LOVELAND MAGAZINE

News and Events from the Loveland, Ohio Area

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Since 2004

Tag: distribution modernization rider

  • Utility regulators block watchdog’s requests for info about a buried audit of a $460 million fund

    Utility regulators block watchdog’s requests for info about a buried audit of a $460 million fund

    Photo by Getty Images.

    BY: JAKE ZUCKERMAN – Ohio Capital Journal

    An administrative judge blocked a watchdog’s attempt to obtain an audit that the Ohio utility regulatory agency’s former chairman, who has been accused of taking a $4.3 million bribe, allegedly tried to squash before publication.

    The ruling, released Friday evening, is a setback for the Ohio Consumers’ Counsel, a state funded agency representing residential ratepayers in utility cases. The OCC has pushed for investigations of FirstEnergy, especially since the company admitted to playing a central role in a massive public corruption scandal.

    The OCC asked the Public Utilities Commission of Ohio to grant it a subpoena to obtain a copy of any draft audit into a $458 million charge from FirstEnergy that started in 2017 collected called the “Distribution Modernization Rider.” The OCC also sought to depose an auditor who worked on report.

    The Ohio Supreme Court blocked FirstEnergy from continuing to charge customers for the DMR, two years after it was first applied on monthly bills. The court said the PUCO unlawfully failed to ensure the money is actually spent on modernizing the grid. A subsequent PUCO investigation was inconclusive as to whether the DMR monies were used to fund the bribery operations.

    The Supreme Court’s order questioned the value of leaving intact the audit when it overturned the rider, finding the reviews fail to properly protect ratepayers from the “possible misuse of DMR funds.” Additionally, the justices reasoned that any findings of misuse of the funds would be moot given the court had already blocked the charge and a state law blocked the court from ordering refunds unless PUCO explicitly allows for them, which it did not. The PUCO later nixed the audit, citing the court’s thinking.

    The OCC has previously obtained a text message from FirstEnergy’s CEO referencing former PUCO Chairman Sam Randazzo “burning the DMR final report.”

    The text partially came to light when FirstEnergy entered into a deferred prosecution agreement with the U.S. Department of Justice to possibly avert a charge of wire fraud. The company agreed to pay a $230 million penalty. It also admitted to paying Randazzo $22 million over nine years, including $4.3 million just before he started as PUCO chairman. The company also admitted to a separate $60 million bribery scheme ran through the state Legislature to pass House Bill 6 in 2019.

    Randazzo has not been charged with a crime and has maintained his innocence. The PUCO has received two subpoenas in connection with the investigation.

    PUCO Attorney Examiner Gregory Price denied both the OCC’s requests. He said the facts are clear that no such draft report exists in any form. Additionally, the question of FirstEnergy’s political spending is being “thoroughly addressed” in other PUCO cases.

    Price ruled OCC’s reliance on the Randazzo text shows its “obvious interest in investigating potential wrongdoing” as opposed to matters it “actually has jurisdiction over.”

    In December 2020, about two months after federal agents raided Randazzo’s home, the PUCO opted to resume the audit into the DMR. However, this time it hired Daymark Energy Advisors. That audit, released earlier this year, was inconclusive as to whether the DMR funds were used to fund the HB 6 campaign. FirstEnergy, the auditors said, pooled funds from all its 11 utilities in one pot, creating an “inability” for the auditors to track the funds.

    Price, however, said the final report “appears to fully address whether [FirstEnergy] properly expended the DMR funds.”

    In records the PUCO provided to federal prosecutors, Price is copied onto email threads regarding policy meetings before and after the passage of House Bill 6. As was first reported by Cleveland.com, one email shows Price was invited to one such meeting days before the House passed the bill.

    Other investigations into FirstEnergy, Randazzo and other alleged conspirators continue. Former House Speaker Larry Householder is expected to stand trial on a racketeering charge in connection with the scandal this fall. He recently asked a court to dismiss the charge against him. That motion has not yet received a ruling.

    Meanwhile, FirstEnergy shareholders have filed a class action lawsuit against the company as well.

  • Consumer advocate wants to know where utility got $60M from in alleged bribery scandal

    Consumer advocate wants to know where utility got $60M from in alleged bribery scandal

    By Marty Schladen – Ohio Capital Journal

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    Ohio’s official utility watchdog wants to know where Akron-based FirstEnergy got the $60 million that federal prosecutors say fueled the largest bribery scandal in Ohio history.

    The Office of Ohio Consumers’ Counsel on Tuesday evening filed several motions with the Ohio Public Utilities Commission: 

    • A request for an investigation and a management audit of FirstEnergy.
    • A requirement that the company show that it hadn’t misused consumer money to support the passage of a nuclear bailout. 
    • And that the regulator reopen a probe into how FirstEnergy spent money intended to upgrade the electricity grid.

    In July, the U.S. Attorney’s office charged then-House Speaker, Larry Householder, R-Glenford, in an alleged scheme to funnel FirstEnergy money through 509(c)(4) “dark money” groups in a corrupt effort to elect supportive lawmakers and make Householder speaker. 

    The feds say the goal was to pass House Bill 6, a $1.3 billion bailout that went primarily to two failing nuclear power plants, but also subsidized two failing coal-powered generators. In addition, the money was used to fund a xenophobic campaign to stop a voter repeal of HB 6 and to line the pockets of Householder and his alleged conspirators, federal officials said.

    Also charged were Matt Borges, a lobbyist who was formerly chairman of the Ohio Republican Party, Neil Clark, a lobbyist who owns Grant Street Consulting, Juan Cespedes, also a lobbyist, and Householder’s aide, Jeffrey Longstreth.

    In its filing, the consumers’ counsel said it was asking the utilities commission to do its job.

    “The (Public Utilities Commission of Ohio) has the right and duty to regulate public utilities, for the protection of the public,” it said. “The PUCO should require FirstEnergy to show that money it collected from consumers, including the distribution modernization charge money, was not improperly used regarding House Bill 6 and that it did not violate any utility regulatory laws or PUCO orders regarding House Bill 6.”

    A FirstEnergy spokeswoman said her company will comment through official channels.

    “We are unable to comment on pending litigation, but we will respond to the motion by September 23 as required,” External Communications Manager Jennifer M. Young said in an email.

    In its filings, the consumers’ counsel noted that “Long before the House Bill 6 subsidies, FirstEnergy was authorized to charge its consumers nearly $7 billion for these and other FirstEnergy power plants as part of the transition to power plant competition (and a supposed end to future power plant subsidies) under Ohio’s 1999 electric deregulation law.”

    The documents also focused on $465 million FirstEnergy was allowed to collect from Ohio ratepayers in 2017 and 2018 as a “distribution modernization rider.” In other words, the charge was meant to fund improvements to the lines and poles and other equipment needed to efficiently deliver electricity in Ohio.

    The consumers’ counsel pointed to an independent audit showing that at least some of the money was used for other purposes. For example, it was placed in FirstEnergy’s “Regulated Utility Money Pool,” where its out-of-state utilities could borrow from it.

    The dividends FirstEnergy paid shareholders also took a big jump once the company started collecting more from ratepayers, supposedly to improve the power grid. The money for dividends from FirstEnergy’s Ohio utilities went from $141 million in 2016 to $350 million in 2017 — the first year of the subsidy — to $400 million in 2018.

    The Ohio Supreme Court subsequently declared the charge to be unlawful, but the money wasn’t refunded to ratepayers. 

    After the court ruling, the utilities commission shut down an investigation into the extra charge and how the money was used. But now the consumers’ counsel says it “should be reopened in light of the new information alleged in the U.S. Criminal Complaint about FirstEnergy’s use of extraordinary amounts of money in its efforts for the passage of House Bill 6.”

    After other interested parties have a chance to respond to the consumers’ counsel motions the utilities commission will decide whether to approve them.

    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.