FirstEnergy pushed for ‘cooperative’ utility regulator; DeWine heeded its pick

By: - February 16, 2022 4:00 am

FirstEnergy’s headquarters in Akron. Source: Google Maps.

FirstEnergy executives and two powerful politicians who the company admitted to bribing all unified behind renominating a “very cooperative” incumbent to serve on a key regulatory panel, the company stated in court filings.

The filing doesn’t identify the commissioner, but only refers to an “incumbent” and then-current “PUCO official.” Commissioner Lawrence K. Friedeman was the only of five incumbents at the time who applied for the open seat. He made it onto a shortlist of finalists from which he was reappointed by Gov. Mike DeWine in early 2020 to a five-year term on the Public Utilities Commission of Ohio.

The apparent connection between the Statehouse public corruption probe and Friedeman, which has not been previously reported, suggests FirstEnergy played some additional role in controlling who would sit on the board that regulates it. This ties FirstEnergy to two of five slots on the PUCO in the time frame the company was accused of criminal conduct.

PUCO Commissioner Lawrence K. Friedeman. Official photo.

The PUCO plays a key role in overseeing utility companies, which operate in a monopolistic market. The PUCO sets what rates utilities can charge for energy; what additional fees they can pass on to customers; and whether their profits are “significantly excessive” in violation of state law.

To possibly avert a charge of honest services wire fraud, FirstEnergy entered what’s known as a deferred prosecution agreement with federal prosecutors in July 2021. The company agreed to pay a $230 million penalty and admit to an extended narrative of how it bribed House Speaker Larry Householder, R-Glenford, and PUCO chairman Sam Randazzo in exchange for several legislative and regulatory favors to save the company hundreds of millions.

More specifically, prosecutors say the company transferred more than $60 million into an account secretly controlled by Householder between 2017 and 2019 used for personal and political purposes, and paid Randazzo’s business $4.3 million just before he started as PUCO chairman.

The criminal allegations regarding Householder center on House Bill 6 — 2019 legislation that bailed out nuclear plants owned at the time by a FirstEnergy subsidiary and put ratepayers on the hook to “recession-proof” the company, as its CEO said. Householder has pleaded not guilty and awaits trial. Randazzo has maintained his innocence and has not been charged with a crime.

With the bill passed and a ballot referendum effort to repeal it thwarted, the parties looked to a PUCO seat set to open in April 2020. Householder texted FirstEnergy CEO Chuck Jones on Jan. 15, 2020, asking who Jones likes for the seat, according to FirstEnergy’s court filing.

Jones forwarded the query to another company executive, Mike Dowling. He later added on to it.

“I think [Randazzo] wants [the incumbent candidate — Friedeman] re-upped because he’s very cooperative with [Randazzo],” the text said, per court records. “Tell [Randazzo that Householder] asked me … my response was whoever [Randazzo] wants.”

Jones then texted Householder to say that Randazzo likes Friedeman, and Randazzo has been “outstanding.” Jones said Randazzo, as PUCO chairman, approved a company request to the PUCO per a piece of HB 6 that allowed it to “decouple” its revenue from the amount of energy used by customers, using the unusually warm (and therefore profitable) year of 2018 as a baseline. As Jones noted, the PUCO, on a 5-0 vote, even agreed to override the recommendation of “staff bureaucrats” who wanted to use a more normal weather year as FirstEnergy’s baseline.

“Very good,” Householder responded. “I need to have my appointee to make recommendation for Gov. I will take care of it tomorrow.”

Those texts were exchanged Jan. 15, 2020. The PUCO nominating council included Friedeman on a shortlist of candidates in late January from which the governor made a final decision Feb. 6.

The deferred prosecution agreement doesn’t identify most players by name, though it offers enough clues to match their identities against other public information. For instance, Friedeman is mentioned as an “incumbent” who could be “re-upped.”

Of the five current PUCO commissioners, Friedeman is the only one who applied for the open seat, was added to the shortlist, and ultimately appointed. However, official sources including FirstEnergy, the U.S. Attorney’s Office, and the PUCO all declined to comment or confirm the deferred prosecution agreement section is referencing Friedeman.

Gov. John Kasich appointed Friedeman in 2017 to fill out a vacated term. He spent years working in the natural gas industry, including as the vice president of regulatory affairs for IGS Energy in the seven years leading up to his appointment. He also worked at Vectren Energy Delivery of Ohio and Columbia Energy Services. He served in official positions with the Ohio Gas Association and the Ohio Gas Suppliers Association.

His appointment was subject to Senate confirmation. However, the confirmation process was essentially rubber stamped. His confirmation hearing in committee lasted 60 seconds, and his name was never spoken out loud. He was unanimously confirmed by the full chamber.

The Friedeman appointment joins a list of other official actions from DeWine that have caught prosecutors’ attention in their criminal probe of the passage of HB 6.

DeWine’s 2018 gubernatorial received $1 million from FirstEnergy, according to the Dayton Daily News. Upon victory, DeWine hired Dan McCarthy as his legislative director. McCarthy, a former FirstEnergy lobbyist, founded a nonprofit group that was later used as a pass-through for $15 million to another nonprofit allegedly controlled by Householder. DeWine overrode objections from environmental groups to appoint Randazzo as the PUCO chairman. When HB 6 passed through an acrimonious legislative slog, DeWine took the unusual step of quickly signing the bill instead of taking the constitutionally-allotted 10 days.

Dan Tierney, a DeWine spokesman, said he could not confirm or deny whether the deferred prosecution agreement section was referring to Friedeman. Tierney said DeWine has “no recollection of any conversations” with Jones, Dowling, Randazzo or Householder prior to Friedeman’s reappointment.

When asked why the governor opted to name a candidate with close ties to the natural gas industry as a utility regulator, Tierney said it is “fairly common for sitting commissioners to be renominated and subsequently reappointed to their seats.”

PUCO critics like the Ohio Consumers’ Counsel have alleged that the PUCO is essentially a shill for Ohio’s regulated, investor-owned utility companies. The OCC has drawn attention to texts mentioned in court documents and later obtained in a records request referring to Randazzo “burning” an audit into a controversial and later overturned $460 million charge to FirstEnergy customers as PUCO chairman. In a statement, OCC spokeswoman Merrilee Embs didn’t answer whether the OCC believes the FirstEnergy filing was referring to Friedeman.

“We’ve been asking questions with depositions and subpoenas. The public deserves answers,” she said. “The FirstEnergy text message described in the U.S. Attorney’s filing last year raises more questions about the PUCO commissioner appointment process.”

After this story was published, the OCC added onto its statement: “In any event, we don’t think that a former utility official, such as Mr. Friedeman, should be appointed to the PUCO to regulate utilities for the public.”

The HB 6 probe has yielded pleas of guilt from a Householder adviser and a lobbyist who represented FirstEnergy. Householder and another lobbyist have also been indicted on a charge of racketeering and await trial. A third lobbyist, Neil Clark, died by suicide while under indictment.



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Jake Zuckerman
Jake Zuckerman

Jake Zuckerman is a statehouse reporter. He spent three years chronicling the West Virginia Legislature for The Charleston Gazette-Mail after covering cops and courts for The Northern Virginia Daily.