passage of House Bill 6 and defend it against a referendum. More than $56 million went from FirstEnergy, FirstEnergy Service Company or FirstEnergy Solutions (now Energy Harbor) directly or indirectly to Generation Now, the primary dark money group at the center of the alleged scheme, or to other entities alleged to have played roles, according to a court filing by FirstEnergy in March.

Read more: In Ohio, utility and fossil fuel influence reaches beyond bailout bill

Calls for a full repeal of HB 6 began last summer, with clean energy advocates also pushing for action to redress legislative moves that had hampered industry growth for at least seven years.

A surgical repeal of HB 6’s nuclear subsidies and utility decoupling charges was finally signed into law on March 31, eight months after the federal government released its criminal complaint. Energy Harbor (formerly FirstEnergy Solutions) indicated last December that it might want an option to decline the money in any case.

“It’s clear we haven’t seen the end of the ongoing HB 6 investigation,” said Miranda Leppla, vice president of energy policy for the Ohio Environmental Council Action Fund. As she sees it, “the rest of HB 6 was only able to pass because of the corrupt actions identified by the FBI. There is no excuse for leaving the remaining pieces of HB 6 on the books — especially when they are making our air quality worse, putting clean energy jobs at risk, and causing our electric bills to rise.”

Read more: FirstEnergy’s transparency pledge clashes with ongoing actions

It’s unclear what the partial repeal’s impact, if any, will be on Energy Harbor, now separated from FirstEnergy. Company spokespeople did not respond to requests for comment for this story.

The piecemeal repeal may be “destined to backfire if the goal is to take the heat off state lawmakers,” suggested Dave Anderson, policy and communications director for the Energy and Policy Institute. Soon, “you’ll basically have a full year where every time there’s a new revelation about the details of the corruption scandal, the question is going to be why they didn’t repeal it outright.”

Tipping the scales

For the time being, HB 6 continues to tip the scales in favor of utilities and fossil fuel interests. To the extent that it and other pending bills might suppress growth in Ohio’s clean energy sector, nuclear plants arguably benefit as well.

FirstEnergy has given up guaranteed income from revenues pegged to a year when they were unusually high. And its utilities have subsequently agreed to repay roughly $26 million collected last year, most probably through offsets.

Meanwhile, the company retains any advantage HB 6 might have provided in moving the FirstEnergy Solutions’ corporate separation and bankruptcy case along, after nearly a decade of FirstEnergy seeking regulatory and legislative bailouts for some power plants.

The law “was going to make it easier to unload Energy Harbor,” said Ashley Brown, who heads the Harvard Electricity Policy Group and previously was a commissioner for the Public Utilities Commission of Ohio. Some hearings remain in the bankruptcy case, and it’s unclear to what extent FirstEnergy might someday be liable for environmental cleanup at its former subsidiary’s coal and nuclear facilities.

“HB 6 wasn’t just a corrupt bailout of FirstEnergy Solutions’ [now Energy Harbor’s] nuclear plants with a hack and slash of Ohio’s clean energy and efficiency goals added on,” said Neil Waggoner, head of the Sierra Club’s Beyond Coal campaign in Ohio. “HB 6 was a massive handout to old, dirty coal plants.” 

For now, HB 6’s subsidies for electricity from two 1950s-era coal plants remain in place, even though one of those old plants is in Indiana. “They’re not competitive coal plants,” said John Seryak, CEO of RunnerStone. So, Ohio consumers and businesses “pay more money for electricity with no corresponding benefits” — roughly $700 million more through 2030, he told the Ohio Consumers’ Counsel Governing Board on March 16. A handful of previously planned solar projects also could get $140 million. Pending Senate Bill 117 would repeal the subsidies for the coal plants, and a first hearing was held on that bipartisan bill last month.

“HB 6 also provided a stealth bailout to FirstEnergy Solutions’ [now Energy Harbor’s] Sammis coal plant,” Waggoner said. “The FirstEnergy Solutions [Energy Harbor] CEO, John Judge, stated clearly that if the company got its massive — and now known to be corrupt — nuclear bailout, the company would rescind the retirement of the Sammis plant — an action they took not long after the ink dried on HB 6.”

Otherwise, bills for a complete repeal of HB 6 have largely stalled. Without action on them, provisions that gutted Ohio’s renewable energy and energy efficiency standards remain in place.

Prior analysis by the Ohio Environmental Council and the Environmental Law & Policy Center had found the energy efficiency standard saved consumers roughly $3.61 more per month, on average, than the cost of both clean energy programs. And a 2019 report by Resource Insight, Inc., for both organizations calculated that customers saved an additional $2 per month from the downward pressure that energy efficiency placed on the electricity market.

Wasted energy could cost Ohioans up to $5 billion, a March 2021 analysis found. Aside from wasting money, critics say gutting the clean energy standard will lead to more asthma attacks, heart attacks and other harmful health effects. 

Critics also worry about discouraging investment and job growth in the state, both from the renewable energy industry and from companies that have made commitments to reduce greenhouse gas emissions to fight climate change. Pending bills to place further limitations on wind and solar energy would place renewable energy at a greater competitive disadvantage.

“If we fail to both repeal the OVEC subsidies and reinstate energy waste reduction programs for Ohioans, we’ll continue to see an artificial reliance on fossil fuels and more demand for electricity than we would otherwise,” Leppla said. “As a result, Ohioans will breathe dirtier air and pay higher electric bills, while these bad policies also threaten Ohio’s 114,000 clean energy jobs.”

Correction: This article has been updated to clarify that John Seryak was speaking in his capacity as CEO of RunnerStone, a subsidiary of Go Sustainable Energy, of which he also is president and CEO.

Utility and fossil fuel interests still ahead in Ohio under House Bill 6 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 story is part of a collaborative journalism project produced by the Energy News Network and Eye on Ohio, the Ohio Center for Investigative Journalism. Funding is provided by the Cleveland Foundation, the George Gund Foundation, and the Accountability Project at American University’s Investigative Reporting Workshop.

Complete disclosures are still not forthcoming from FirstEnergy, Energy Harbor and others who may have played roles in an alleged conspiracy that funneled millions of dollars to former Ohio House Speaker Larry Householder in order to elect lawmakers sympathetic to House Bill 6, pass the law and then prevent voters from having a chance to reject the law in a statewide referendum.

FirstEnergy President and CEO Steven Strah said at the company’s Feb. 18 earnings call that the company is now “deeply committed to creating a culture in which … our leaders prioritize and encourage open and transparent communications with all of our stakeholders.” Strah became acting CEO last October and was formally appointed to the position on March 8, replacing Chuck Jones, who was fired for violating “certain FirstEnergy policies and its code of conduct.”

Read more: In Ohio, utility and fossil fuel influence reaches beyond bailout bill

Yet there continues to be a clash between that stated commitment and what the company has actually disclosed. In particular, the company still has not provided full details about its various contributions to dark money groups that funneled money to the Republican Governors Association, Generation Now, campaigns for Gov. Mike DeWine and his daughter, and others.

The company likewise has not provided a copy of a purported agreement made with an entity linked to former Public Utilities Commission Chair Sam Randazzo, ostensibly going back to 2013. A $4 million payment for the stated purpose of ending that agreement was among the reasons Jones and others were dismissed.

Read more: Utility and fossil fuel interests still ahead in Ohio under House Bill 6

“FirstEnergy believes that payments under the consulting agreement may have been for purposes other than those represented within the consulting agreement,” the company said in its February 2021 filing with the Securities and Exchange Commission.

Nor has FirstEnergy provided full details about other transactions noted in that filing, “which in some instances, extended back ten years or more, including vendor services, that were either improperly classified, misallocated to certain of the Utilities or Transmission Companies, or lacked proper supporting documentation.”

Asked how to reconcile the lack of explanations with a commitment to transparency, FirstEnergy spokesperson Jennifer Young repeated the company leadership’s commitment “to sharing all the information we can, when we are able to share it. However, because of the ongoing investigations, there remains information we are unable to share at this time, including that related to contributions.”

Aside from the money that might have gone to Generation Now, Partners for Progress, or the Coalition for Growth & Opportunity, other contributions are not obviously related to pending litigation involving HB 6.

Civil lawsuits against FirstEnergy, Energy Harbor and others have in part been stayed pending resolution of the criminal case. Householder and former Ohio Republican Party chair and lobbyist Matt Borges have yet to face trial. Co-defendants Generation Now, its president Jeff Longstreth and lobbyist Juan Cespedes have pled guilty. The sixth co-defendant, Neil Clark, was found dead near a pond in Collier County, Florida, on March 15.

Stays of civil litigation are sometimes granted in similar cases so defendants won’t risk incriminating themselves while defending against the civil charges, although parties remain free to avoid testifying or responding to various discovery questions under the Fifth Amendment. Neither FirstEnergy nor any of its current or former officers are named as defendants in the federal criminal case against Householder, although federal investigations are ongoing.

Energy Harbor and its officers likewise have not been named as criminal defendants at this time. Company spokespeople did not respond to multiple requests for comment for this story. The company only allows access to financial reports to registered shareholders. 

While FirstEnergy must provide periodic reports to the Securities and Exchange Commission, Energy Harbor avoids reporting. Following its emergence from the FirstEnergy Solutions bankruptcy and full separation from FirstEnergy, the company’s shares have been traded over the counter as a “pink sheet” listing, and not on any major stock exchange. Company shares fell precipitously after news of the Householder arrest, have had an up-and-down performance, and have yet to recover fully, Seeking Alpha data shows.

Meanwhile, FirstEnergy, Energy Harbor and their current and former officers have generally not had to respond to discovery in pending civil lawsuits. The March 31 repeal of HB 6’s nuclear subsidies and guaranteed revenue provisions may make certain cases moot, including cases brought by the Ohio Attorney General and cases brought by some cities on behalf of ratepayers who live there. Shareholder cases against FirstEnergy likely will continue.

A piecemeal approach

Several regulatory cases remain open with respect to whether FirstEnergy used money from ratepayers for political and charitable activities related to HB 6. The company’s annual report for shareholders filed in February noted that the Federal Energy Regulatory Commission has directed the company to retain all records relating to an ongoing audit and activities concerning HB 6. And despite an announced settlement to return about $26 million in decoupling revenues that were previously collected, FirstEnergy’s utilities will continue to face at least three regulatory cases before the Public Utilities Commission of Ohio.

After a five-month delay, lawyers for the Office of the Ohio Consumers’ Counsel finally were able to conduct a deposition in one of those cases. A deposition lets lawyers ask pretrial or prehearing questions of a witness under oath. That particular regulatory case began specifically to see if Ohio ratepayer money was spent on activities related to HB 6. Witness Santino Fanelli had provided a conclusory affidavit last fall to support the company’s claim that ratepayers didn’t pay rates, riders or charges that included HB 6 costs.

Basically, Fanelli’s affidavit said that couldn’t have happened because the rates, riders or charges weren’t designed for that purpose or weren’t included in accounts for HB 6 costs. But then the company’s written discovery responses said it couldn’t admit or deny what happened to money collected for various purposes after it went from utilities to FirstEnergy Service Company.

“I’m not aware of costs incurred by the utilities for any political or charitable spending payments that have been determined to be in support of House Bill 6,” Fanelli said multiple times during the two-day deposition on March 9 and 10. When asked about amounts improperly charged to ratepayers, as disclosed in the company’s February SEC filing, Fanelli did note that costs allocated to Ohio utilities and their ratepayers included amounts that went to Generation Now and Hardworking Ohioans, identified as “Dark Money Group 1” in the federal complaint.

“My understanding is that there’s been no conclusion reached determining that those costs are in support of HB 6,” Fanelli said, noting that the timing also preceded HB 6. FirstEnergy’s lawyers objected to various questions about what happened to funds from a credit support rider that later was found unlawful, as well as questions about how various executives’ time would have been charged to utilities.

A call to PUCO hearing examiner Gregory Price clarified that the relevant time frame was from January 2017 onward. However, Price ruled against requiring Fanelli to answer questions about the credit support rider or other matters being dealt with in parallel PUCO proceedings or audits. He later repeated those positions at a March 25 hearing, suggesting that he did not want to interfere with the federal investigation in which FirstEnergy is not a named defendant.

“Geez, how much can you piecemeal this thing to death?” said Dave Anderson, policy and communications director for the Energy and Policy Institute, after reading an unsigned transcript of the deposition. 

Compartmentalizing the issues risks that some facts may not surface or that people won’t be able to connect related facts, Anderson said. “It’s hard to see how they could get a full picture of how consumers’ money might have been spent.”

Having separate issues dealt with in multiple cases also will draw out the time for resolution of the HB 6 scandal. On April 7, the PUCO reissued a December 2020 request for proposals to audit how FirstEnergy spent nearly half a billion dollars collected from ratepayers for an unlawful but nonrefundable no-strings-attached credit support rider. An insufficient number of proposals had been received, the PUCO’s order noted.

Spending the rider money was probably separate from the improper charges noted in FirstEnergy’s February SEC filing. Those charges likely were reported to the Federal Regulatory Exchange Commission as part of a catch-all contractor category known as Account 923, Anderson said. 

There may well be more charges that ratepayers should not have paid. Anderson has estimated that 13 of the company’s utilities had paid $144 million for external affairs support over the course of three years. That category could have included a broad range of work on state and federal affairs, energy and market policy, corporate affairs, regulatory affairs, community development, and economic development, according to a 2018 audit of FirstEnergy’s practices for corporate separation.

All of these different services were overseen by Michael Dowling, the former head of external affairs, who was terminated at the same time as Jones, Anderson said.

FirstEnergy’s recent disclosures, plus an ongoing FERC audit of FirstEnergy, raise questions about what else might be discovered — and when.

“It certainly seems like this is reaching a point where it goes far beyond [HB 6] to what FirstEnergy may have used customer money for inappropriately going back many years,” Anderson said.

FirstEnergy’s transparency pledge clashes with ongoing actions 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.