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BY:  Ohio Capital Journal

Even as its former top executives await possible criminal charges for gouging ratepayers, Akron-based FirstEnergy is seeking a $1.4 billion rate increase. The state’s consumer watchdog objects, saying the company’s profits are higher than normal and that it should use a more thorough process to prove that it really needs the money.

The electric utility is seeking the increase as part of its “electric security plan” — a package of investments aimed at improving reliability and efficiency.

“Our plan will build on the significant enhancements we’ve made to reinforce the grid against progressively stronger storms,” a statement on the FirstEnergy website quotes Patricia Mullin, acting president of FirstEnergy’s Ohio operations, as saying. “We’re committed to making the right investments to ensure a modern, more reliable grid while also keeping electric bills affordable, and we will continue working with interested stakeholders to ensure an open and thorough review of our proposal.”

However, the state’s consumer watchdog, the Ohio Consumers’ Counsel, is objecting to the proposal on several grounds. For example, OCC contends that FirstEnergy is already highly profitable and shouldn’t need more of the ratepayers money.

That’s not true, FirstEnergy spokeswoman Lauren Siburkis said in an email.

“Our most recently disclosed return on equity in Ohio (shared during the third quarter earnings call) shows that to be 6.2%, which is much lower than the recently authorized returns in Ohio of 9.5% to 10%,” she said.

However, the company, which operates in several states, appears to be doing quite well overall. In its third-quarter financial disclosure, the company reported that so far this year its per share earnings are up 17% over last year.

OCC, the consumer watchdog, also objects to the mechanism through which FirstEnergy is seeking the rate hike. It’s asking the Public Utilities Commission of Ohio to approve “riders” in a process that isn’t as rigorous as a full “rate case.” That’s when regulators and others scrutinize many aspects of a utility’s operations and its books to ensure they’re not unfairly profiting from the monopolies that regulators grant them.

FirstEnergy has abused the rider process in the past. As part of a huge bribery and money-laundering scandal, the company in 2019 received a “decoupling rider” that allowed the company to bill customers tens of millions to cover shortfalls in revenue.

Chuck Jones, then the company’s CEO, boasted to investors that the rider made the company “somewhat recession-proof.” The rider was repealed after FirstEnergy admitted wrongdoing in a deferred prosecution agreement.

OCC is arguing that going through a full rate case is the best way to prevent mischief and inefficiency.

“Reliance on an excessive number of trackers, riders and other special regulatory mechanisms decreases a utility’s incentive to manage all aspects of its business in a cost-effective manner,” regulatory auditing expert Greg Meyer said in testimony to the regulatory commission that OCC sent to reporters last week. “FirstEnergy seems to ignore the fact that under its proposed (electric security plan), FirstEnergy’s consumers will be required to pay for energy-efficiency programs, demand-response programs and the multiple riders, in between base rate cases. These charges will add costs to the bills of FirstEnergy’s consumers without a review of all the relevant factors of FirstEnergy’s operations.”

Asked why FirstEnergy didn’t seek the rate hike as part of a full rate case, Siburkis seemed to say FirstEnergy couldn’t wait six months, when one is scheduled.

“The settlement we reached in 2021, which received the PUCO’s approval and delivered $306 million in customer benefits, explicitly requires us to submit the rate case in May 2024, no sooner and no later,” she said.

That settlement was a deferred prosecution agreement in which FirstEnergy ponied up $230 million in fines and said that in addition to other bad acts, Jones and former Vice President Michael Dowling bribed Sam Randazzo — Gov. Mike DeWine’s first appointment to chair the PUCO — $4.3 million in exchange for regulatory and other favors.

Jones and Dowling were fired and Randazzo resigned. All three men deny wrongdoing, but in court filings, they have acknowledged that federal law enforcement is investigating their conduct.

Four already have been convicted over their participation in the scandal. Former Ohio House Speaker Larry Householder in June was sentenced to 20 years in federal prison for shepherding the corrupt utility bailout through the legislature. Former state GOP Chairman Matt Borges was sentenced to five years for playing a lesser role, and two others have pleaded guilty and await sentencing.

For six weeks early this year, federal prosecutors put on a mountain of evidence in a Cincinnati courtroom about how FirstEnergy spent more than $60 million helping Householder bribe and bully through a $1.3 billion utility bailout that benefitted that company far more than any other utility.

Now it’s asking for almost the same amount without going through the most rigorous regulatory scrutiny. Asked why ratepayers should trust FirstEnergy’s claims, Siburkis said the company has turned the page on its ugly recent past.

“FirstEnergy has accepted responsibility for its actions related to House Bill 6 and has taken significant steps to put past issues behind us,” she said. “Today, we are a different, stronger company with a sound strategy and focused on a bright future.”

Marty Schladen

Marty Schladen has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017. He’s won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.


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