State watchdog seeks probe of utility tied to bribery scheme

Mark Gillispie, AP

CLEVELAND (AP) — Ohio’s consumer watchdog has asked a regulatory agency to conduct an independent investigation of the state’s largest electric utility, FirstEnergy Corp., that federal authorities have tied to a $60 million bribery scheme involving one of Ohio’s most powerful politicians.

The Ohio Consumers’ Counsel in a motion filed late Tuesday with the Public Utilities Commission of Ohio has asked that outside investigators examine whether money collected from consumers “was improperly used for any activities in connection with HB6 instead of for electric utility service.”

HB6 is now considered a tainted piece of legislation that, in part, created a $1 billion bailout of two Ohio nuclear power plants owned by a FirstEnergy subsidiary until early this year. The law requires a charge on all Ohio ratepayers’ electric bills to fund the nuclear bailout.

The Consumers’ Counsel also asked that the investigation and a management audit determine whether FirstEnergy violated any state laws or regulations.

The investigation should examine FirstEnergy’s corporate governance and its “corporate relationships” with other FirstEnergy subsidiaries, the motion said.

HB6 was pushed through the Legislature last year by then-Ohio House Speaker Larry Householder. It also includes a provision potentially worth hundreds of millions of dollars to FirstEnergy that customers would pay for.

PUCO spokesman Matt Schilling in an email said the agency is required to conduct “management and financial audits of nuclear resources receiving funds from HB6.”

The nuclear plants were transferred through bankruptcy court earlier this year to a company created by creditors of a FirstEnergy affiliate to a new, separately owned company called Energy Harbor.

The bill includes yet another provision that could cost customers $444 million over the next six years to subsidize two coal-burning power plants. The plants are owned by a number of electric utility companies, including the newly created Energy Harbor. One of the plants is in Ohio. The other is in Indiana.

First Energy officials have long maintained the nuclear plant bailout would not benefit the corporation itself, yet nearly all of the money used to fund the bribery scheme, an FBI affidavit said, came from FirstEnergy Corp.

FirstEnergy spokeswoman Jennifer Young said CEO Chuck Jones indicated in the company’s most recent earnings call that FirstEnergy paid about 25% of the funds referenced in the Justice Department’s affidavit.

Householder and four others have been indicted on federal racketeering charges in the alleged bribery scheme that prosecutors said was funded by FirstEnergy. He has pleaded not guilty and FirstEnergy officials have denied any wrongdoing. Householder was removed as speaker a week after an FBI affidavit detailing the bribery scheme became public.

The Consumers’ Counsel filing said that before HB6 was approved, FirstEnergy had charged customers nearly $7 billion under a 1999 state deregulation law that created competition and was supposed to end such subsidies.

A second part of Tuesday’s filing asks the PUCO to reopen a 2017 case in which the regulatory agency ordered an audit of a previous ruling allowing FirstEnergy to charge customers for modernizing its electric grid.

The audit found peculiarities, the counsel’s filing said, including the PUCO not stopping FirstEnergy from using customers’ grid modernization charges to create a pool of cash from which its affiliates could borrow money, including corporate entities located outside Ohio.

The counsel and others filed an appeal with the Ohio Supreme Court to overturn the grid modernization charge, which cost customers roughly $465 million by the time justices said the charges were unlawful and unreasonable and revoked them, the filing said.

The PUCO complied with the court’s ruling to end the modernization charge, but did not order FirstEnergy to pay back the $465 million it had charged to customers before the Supreme Court made its ruling.

PUCO spokesman Schilling said that case remains a pending matter that will allow for responses to the Consumers’ Counsel motion.