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Newly disclosed texts from a former head of the Public Utilities Commission of Ohio suggest he knew a grid modernization charge that cost ratepayers nearly half a billion dollars was “likely to be found illegal and could not be refunded.”

Former PUCO Chair Asim Haque and former FirstEnergy Vice President Michael Dowling exchanged text messages on the same day the Supreme Court of Ohio held the charge unlawful. Challengers in the case had argued that the commission’s order imposing the charge basically had no strings attached to make FirstEnergy take any specific actions to modernize the grid.

At the same time, the court ruled against refunding the charge. By that time in 2019, Ohio ratepayers had spent roughly $456 million.

“And knowing that it would likely be found illegal and could not be refunded, I knew you would hold onto the funds,” Haque wrote. 

The text suggests the ruling wasn’t a surprise to him and that the failure to provide for any refund in the 2016 order was deliberate.

The court ruling and text message exchange were in June 2019, more than two months after Haque’s resignation. Haque is now a vice president at grid operator PJM.

In an email response to Eye on Ohio and the Energy News Network, Haque maintains the exchange was a joke. But advocates for Ohio ratepayers aren’t laughing.

“This is just wrong and improper on its face,” said Howard Learner, executive director of the Environmental Law & Policy Center, which has challenged FirstEnergy bailout efforts since 2014. “The former PUCO chair, whose job was to protect consumers by ensuring fair utility rates, is cozying up to a FirstEnergy senior executive and suggesting that he intentionally did favors for the utility.”

“Once again, this undermines public confidence in the fairness and integrity of PUCO’s ratemaking process,” Learner added.

“When you break this down, the first thing that [Haque] says is that he knew that his ruling was likely to be found illegal. And he made the ruling anyway,” said attorney Rob Kelter, also at the Environmental Law & Policy Center.

“The second part of it is that he knew the money couldn’t be refunded, and that part of his thinking was that he knew FirstEnergy would be able to hold onto the money because of the longstanding prohibition against retroactive ratemaking,” Kelter said.

“It speaks volumes about his integrity as chairman,” Kelter added.

A transcript of the texts was among thousands of pages FirstEnergy provided to the Office of the Ohio Consumers’ Counsel as part of an ongoing and protracted effort by the state’s consumer advocate to get materials relating to the ongoing House Bill 6 corruption scandal. The Energy News Network and Eye on Ohio received the document in response to a records request.

Money wasn’t tracked

Audits by the Federal Energy Regulatory Commission and by Daymark Energy Advisors released earlier this year found that FirstEnergy’s regulated utilities put the rider money into a money pool managed by an unregulated affiliate. After that, FirstEnergy failed to track how the funds were spent.

“[G]iven the inability to trace how Rider DMR funds were spent, we cannot rule out with certainty use of Rider DMR funds in support of the passage of H.B. 6,” Daymark wrote. DMR stands for “distributed modernization rider.”House Bill 6 is the 2019 law at the heart of Ohio’s ongoing corruption scandal. FirstEnergy has admitted that it and its affiliates paid roughly $59 million to dark money groups to benefit former Ohio House Speaker Larry Householder and others. In return, lawmakers passed the nuclear and coal bailout law that also gutted Ohio’s clean energy standards. Additional actions by the dark money groups thwarted a referendum voters would have been entitled to under Ohio’s constitution.

The nuclear bailout and utility recession-proofing provisions have been repealed, but the rest of the law remains in place.

Dowling and former FirstEnergy Chair and CEO Chuck Jones were identified in March as having authorized payments to the dark money organizations and to former PUCO Chair Sam Randazzo in response to U.S. District Court Judge John Adams’ question, “Who paid the bribes?”

Because FirstEnergy’s actions have thwarted auditors’ efforts to track the spending, the Office of the Ohio Consumers’ Counsel and Ohio Manufacturers’ Association Energy Group have asked the PUCO to order restitution and impose penalties on FirstEnergy up to $1.4 billion dollars. The consumers’ counsel referenced the texts in its May 4 reply comments on the Daymark audit.

“Distressingly, we learned from FirstEnergy’s discovery responses that it apparently was known within the PUCO that the DMR charges would likely be found illegal and that, even so, FirstEnergy would get to hold onto the funds,” the filing said.

“Now the PUCO can right some of this wrong for two million Ohio consumers” by ordering substantial forfeitures and damages of $456 million tripled, per Ohio law, it concluded. That request is distinct from the refund request that the court ruled on three years ago.

Other questions

“It’s up to Chair Randazzo now to find a path for you,” Haque also texted in 2019.

Haque may not have known about the $4.3 million FirstEnergy admitted paying to a company linked to Randazzo shortly before DeWine named him as PUCO chair in 2019. Haque likewise may not have known about the additional $18 million FirstEnergy paid to that company while Randazzo was representing a group of large industrial energy users in multiple cases before the PUCO, including the one that led to the unlawful rider.

Nonetheless, Haque’s comment raises a question about whether he thought part of his job at the PUCO had been to “find a path” for FirstEnergy. 

The PUCO’s stated mission is “to assure all residential and business consumers access to adequate, safe and reliable utility services at fair prices, while facilitating an environment that provides competitive choices.”

“Remember me fondly, my friend,” Haque also texted Dowling. “It was the regulator that annoyed you the most, that simultaneously gave you the most: DMR and grid modernization spend. I should have a small picture in memoriam in those hallowed halls in Akron,” likely a reference to FirstEnergy’s headquarters.

Dowling’s responses to that initial comment included a frowning emoji. “Are you talking about your just found to be illegal DMR?” Dowling asked.

That comment suggests the concept for the rider came from the PUCO. Support for that idea also comes from a 2016 FirstEnergy filing. It said the company liked the PUCO’s idea of a distribution modernization rider, but wanted $558 million per year instead of the $131 million the PUCO suggested.

Haque’s last text on June 19, 2019, stated, “I’m kidding around with you albeit my timing is probably bad.” Nonetheless, he added, the DMR rider “was a lot of work so I feel bad it was overturned.”

“My text exchange with Mike Dowling was tongue-in-cheek based on my previous contentious interactions with him and the company,” Haque said in an emailed comment to the Energy News Network and Eye on Ohio. “You will see at the bottom of the text message that I say that I’m kidding. FirstEnergy was not a fan of mine, and the notion of my picture in the halls of their Akron headquarters would have been especially absurd.”

“While I’m unable to comment on the text exchange itself, there are not photos of regulators hanging in our offices,” said FirstEnergy spokesperson Jennifer Young.

Haque also said his “response to Dowling about knowing, three years prior, how a 4-3 Ohio Supreme Court decision would turn out is purely sarcastic.” The rider was “infinitely smaller than what the company wanted, and they demanded. FirstEnergy was not pleased,” he added. 

“I am proud of my work as a regulator in Ohio,” Haque concluded. “I have never been a subject of this investigation and I stand on my record in defending the interests of Ohio ratepayers.”

“I just think his words speak for themselves,” Kelter said.

Former PUCO chair texted he knew FirstEnergy charge was likely unlawful, but company would keep money anyway 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 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.

Got a question? Story idea? Send tips or comments to info@eyeonohio.com.

New developments in the saga surrounding House Bill 6, Ohio’s nuclear and coal bailout law, include:

• The Public Utilities Commission of Ohio doubles down on its piecemeal approach to FirstEnergy’s HB 6 cases, limiting challengers’ fact-finding even after a regulatory judge, who had also acted on the policy side of the bailout law, withdrew from the cases.
• FirstEnergy and others are fighting against the Ohio attorney general’s efforts to move ahead in the state’s civil conspiracy case.
• One federal judge wants more facts before approving settlement deals in a FirstEnergy shareholder case, while another rejects a move to dismiss claims for damages.
• Despite apparent efforts to delay full inquiry into various HB 6 issues until after the elections, critics continue calls for increased scrutiny and reform, including the launch of an advocacy group’s “Crime with DeWine” campaign. 

‘Who paid the bribes?’

U.S. District Court Judge John Adams walked out of a March 9 court hearing when a FirstEnergy lawyer evaded his question of who paid bribes relating to HB 6 matters.

The hearing in Adams’ court dealt with a proposed settlement of several shareholder derivative cases. Under the deal, insurers would pay FirstEnergy $180 million, minus lawyer fees for the plaintiffs in the cases. Adams also wanted to know why plaintiffs were agreeing to settlements before questioning any current or former company executives under oath.

“You are not here to answer my questions. You are here to duck and avoid,” Adams told FirstEnergy’s lawyer, Jeroen van Kwawegen.

Van Kwawegen tried to shield the information as part of settlement discussions between the parties, but Adams’ follow-up order on March 11 cast doubt on that argument. He gave parties until noon on March 16 to file briefs.

Former PUCO commissioner Ashley Brown, who headed the Harvard Electricity Policy Group, noted the contrast between Adams’ approach and the PUCO commissioners’ adherence to a more tempered approach that same day. “It’s just astounding to read these things back-to-back,” he said.

It’s unclear who approved all the payments involved in the scandal. FirstEnergy statements attached to a Feb. 18 filing at the PUCO indicate that the company’s former head of external affairs, Michael Dowling, approved at least $1 million of payments to Generation Now in 2017. The filing also shows that former executive Joel Bailey approved a 2018 payment to Hardworking Ohioans. Both organizations acted as dark money groups in the alleged HB 6 conspiracy.

Read more:

• ‘Who paid the bribes?’ Federal judge demands info on House Bill 6 in hearing over FirstEnergy shareholders’ litigation (Cleveland.com)
• Judge demands answer on bribe payments in corruption scandal (Associated Press)
• Who paid the bribes? Judge demands answers in FirstEnergy shareholders’ suit (Ohio Capital Journal)

Maintaining consistency

Regulatory judge Gregory Price withdrew from four FirstEnergy House Bill 6 cases on March 4, following multiple news reports showing he had acted on the policy side of HB 6. Former PUCO Chair Sam Randazzo looped Price in on communications before the law passed in 2019 and after calls for repeal following the arrests of former Ohio House Speaker Larry Householder and others in July 2020.

Critics stressed the potential for bias and the appearance of impropriety if someone in a judge-like role may have already taken a position on an issue, especially when allegations against Randazzo raised the specter of corruption within the PUCO. 

Yet on March 9, the PUCO commissioners doubled down on their piecemeal approach to the controversy and affirmed Price’s latest refusal to allow prehearing fact-finding by the Office of the Ohio Consumers’ Counsel.

Specifically, the order refuses to let the consumers’ counsel get a never-finalized audit report on an unlawful FirstEnergy rider. The order likewise bars the consumers’ counsel from questioning the auditor, Oxford Advisors, under oath prior to the hearing in the case. The PUCO will produce someone from Oxford Advisors at the hearing in the case. But the inability to take a deposition will arguably limit challengers’ ability to prepare cross-examination of that witness.

Texts by former FirstEnergy executives suggest Randazzo may have had Oxford Advisors’ draft report “burned” at the company’s behest. Yet the PUCO order dismissed arguments about unusual circumstances as “nothing more than unsubstantiated speculation.” And it treated issues about whether the rider might have funded HB 6 activities as limited to another case.

Comments by PUCO Chair Jenifer French and Commissioner Daniel Conway accepted ownership of the rulings in the FirstEnergy cases, although neither spoke about the corruption allegations relating to FirstEnergy or Randazzo.

Regulatory judges in cases “work for us, and the decisions that are made are made by us, not by utility examiners,” Conway said. French said the ruling “maintains consistency by treating OCC’s request for information as it has treated other requests of this nature in the past.”

Read more:

• Ohio regulatory judge steps back from FirstEnergy’s HB 6 cases after subpoenaed records reveal his role (Energy News Network/Eye on Ohio) 

Another limited audit

Also on March 9, the PUCO said it would hire an outside auditor in a case opened in September 2020 to find out if ratepayer money directly or indirectly funded FirstEnergy’s HB 6 activities. However, the order limits the auditor’s work to assisting agency staff in reviewing FirstEnergy’s response to the PUCO’s initial order asking the company to show that it didn’t use ratepayer money for HB 6.

In other words, the auditor won’t conduct an independent audit to answer the question of whether ratepayer money paid for HB 6 activities. Instead, the auditor will basically help PUCO staff look over FirstEnergy’s shoulder to see if they’re satisfied with FirstEnergy’s position on whether it acted properly.

FirstEnergy has gone from a categorical denial of any improper use of ratepayer money to an admission that some ratepayer funds were used for political or other unauthorized purposes. Those amounts are far less than the nearly $71 million for lobbying and HB 6 expenses noted in a Feb. 4 audit report from the Federal Energy Regulatory Commission. But that report and a Daymark Advisers audit released in January found that money from the rider involved in the “burned” audit dispute went into a money pool.

The ultimate disposition of funds from that money pool was not clearly tracked, the two reports found. Consequently, it’s unclear whether FirstEnergy can show that additional ratepayer money wasn’t used directly or indirectly on HB 6. Much will depend on who bears the burden of proof on the issue.

A final version of the new audit report won’t be due until December 2022.

Meanwhile, rulings on March 11 supported most of FirstEnergy’s privilege claims in the case, although other parties will be able to get materials FirstEnergy provided in connection with FERC’s audit. However, PUCO won’t let the consumers’ counsel get copies of various communications between FirstEnergy and FERC relating to that audit or an ongoing review. The consumers’ counsel has asked to intervene in that ongoing review.

Read more:

• FirstEnergy, DeWine’s office and others still far from full disclosure on HB 6 (Energy News Network/Eye on Ohio)
• Ohio regulators decline to force FirstEnergy to hire an independent auditor (Energy News Network/Eye on Ohio)

A ‘plausible, persuasive case’

In a separate case, U.S. District Court Judge Algenon Marbley held on March 7 that shareholders had “set out a plausible, persuasive case for securities fraud under theories of both misstatement liability and scheme liability.” Other claims likewise withstood FirstEnergy’s motion to dismiss, subject to a few tweaks. Nor did a dismissed AEP case control the outcome for FirstEnergy.

“To dismiss this Complaint, as Defendants urge, would be to adopt a severely strained view of bribery laws, pleading requirements, and the facts of the case,” Marbley wrote.

FirstEnergy noted a potential risk of loss from shareholder claims and the Ohio attorney general’s lawsuit in its most recent annual report to the Securities and Exchange Commission.

‘The cows have left the barn’

Filings in the Ohio attorney general’s civil corruption case seek to move ahead with discovery, noting that other cases already have allowed extensive discovery from FirstEnergy and other parties.

“The cows have left the barn. It is time to stop manning the only closed barndoor,” said a Feb. 22 filing by the state’s lawyers. A March 8 filing provided additional support under Ohio law for moving ahead, despite the pending criminal claims against Householder and others.

FirstEnergy’s March 11 response stressed that the stay in the case resulted from an agreed-upon order from February 2021, as part of a compromise for the utilities to stop collecting fees under HB 6’s recession-proofing provisions, which have since been repealed. In other words, FirstEnergy would treat the stay as a rock-solid freeze against moving ahead, even though other cases have moved forward and there’s no longer any benefit flowing to the state and ratepayers from a stay.

Read more:

• Ohio cities settle civil claims related to power plant bailout (Energy News Network/Eye on Ohio)

‘Crime With DeWine’

Outside of court and regulatory hearings, Ohio Citizen Action launched a Crime With DeWine campaign on March 8. The title is a play on Gov. Mike DeWine’s 2020 “Wine with DeWine” briefings on the COVID-19 pandemic. The focus is on getting DeWine and Lt. Gov. Jon Husted to reject utility funding and to adopt reforms for both the PUCO and its nominating council.

“The activity is not tied to any election or campaign. It’s a grassroots effort,” said Rachael Belz, executive director of Ohio Citizen Action. The organization had been critical of the PUCO since before Randazzo’s appointment in 2019. That criticism continued after news surfaced about payments from FirstEnergy to Randazzo.

“There’s never been any cleaning house of any kind except for Randazzo resigning after his house was raided by the FBI,” Belz said.

Among other things, the group wants reforms that will include consumer advocacy as one of the required background fields for PUCO commissioners, full disclosure about both PUCO candidates and people serving on the nominating council, rejection of campaign donations from all Ohio utilities who have benefited from HB 6, and more.

“Nobody at the PUCO seems to respect the consumer in Ohio, and that continues to be troubling,” Belz said.

Meanwhile, the We the People coalition continues to call for the revocation of FirstEnergy’s corporate charter. And Democratic challengers for governor continue to focus on the HB 6 scandal and call for reform at the PUCO.

“Mike DeWine’s PUCO continues its coverup,” tweeted John Cranley, a former Cincinnati mayor and challenger for the Democratic governor nomination, adding that “it’s no surprise that the findings don’t have to be public until after the November election.”

Eye on Utilities: ‘Nobody at the PUCO seems to respect the consumer in Ohio’ 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.

That same judge, Greg Price, is presiding over multiple regulatory cases in which a government watchdog agency is trying to investigate that same corruption. His orders, spanning 18 months, have blocked investigations into a utility at the center of the scandal on multiple fronts. 

One ruling barred the agency from deposing a witness who worked on a FirstEnergy Corp. audit — an audit the company’s CEO said in a text message that former Public Utilities Commission of Ohio Sam Randazzo helped conceal. Another allowed FirstEnergy to attest to regulators its own innocence, as opposed to hiring an independent auditor to review the company’s practices after it was accused in court documents of participating in a bribery scheme. 

As an attorney examiner at PUCO, Price hears cases involving disputes between utility companies, residential interests, industrial interests, and others. Examiners — essentially administrative judges — preside over PUCO case hearings, issue procedural orders like what evidence must be turned over between parties in a case, and influence the five-member commission on final orders. 

His involvement in the passage of House Bill 6 in 2019 came to light when the PUCO, which regulates utility companies and sets electric rates, submitted troves of records to the U.S. Department of Justice in response to two subpoenas.  

The records show Price helped draft the legislative text, received regular updates about its legislative progress, formally reviewed HB 6 for the PUCO, and was briefed on its status as lawmakers launched efforts to repeal it after the FBI arrested the Ohio House speaker and four alleged co-conspirators.

The legislation, among other provisions, provided $1 billion from ratepayers to bail out two nuclear plants owned at the time by a FirstEnergy subsidiary; subsidized two coal plants jointly owned by several utility companies for an estimated $700 million from ratepayers; and allowed FirstEnergy to “decouple” its revenue from its energy sales, which its CEO said would “recession-proof” the company.

Prosecutors charged former House Speaker Larry Householder in July 2020 with using $60 million secretly provided by FirstEnergy to pass the bill, enriching himself personally and politically. FirstEnergy in 2021 entered into a deferred prosecution agreement with the DOJ, admitting to bribing not only Householder but former PUCO chairman Sam Randazzo. The company says it paid Randazzo $4.3 million for regulatory favors just before he was appointed.

Householder has pleaded not guilty and awaits trial. Randazzo has not been charged with a crime and has maintained his innocence. FirstEnergy paid a $230 million penalty and is cooperating with the investigation in an effort to avert a charge of honest services wire fraud.

Alongside the criminal probes, the PUCO has four open cases regarding FirstEnergy and House Bill 6. These have put Price in charge of answering questions about what kind of evidence FirstEnergy must turn over to outside investigators. Ashley Brown, a former PUCO commissioner and current executive director of the Harvard Electricity Policy Group, said this poses a conflict of interest for Price.

“It’s very, very strange to me that he would be both involved at the policy level and adjudicating those same policy issues later on,” Brown said. “If it were me, I’d recuse myself.”

In a brief phone call, Price declined to answer questions about the subpoenaed records or his role in the passage of HB 6. Matt Schilling, a PUCO spokesman, declined to answer written questions or make officials available for interviews, citing open PUCO cases and pending criminal investigations.

However, he defended Price’s apparent involvement in drafting HB 6.

“It is not unusual for the PUCO or its subject matter experts to be asked to review and share their expertise regarding legislation pertaining to public utility and commercial transportation law,” Schilling said.

Utility law is complex and requires specialized industry and legal knowledge to practice. But an administrative law judge like Price is supposed to be neutral and his actions transparent, said Neil Waggoner, an environmental advocate with the Sierra Club.

“The PUCO, especially under Randazzo’s tenure, showed itself to be neither of those things,” he said. “We need a full accounting of exactly what input and involvement PUCO commissioners and staff had in regard to HB 6 and repeal efforts, as well as an accounting for how that may or may not have impacted ongoing proceedings.”

Requests denied

Householder was arrested July 21, 2020. The PUCO, somewhat inexplicably, didn’t launch any investigation into FirstEnergy until Sept. 15 of that year. 

When it finally did, it rejected requests from the Ohio Consumers’ Counsel to hire an independent auditor to determine whether the company broke any laws in the passage of the bill. Instead of bringing in a disinterested investigator, Price ordered a FirstEnergy official to answer to the PUCO whether it did so. The FirstEnergy official denied wrongdoing at the time.

Randazzo resigned as chairman in November 2020 after the FBI raided his condo and FirstEnergy first disclosed the $4.3 million payment to him. The company said it identified the payment via an internal investigation ordered by its board of directors after Householder’s arrest. 

In September 2021, Price presided over a hearing over whether FirstEnergy would have to turn over that same internal investigation to the Ohio Consumers’ Counsel, a state-funded watchdog agency that represents residential consumers’ interests before the PUCO. Price ordered the company to give it to the PUCO to review privately, before ruling whether it should be turned over. 

“We’ve heard a lot about this internal investigation, but we are in no position to make any rulings as to whether or not it’s privileged sight unseen,” Price said.

After review, the PUCO found the report to be protected by attorney client privilege and ruled it didn’t need to be released.

Around that same time, Price ruled FirstEnergy didn’t need to provide the Ohio Consumers’ Counsel with the documents it gave federal regulators who sought to investigate the HB 6 episode. Price denied the request until the Federal Energy Regulatory Commission issued its audit.

“If and when a public audit is released by FERC, we can revisit this issue at that time,” he ruled in August 2021, according to a hearing transcript.

FERC’s audit, released earlier this month, found FirstEnergy improperly used $71 million to lobby for the passage of HB 6 and ordered the company to develop a plan to refund customers. The Ohio Consumers’ Counsel has since asked Price to honor his word. The matter awaits a ruling. 

‘Burning’ an audit

Before utility companies can add extra fees to users’ bills, they need the PUCO’s permission.

FirstEnergy in 2017 got that permission to apply a “Distribution Modernization Rider” fee to its customers. Over the objections of the Consumers’ Counsel, the PUCO denied a request to attach a refund mechanism to the charge. The commissioners called adding a refund mechanism “counterproductive.”

Two years, one lawsuit, and $458 million collected from customers later, the Ohio Supreme Court deemed the charge unlawful and cut it off. The judges found the PUCO allowed the charge without making sure FirstEnergy uses the money to modernize the grid (despite the name). However, state law prohibits the court from demanding refunds unless PUCO explicitly creates such a mechanism.

When the PUCO allowed the charge, it hired Oxford Advisors to serve as a third-party monitor and file a final report auditing the funds. Oxford, through PUCO staff, requested a delay on its deadline to file the report. The commissioners, with Randazzo at the helm one year into his chairmanship, instead determined the audit would be “moot” and dismissed the case on Feb. 26, 2020.

Less than two weeks later, FirstEnergy CEO Chuck Jones sent a text to another company executive (the text was later obtained by the Consumers’ Counsel via records request). 

In the text, Jones said Randazzo “will get it done for us but cannot just jettison all process.” He lists several favorable regulatory decisions, including “burning the DMR final report has a lot of talk going on in the halls of PUCO about does he work there or for us?”

Federal agents arrested Householder in July 2020. They raided Randazzo’s condo on Nov. 17, 2020, the same day FirstEnergy disclosed the $4.3 million payment to Randazzo (not named personally in the document) in a filing with the U.S. Securities and Exchange Commission.  

In December 2020 and under heavy public scrutiny, the PUCO ordered a different firm, Daymark Energy Advisors, to resurrect the audit and determine how FirstEnergy used the money. 

Citing the text as an impetus, the Ohio Consumers’ Counsel asked the PUCO to issue a subpoena for any draft version of the final Oxford audit, and to compel an Oxford employee to testify about it.

Price, in a ruling earlier this month, denied the requests relating to that final audit. He said the Counsel’s reliance on the text message shows its “obvious interest in investigating potential wrongdoing” admitted to by FirstEnergy “rather than investigating what the Commission actually has jurisdiction over investigating, which is whether [FirstEnergy] improperly used DMR funds.”

He ordered the auditor to testify at a PUCO hearing, but only about an earlier filing — not the report that was allegedly covered up.

Daymark’s final audit, released in January, could not trace the outcome of the DMR money because FirstEnergy commingled it with revenue from all 11 of its utilities. The auditors said they were unable to determine both whether the money was spent on modernizing the grid and whether it was spent on HB 6 lobbying.

However, Price, defending the decision to reject the Ohio Consumers’ Counsel’s subpoena, said the second audit “appears to fully address whether [FirstEnergy] properly expended the DMR funds.”

The Consumers’ Counsel has since appealed the case to the five commissioners on the PUCO, emphasizing the “extraordinary” nature of the case. The Counsel asked the PUCO’s legal director — not Price — to certify the appeal and sent to the full commission to overrule Price.

“To paint issues pertaining to the use of DMR funds as outside the PUCO jurisdiction is just plain wrong,” the Ohio Consumers’ Counsel  wrote.

‘Nicely done Greg’

The most explicit reference in the subpoenaed records of Price working on HB 6 comes in the window between when law enforcement arrested Householder and when they raided Randazzo’s condo.

After the arrests, a state legislative committee considered a repeal of the bill. A state representative asked in writing whether Randazzo helped write or review the decoupling language in HB 6.

“We did make suggestions to mitigate some of the more objectionable language that, as I recall, would have given the PUCO limited/no discretion,” Randazzo said in an email to Scott Elisar, his former law partner who he hired as PUCO’s policy director.

“Tammy and Greg Price were involved I think. I do recall saying that it should be removed because it was going to be confusing when blended with other issues as well as the difficulties people were having distinguishing between [FirstEnergy] and [FirstEnergy Solutions].”

Most of the records are less clear as to Price’s involvement. They show that starting on April 12, 2019, the day HB 6 was introduced, Price was regularly updated on the bill’s developments. When Randazzo sought help with his testimony before lawmakers in May 2019, PUCO’s legal director Angela Hawkins added Price to an email thread.

“Will make him available to assist if necessary on the below issue,” she said on May 6, 2019.

On May 20, 2019, Randazzo thanked the head of the Ohio Air Quality Development Authority, Christina O’Keeffe, for a visit to discuss HB 6. Price and other staff are copied onto the email chain, though it’s not clear who attended.

When the bill passed the House on May 29, 2019, a legislative report from the governor’s office listed Price, Elisar and the PUCO’s Statehouse liaison as legislative and legal reviewers for the agency on the bill. A similar report from when the bill passed the Senate listed the designation as well. Price was listed as a “required attendee” for the PUCO on a July 15, 2019 hearing and received a briefing on it afterward.

In late September 2020, another PUCO lawyer wrote a formal legal memo analyzing legislation to repeal HB 6. The memo is addressed to Price and Randazzo.

Months after the Householder arrests, Brown, a former PUCO Commissioner, wrote an op-ed in the Cleveland Plain Dealer criticizing the PUCO and calling on it to investigate FirstEnergy. Randazzo alleged Brown’s take on a 40-year-old regulatory issue involving the PUCO and a natural gas company was incorrect. He emailed Price and 10 other staffers requesting research assistance to refute Brown.

Price dug up an old news clip on the incident and sent it to the chairman.

“Nicely done Greg,” Randazzo said. 

Ohio Capital Journal is part of States Newsroom, a network of news outlets supported by grants and a coalition of donors as a 501c(3) public charity. Ohio Capital Journal maintains editorial independence. Contact Editor David DeWitt for questions: info@ohiocapitaljournal.com. Follow Ohio Capital Journal on Facebook and Twitter.

Ohio judge helped write a bailout that led to arrests; now he’s blocking outside probes 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.

Newly produced documents show that Sam Randazzo, former chair of the Public Utilities Commission of Ohio, came up with the idea to let FirstEnergy show it didn’t use ratepayer money for House Bill 6, the nuclear and coal bailout law at the heart of Ohio’s largest corruption case.

The move was far short of a full investigation that consumer advocates have called for. And it’s unclear whether the Public Utilities Commission of Ohio would have done anything at that point in September 2020 without bad publicity.

FirstEnergy was identified as “Company A” in the federal government’s complaint against former Ohio House Speaker Larry Householder and others in July 2020. The complaint detailed how the company, its affiliates and others had funneled roughly $60 million to dark money groups to elect lawmakers friendly to Householder, pass the state’s nuclear and coal bailout law, and prevent a voter referendum on the law.

FirstEnergy later disclosed that it had paid $4 million to a company linked to Randazzo shortly before he became PUCO chair. The company admitted last summer that it made the payment with the expectation that Randazzo would act in FirstEnergy’s interests with respect to HB 6 and other legislative and regulatory priorities. Randazzo is now a defendant in the state of Ohio’s civil conspiracy case arising out of HB 6.

Seven weeks after the federal government’s complaint became public, the PUCO still hadn’t taken any action. The Office of the Ohio Consumers’ Counsel asked the agency to order an independent investigation and management audit of FirstEnergy’s utilities, corporate governance and activities relating to HB 6. The Consumers’ Counsel also asked for an independent audit on an unlawful rider under which FirstEnergy’s utilities had collected more than $450 million.

Randazzo sent a heads up about the consumers’ counsel’s move to Gov. Mike DeWine’s former chief of staff, Laurel Dawson, whose former firm and whose husband had done lobbying work for FirstEnergy.

“Thanks, Sam. Will be back in touch,” Dawson replied on Sept. 9, 2020.

Even then, the PUCO didn’t do anything until Matt Schilling, PUCO’s public affairs director, sent several news clips to Randazzo and others on Sept. 15, 2020. “PUCO needs to ‘connect the dots,’” said one editorial headline from the Sandusky Register.

“So, we need to do something to respond to OCC’s request for an investigation,” Randazzo said in a group email that afternoon. “It was/is my understanding that we were going to put out an AE [Attorney Examiner] entry requesting comments on OPCC [the Consumers’ Counsel’s] request.”

“Just thinking out loud…since this issue has grabbed media attention would it be better to have commissioners issue something asking for comments at our next meeting instead of an AE?” asked Commissioner Beth Trombold in response. “Just wondering if it would signal better that we are engaged.”

“I don’t care which path we take … I have a slight preference for doing something sooner,” Randazzo responded. He went on to say that the PUCO already audited FirstEnergy’s riders. “My point here is that we need to be proactive…” PUCO Deputy Director Katherine Fleck then offered to put something together for commissioners and others, including Schilling, to review.

“We could, on our own initiative, issue a show cause order to FE [FirstEnergy] directing FE to demonstrate that no costs associated with HB 6 have been included in any riders or base rates,” Randazzo wrote.

Senior utilities attorney examiner Gregory Price issued that order that afternoon. He’s also an attorney examiner in some of the PUCO’s other limited-issue FirstEnergy cases relating to HB 6.

The PUCO’s “baby step” response of letting FirstEnergy report on itself received criticism from several fronts. Lawmakers also asked questions when Randazzo testified before a House select committee on Sept. 16, 2020.

“It’s a case. It’s an investigation. What happens after that, as I hope you would expect of us, would be a function of what the evidence shows and what our legal authority is. And that’s as much as I can say about this,” Randazzo said in answer to questions from Rep. David Leland, a Democrat from Columbus.

After FirstEnergy fired former CEO Charles Jones and other executives, the PUCO announced a corporate separation audit of FirstEnergy. But, Randazzo told Schilling on Nov. 5, “Corporate separation requirements … are not designed to address politics or lobbying (coordinated or otherwise) except as cost allocation may be involved.” PUCO staff later told bidders for that audit not to include any HB 6-related activities in their work.

On Nov. 16, 2020, FBI agents searched Randazzo’s home. FirstEnergy disclosed later that week that it had paid $4 million to a company linked to Randazzo shortly before he became PUCO chair. Randazzo resigned on Nov. 20, 2020.

Behind the scenes

Legislative records released in December 2020 show that Randazzo played a significant behind-the-scenes role on House Bill 6 before it was passed.

And newly produced documents from the PUCO show Randazzo continued to play a significant role after the HB 6 scandal became public.

Among other things, Randazzo and others at the PUCO reviewed bills that called for a full repeal of HB 6 and provided an “internal document on the repeal legislation” to advisors in DeWine’s office.

That document may have been a version of a spreadsheet of “Repeal HB 6 scenarios.” The document outlined options such as repealing the nuclear subsidies, repealing those subsidies plus the coal plant bailout, and repealing those provisions as well as recession-proofing provisions for utilities. The spreadsheet also listed an option for no repeal, but with a fortified audit of the bill’s nuclear subsidies and tweaking of the subsidies’ timing.

None of the options included a full repeal of HB 6 or a repeal that would have undone its gut of Ohio’s clean energy standards.

Price, a hearing examiner in the PUCO’s ongoing FirstEnergy cases, was included on some of the emails about proposed repeal legislation in the summer of 2020. 

Additionally, a September 2020 comparison of select HB 6 nuclear provisions with a 2019 compromise bill was addressed to Randazzo and Price,
“per your request.” (The other bill would also have kept Ohio’s clean energy standards and reform wind turbine setbacks that lawmakers tripled in 2014.)

Randazzo also sought comments and suggestions from Price and others on draft testimony for the Ohio Senate, including “unwinding challenges” of HB 6. And Randazzo also sought input after former PUCO Commissioner Ashley Brown wrote in a Sept. 4, 2020 editorial that the PUCO had previously called on Columbia Gas to replace its board of directors.

In addition, Price apparently attended some discussions on the bill before its enactment in 2019. It’s unclear why Price, a senior utilities attorney examiner, would have been included in those pre- and post-enactment communications. 

“Why he would be weighing in on what should or shouldn’t be in legislation seems like a bit of a mystery,” said Dave Anderson, policy and communications manager for the Energy and Policy Institute.

Price has made several rulings in the 17 months since September 2020, which has frustrated the Office of the Ohio Consumers’ Counsel’s efforts to get full information from FirstEnergy in its HB 6 cases.

Ohio lawmakers didn’t repeal HB 6’s $1.1 billion in subsidies for FirstEnergy Solutions’ former nuclear plants (now owned by Energy Harbor) until late March 2021. Several other parts of HB 6 remain on the books, including its gut of the state’s clean energy standards and subsidies for two 1950s-era coal plants. Consumers have paid roughly $225 million for those subsidies since January 2020.The 13 gigabytes of materials produced by the PUCO on Feb. 11 represent only part of the records turned over to the federal government in response to subpoenas released last year. The agency’s legal review of materials is ongoing and it plans to supplement its response to public records requests, said PUCO Deputy Legal Director Donald Leming.

Former Ohio regulator linked to $4M payoff directed agency to limit response to FirstEnergy corruption 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.

Coal subsidies passed in 2019 as part of a historically corrupt energy law are of no help to the state’s economy, the vast majority of a panel of academic economists said in a survey that was released Monday.

Of the 22 economists responding, 21 disagreed with the proposition that “subsidies for coal plants paid for through state-mandated rate increases such as those in (House Bill 6) have economic benefits that outweigh their costs,” according to Scioto Analysis, which conducted the survey. The remaining economist was uncertain.

House Bill 6 is a package of measures that included $1 billion to prop up nuclear power plants in Northern Ohio, a $102-million-a-year subsidy to Akron-based FirstEnergy, and rules that gutted renewable energy standards. It also included $233,000 a day in subsidies for two 66-year-old coal plants — including one that isn’t even in Ohio.

In the summer of 2020, federal agents arrested then-House Speaker Larry Householder, R-Glenford, and four associates on charges that they funneled $61 million from FirstEnergy through dark money groups and into an effort to elect lawmakers who would support Householder for speaker and pass HB 6. Two have pleaded guilty and a third died by suicide. Householder has pleaded not guilty.

Sam Randazzo, Gov. Mike DeWine’s appointee to chair the Public Utilities Commission of Ohio, was also forced to resign after it was revealed that he received a $4 million payment from FirstEnergy just as he was about to assume his post running the state’s utility regulator.

When he announced the indictments, U.S. Attorney David M. DeVillers said it was “likely the largest bribery and money-laundering scheme ever in the state of Ohio.”

Some of the major provisions in HB 6 are no longer effective. FirstEnergy successor company Energy Harbor, which owns the nuclear power plants, no longer wants those subsidies because of how they’re treated under federal rules. And early this year, FirstEnergy agreed to forego the huge subsidy it was receiving as part of the law.

But the coal subsidy, worth $153,000,000 so far to the companies that own the plants, is still on the books. That’s so even after the Capital Journal reported that the Randazzo-run PUCO censored an audit of the program, removing statements such as, “keeping the plants running does not seem to be in the best interests of the ratepayers.”

The economists participating in this week’s survey said the subsidy isn’t good for the Ohio economy, either.

“Subsidies would only be justified by positive externalities, but burning coal produces the opposite,” University of Bluffton economist Jonathan Andreas wrote in the comment section accompanying the survey. “If energy prices need to rise to encourage supply, then that would allow any producer to compete for business, but instead of letting markets work, politicians picked two winning power plants to award money upon. That smells of corruption. Half of the money is going to an out-of-state plant and most of the benefits probably go to out-of-state shareholders! Bad for Ohio.”

Maintaining the subsidy — and gutting the renewable energy standards — seem wildly out of step with an alarming report issued in August by the International Panel on Climate Change. Synthesizing 14,000 scientific papers, the committee reported there’s no longer any doubt that human activity is affecting the climate, that we’re going to see the effects for the next several decades no matter what we do, and that if we don’t address the problem urgently, the results will be catastrophic.

Many of the economists in the Ohio survey pointed out that those environmental harms amount to economic costs.

“Coal plants emit particles and produce coal ash ponds that are extremely hazardous for human health and the environment,” wrote Fadhel Kaboub of Denison University. “Not only do we need to eliminate the subsidies, but we also need to replace them with renewable energy sources, and transition their workers to local green jobs with equivalent pay and benefits packages.” 

One economist said that in addition to being dirtier than renewables, coal also costs more.

“Coal is now a more expensive source of energy than natural gas or renewable sources such as solar and wind AND coal is the most polluting source of energy,” wrote Kevin Egan of the University of Toledo. “Thus it is efficient to dramatically reduce our use of coal. Instead Ohio is propping it up with not efficient corporate subsidies. Complete 100% waste of taxpayer dollars.”

Ohio Capital Journal is part of States Newsroom, a network of news outlets supported by grants and a coalition of donors as a 501c(3) public charity. Ohio Capital Journal maintains editorial independence. Contact Editor David DeWitt for questions: info@ohiocapitaljournal.com. Follow Ohio Capital Journal on Facebook and Twitter.

Ohio coal subsidies’ benefits don’t outweigh costs, economists say 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.