** FirstEnergy floats $13.6 million refund in Pennsylvania in response to Ohio criminal investigation and audits of influence spending charged to customers ([link removed])
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By Dave Anderson on Apr 04, 2024 07:52 am
FirstEnergy is proposing to refund $13.6 million to Pennsylvania customers who the company mischarged for payments related to the utility’s bribery schemes in Ohio, as well as advertising, lobbying, sports sponsorships and other expenses that are supposed to be excluded from the rates of publicly regulated utilities.
The utility is proposing the refund as part of a newly filed rate case in which FirstEnergy is seeking to increase the rates paid by its Pennsylvania customers by $502 million ([link removed](kWh)%20per%20month.) , or nearly thirty-seven times the proposed refund. Most residential ratepayers would receive a one-time monthly bill credit for $4 to $6 in January of next year from the refund, while their monthly bills would rise by more than $16 to $21 if FirstEnergy gets its way on the rate hike.
First, the Pennsylvania Public Utilities Commission (PUC) will have to review the rate request. Pennsylvania law requires ([link removed]) that the PUC ensure the lowest rates for customers while allowing utilities to recover reasonably incurred expenses and a fair return on investment. Customers can participate in the rate case ([link removed]) by filing a complaint, providing comments, or speaking at a public hearing.
FirstEnergy’s assistant comptroller Tracy Ashton ([link removed]) and Directors of Rates and Regulatory Affairs for Pennsylvania Joanne Savage ([link removed]) described how the proposed $13.6 million refund is the result of a string of criminal investigations and regulatory audits spurred by the utility company’s bribery schemes in Ohio.
“First, following the investigation of Ohio HB 6 activities, FirstEnergy’s Board of Directors discovered and reported that certain costs may have lacked proper documentation or may have been improperly classified or misallocated to FirstEnergy’s distribution utilities, including to FE PA,” Ashton said.
House Bill 6 is the Ohio law at the center of multiple ([link removed]) state ([link removed]) and federal ([link removed]) criminal cases ([link removed].) . Enacted in 2019, HB 6 ([link removed]) provided FirstEnergy ([link removed]) and a bankrupt subsidiary
([link removed]) with over a billion dollars in since repealed ratepayer bailouts. FirstEnergy has admitted ([link removed]) it paid over $64 million in bribes to convicted former Ohio House Speaker Larry Householder and indicted ex-Public Utilities Commission of Ohio Chairman Samuel Randazzo to secure the bailouts, as well other regulatory favors ([link removed]) from Randazzo.
At least part of the $13.6 million refund proposed by FirstEnergy stems from “approximately $2.4 million in inappropriate costs” related to the HB 6 schemes flagged earlier ([link removed]) by a 2022 audit by the Pennsylvania PUC.
As previously reported by the Energy and Policy Institute ([link removed]) , those “inappropriate costs” included money paid to Randazzo’s consulting firm and multiple entities associated with Tony George, a Cleveland area businessman who acted as an intermediary between FirstEnergy and Householder ([link removed]) , but has not been charged with any crime. FirstEnergy flagged the initial $2.4 million in refunds owed to Pennsylvania customers in a 2021 presentation to the PUC ([link removed]) that EPI obtained via a public records request.
Ashton and Savage explained how a Federal Energy Regulatory Commission audit then led FirstEnergy to identify millions more in mischarges to Pennsylvania customers. FirstEnergy then brought in an outside auditing firm, Craig Energy and Financial Services, which identified still more mischarges. As a result, the refunds owed by FirstEnergy ballooned from $2.4 million to $13.6 million.
Savage broke down the costs that FirstEnergy began to include in Pennsylvania rates during earlier rate cases in 2006, 2014, and 2016:
Page 31 of VOLUME II STATEMENT NOS. 1 THROUGH 6 – FirstEnergy Pennsylvania rate case 2024 ([link removed])
Page 31 of VOLUME II STATEMENT NOS. 1 THROUGH 6 - FirstEnergy Pennsylvania rate case 2024
Contributed to DocumentCloud ([link removed]) by Dave Anderson (Energy and Policy Institute) • View document ([link removed]) or read text (s3.documentcloud.org/documents/24529440/pages/volume-ii-statement-nos-1-through-6-firstenergy-pennsylvania-rate-case-2024-p31.txt?ts=1712232208)
She then detailed ([link removed]) how the mischarges have continued to pile up in rates since 2007 and continue to be paid by customers in 2024, adding up to the $13.6 million total refund proposed by FirstEnergy when interest is applied:
Page 32 of VOLUME II STATEMENT NOS. 1 THROUGH 6 – FirstEnergy Pennsylvania rate case 2024 ([link removed])
Page 32 of VOLUME II STATEMENT NOS. 1 THROUGH 6 - FirstEnergy Pennsylvania rate case 2024
Contributed to DocumentCloud ([link removed]) by Dave Anderson (Energy and Policy Institute) • View document ([link removed]) or read text (s3.documentcloud.org/documents/24529440/pages/volume-ii-statement-nos-1-through-6-firstenergy-pennsylvania-rate-case-2024-p32.txt?ts=1712232209)
The “Sustainability Funding Alliance” listed in Savage’s exhibit is Randazzo’s consulting firm ([link removed]) , to which FirstEnergy secretly paid the $4.3 million shortly before Randazzo’s appointment as PUCO chairman in early 2019 that prosecutors have cited in the bribery charges against Randazzo.
The “Vendor Payments-16 Entities” mentioned by Savage were first flagged by the FERC audit ([link removed]) as part of $28.8 million in payments related to the federal criminal investigation in Ohio to “entities associated with an individual identified by FirstEnergy.” Cleveland.com previously reported ([link removed]) that the individual is believed to be George, though George denied that he personally received $28 million from anyone. FirstEnergy said ([link removed]) it was unable to comment when previously asked by EPI.
FirstEnergy admitted in its 2021 presentation to the PUC ([link removed]) that it used money from Pennsylvania customers to cover the cost of some payments to George’s Ohio Outdoor Advertising:
Page 10 of 2021.03.18 PA Refunds Presentation for Staff ([link removed])
Page 10 of 2021.03.18 PA Refunds Presentation for Staff
Contributed to DocumentCloud ([link removed]) by Dave Anderson (Energy and Policy Institute) • View document ([link removed]) or read text (s3.documentcloud.org/documents/22267782/pages/20210318-pa-refunds-presentation-for-staff-p10.txt?ts=1712232209)
Evidence later presented by prosecutors during Householder’s trial revealed that the same George firm received $150,000 from Ohioans for Energy Security ([link removed]) , a murky for-profit entity that FirstEnergy secretly paid $23 million ([link removed]) for a xenophobic campaign to defeat a 2019 ballot petition that aimed to repeal HB 6.
Page 1 of Exhibit 154 from Larry Householder racketeering trial ([link removed])
Page 1 of Exhibit 154 from Larry Householder racketeering trial
Contributed to DocumentCloud ([link removed]) by Dave Anderson (Energy and Policy Institute) • View document ([link removed]) or read text (s3.documentcloud.org/documents/23868031/pages/exhibit-154-from-larry-householder-racketeering-trial-p1.txt?ts=1712232210)
“Internal lobbying” costs that FirstEnergy customers were forced to pay for could have included money paid to now terminated former FirstEnergy lobbyists who lobbied on HB 6 ([link removed]) , including FirstEnergy’s now indicted former Vice President of External Affairs Michael Dowling ([link removed]) .
FirstEnergy owes related refunds to customers in Maryland ([link removed]) , New Jersey ([link removed]) , Ohio ([link removed]) and West Virginia ([link removed]) .
State lawmakers in Maryland, Ohio and Pennsylvania have introduced legislation ([link removed]) aimed at preventing publicly regulated utilities from forcing customers to pay for corporate lobbying and political spending. Similar legislation has also been introduced ([link removed]) in at least seven other states this year, and passed in Colorado, Connecticut and Maine in 2023.
Top image attributed to Jericho from Wikipedia Commons ([link removed]) . Creative Commons ([link removed]) Attribution 3.0 Unported ([link removed]) license.
The post FirstEnergy floats $13.6 million refund in Pennsylvania in response to Ohio criminal investigation and audits of influence spending charged to customers ([link removed]) appeared first on Energy and Policy Institute ([link removed]) .
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