FirstEnergy says it didn’t have “strategic direction” of nuclear plants during bailout scandal

By: - September 29, 2020 12:50 am

Davis Bees Nuclear Power Station with electricity pylons, Ohio. Getty images.

FirstEnergy is trying to distance itself from a massive corruption scandal that has gripped the Statehouse since July, but it’s unclear whether federal or state officials are buying it.

The Akron-based corporation is repeatedly referred to as “Company A” in a federal affidavit describing what might be the biggest bribery scandal in the history of Ohio. Then last week, Ohio Attorney General Dave Yost referred to the company directly when he filed a civil suit against it and several others who were involved in the passage of a $1.3 billion nuclear bailout.

But FirstEnergy says that since 2016 it hasn’t had strategic control of FirstEnergy Solutions, the company that owned the reactors. The company now has a new name, Energy Harbor, after emerging from bankruptcy earlier this year.

“FirstEnergy leadership has not had any decision-making power regarding the strategic direction of FES since November 2016, and FirstEnergy and Energy Harbor are now separate, unaffiliated companies,” FirstEnergy spokeswoman Jennifer Young said last week after the attorney general’s lawsuit was filed.

However, a reading of the state suit and the federal affidavit seems to indicate that both entities believe FirstEnergy had a lot of involvement in the scandal.

Capital Square was rocked in July, when then-House Speaker Larry Householder and four associates were arrested in what U.S. Attorney David DeVillers said was a $60 million bribery scandal

He alleged that the money was funneled from FirstEnergy and related entities through 501(c)(4) dark money groups and used to elect lawmakers who would make Householder speaker, pass the bailout bill — House Bill 6 — and fight off a ballot initiative to repeal it. Householder and his alleged accomplices also helped themselves to large quantities of money, DeVillers said.

FirstEnergy, its subsidiary and its successor companies weren’t charged this summer and they deny wrongdoing. But in announcing the charges, DeVillers stressed that his investigation was not complete.

Last week, Yost entered the fray, filing a civil suit on behalf of the state intended to keep Energy Harbor from collecting any of the bailout money when the charge to ratepayers begins Jan. 1. And unlike in the federal criminal case, Yost named FirstEnergy, its subsidiary, FirstEnergy Services, and two successor companies, FirstEnergy Solutions and Energy Harbor, as defendants.

The suit asks the court to give the boot to any official who was improperly involved in the HB 6 effort — or else. It asks that “each defendant business entity and nonprofit entity named in this complaint be dissolved or reorganized such that no agent, officer or representative found to have engaged in acts in furtherance of retains a position within the defendant business or nonprofit entity.”

One reason for that punishment and others, the suit says, is that the HB 6 debacle has harmed the business climate in Ohio.

“Ohio’s reputation among the states as a stable, fair place to compete in business and make investments has been damaged,” it says.

In the wake of the suit, FirstEnergy sought to distance its top executives from FirstEnergy Solutions, Energy Harbor and the failing nuclear plants that are the subject of the bailout.

Young initially said that FirstEnergy leadership didn’t have the power to decide the strategic direction of FirstEnergy Solutions. But as the state’s civil suit points out, FirstEnergy CEO Chuck Jones is also CEO of FirstEnergy Services, which provided nuclear power plant owner FirstEnergy Solutions with “administrative, management, financial, compliance, ethical, external affairs, and political and regulatory advocacy services… ” 

“In addition to its money, FirstEnergy Corp. provided the brains and technical expertise through another one of its subsidiaries, FirstEnergy Services Company,” the Ohio attorney general’s suit says. “Until June of 2020 — long after (HB 6) was passed into law — FirstEnergy Services would provide nuclear-owning FirstEnergy Solutions with legal, ‘ethical,’ financial and ‘external affairs’ support.”

Young, the FirstEnergy spokeswoman, said the strategic direction of FirstEnergy Solutions wasn’t determined by Jones.

“FirstEnergy Solutions (FES) elected its own, independent board of directors in November 2016,” she said in an email. “After that time, FES’s board set the strategic direction for FES. FirstEnergy executive leadership, including CEO Chuck Jones, were not members of the FES board.”

Young added that FirstEnergy Services “began unwinding that support after FES established an independent board of directors in November 2016, and it decreased significantly over time. Consistent with the terms of the settlement agreement, all support ended by June 30, 2020.”

But the federal criminal affidavit seems to be skeptical of claims that FirstEnergy didn’t set the strategic course for nuclear-owning FirstEnergy Solutions. 

It cites an earnings call for the fourth quarter of 2016 in which FirstEnergy CEO Jones said, “In Ohio, we have had meaningful dialogue with our fellow utilities and with legislators on solutions that can help ensure Ohio’s future energy security. Our top priority is the preservation of our two nuclear plants in the state and legislation for a zero emission nuclear program is expected to be introduced soon.” 

The affidavit includes a quotation from the earnings call that was picked up by the trade press at the time it was made. It seems to indicate that Jones had already set long-term strategy for the nuclear plants by the end of 2016. He said that FirstEnergy planned to push for a bailout and to spin them off.

“We are advocating for Ohio’s support for its two nuclear plants, even though the likely outcome is that FirstEnergy won’t be the long-term owner of these assets,” Jones said.

A footnote in the federal affidavit adds that Householder and the other alleged conspirators in the HB 6 affair regarded FirstEnergy Corp., FirstEnergy Services and First Energy Solutions as a single player in the battle to pass and protect the nuclear bailout.

“Notably, all three entities share a common first name, and enterprise members and associates often just referred generically to the ‘company’ or used the common first name in communications, as quoted below,” it said.


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Marty Schladen
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.