Ohio utility poised to keep scandal-tainted bailout money even if it’s repealed

By: - December 3, 2020 1:00 am

Electrical pylons. Photo from Getty Images.

When it comes to billions of ratepayer dollars for bailouts and other add-ons, Ohio utilities are in a no-lose situation. 

In the case of the scandal-plagued, billion-dollar bailout of two Northern Ohio nuclear reactors, their owner is poised to keep any money they collect even if the legislature repeals the bailout. 

State Rep. Mark Romanchuk, R-Ontario, said that would only continue what already is a disturbing trend in the Buckeye State.

“Do you know that there’s been over a billion dollars — that’s with a ‘B’ for boy — collected from ratepayers over the years that have later been ruled unlawful by the Ohio Supreme Court and that money was never returned to the ratepayers?” he asked. 

The rate increase getting attention now stems from House Bill 6, the 2019 nuclear bailout that the news organization Vox called “the worst energy bill of the 21st century.” 

Not only does it spend $1.05 billion over the next decade bailing out two failing nuclear plants that Romanchuk said already have gotten $10.2 billion in subsidies. It also spends hundreds of millions of Ohio ratepayer dollars bailing out 1950s-era coal plants — including one in Indiana. 

And despite the bill’s title, “Creates Ohio Clean Air Program,” HB 6 guts renewable-energy and efficiency standards.

The Vox critique came before federal prosecutors in July arrested then-House Speaker Larry Householder and four associates in what they called a $61 million bribery scheme to pass the legislation. An affidavit in support of the indictments said that Akron-based FirstEnergy and its affiliates poured the money through 501(c)(4) “dark money” groups and into the effort to make Householder speaker so he could shepherd the bailout.

FirstEnergy at first defended the conduct of its corporate leadership, but then fired CEO Chuck Jones in October after Ohio Attorney General Dave Yost in September filed a civil suit threatening to dissolve the company if it didn’t get rid of officers who might have been involved in the scheme.

When news of the indictments broke, Gov. Mike DeWine initially said he deplored any corruption that might have occurred, but said HB 6 was good legislation. A day later, he reversed himself and called for the bill to be repealed and replaced.

Leaders of Ohio’s Republican-controlled General Assembly have made similar calls. But with the 2020 legislative calendar vanishing, it seems unlikely that a repeal will happen before Jan. 1.

That’s when FirstEnergy successor Energy Harbor will start collecting an extra $150 million a year from ratepayers, many of them facing dire financial worries due to the coronavirus pandemic. As things currently stand, it doesn’t matter what happens in the criminal or civil cases stemming from the bailout scandal — there’s no way to make Energy Harbor cough any of that money back up.

“There’s no mechanism to return collected fees and subsidies and riders back to the ratepayer,” Romanchuk said.

Since the scandal broke and FirstEnergy fired Jones, its CEO, appearances have only deteriorated.

Sam Randazzo, DeWine’s pick to chair the Public Utility Regulatory Commission of Ohio, resigned this month after the FBI searched his Columbus home — and after FirstEnergy disclosed that it had paid $4 million to a person who was now involved in regulating the utility.

The process of selecting Randazzo, who had previously done work for the company that is poised to get the bailout, has also been questioned as opaque and rushed.

Asked whether the PUCO has been too cozy with the industry it’s supposed to regulate, DeWine Press Secretary Dan Tierney said the governor’s hands were tied by the committee that nominates commission members.

“The PUCO already had a nominating committee that sends names to the Governor,” Tierney said in an email. “The Governor must choose from the names submitted.”

The governor actually has more choices than that, according to Ohio law. If DeWine doesn’t like any of the four names sent him by the nominating council, he can reject them and demand four more.

There seems to be some desire among legislative leaders to keep the nuclear dollars from flowing, at least temporarily.

On Tuesday, Rep. Jim Hoops, R-Napoleon, filed a bill that would delay HB 6 subsidies from flowing to nuclear-owning Energy Harbor for a year. That prompted Rep. David Leland, D-Cincinnati, to accuse Republicans of “kicking the can down the road.”

Romanchuk has introduced a repeal measure, House Bill 772, that would, among other things, force utilities to disgorge subsidies if they’re later determined to be unlawful.

Such refund mechanisms would already have been useful to Ohio ratepayers, according to the Office of the Ohio Consumers’ Counsel, the state’s official consumer representative. 

“Just since 2008, Ohio electric consumers have been denied (and utilities have kept) well over a billion dollars in refunds after the Ohio Supreme Court found utility charges to be improper,” it said in its 2019 annual report. “Ohio consumers would not be mistaken if they think the system is rigged against them and in favor of the utility industry.”

Such charges, according to the consumers’ counsel, include:

  • $526 million for AEP security plans
  • $330 million for a Dayton Power & Light stability charge
  • $456 million for a FirstEnergy distribution and modernization rider

The latter charge was sold as a way to make FirstEnergy’s lines and poles in Ohio more efficient. But as it was collected in 2017 and 2018, an independent auditor determined  that the money went into a “Regulated Utility Money Pool,” that FirstEnergy’s out-of-state utilities could borrow from.

The Ohio Supreme Court struck down the charge, but FirstEnergy got to keep the nearly half-billion dollars it had already collected because in allowing the charge, the PUCO hadn’t built in a refund mechanism, Romanchuk said.

“They don’t ever do that, as much as I’ve pleaded with them,” he said, explaining that the refusal motivates the utilities to keep approaching state regulators, hat in hand.

“What that does is incentivizes utilities to go to the commission and throw everything they can against the wall and whatever sticks or might get overruled — which might take two to three years — the utilities don’t care because they know they’ll never have to pay the money back,” Romanchuk said.

Asked if the governor supported refunding ill-gotten utility charges to Ohio’s increasingly cash-strapped ratepayers, Tierney didn’t answer directly.

The Governor supports the repeal and replacement of HB 6,” he said. “We are awaiting the introduction of the replacement of HB 6. It would be premature to comment until we know what the General Assembly is proposing in the introductory bill for replacement.”



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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.