FirstEnergy’s headquarters in Akron. Source: Google Maps.
Two summers ago, the powerful speaker of the Ohio House of Representatives and four of his political associates were arrested in a high-profile bribery scandal. The aftershocks are still being felt in Maryland.
It’s a scandal of breathtaking proportions and has had far-reaching consequences in Ohio and beyond. Larry Householder (R), then the House speaker, and the four operatives were charged in a federal criminal complaint of accepting $61 million in bribes from a major energy company, FirstEnergy Corp., in order to pass legislation that provided a $1.5 billion taxpayer-funded bailout for the company’s nuclear power plants.
The scandal has touched the administration of Ohio Gov. Mike DeWine (R), top lawmakers and lobbyists, and regulators. The FirstEnergy CEO and other executives have resigned, and so has DeWine’s appointee to head the state agency that regulates utilities, who has been accused of accepting a $4.3 million bribe. Two of Householder’s associates have pleaded guilty to the charges. A lobbyist who was indicted along with the lawmaker took his own life.
Householder stepped down as speaker soon after his arrest and was expelled from the legislature months later, though not before winning re-election to his House seat in November 2020. He’s due to go on trial next January. FirstEnergy agreed to pay a $230 million fine last July and said it would cooperate with federal criminal investigators in exchange for a deferred prosecution of a wire fraud charge.
Why should anyone care in Maryland?
FirstEnergy is the parent company of Potomac Edison, the electric utility that serves more than a quarter million customers in Western Maryland. And a consumer watchdog in the state is trying to figure out how much the Ohio scandal is costing ratepayers here.
Based on what he’s learned so far, David S. Lapp, who heads the Office of People’s Counsel (OPC), a state agency that represents residential customers’ interests in legal and regulatory cases involving energy utilities, calls the impact of the FirstEnergy case in Maryland “a situation prone to customer abuse that must be remedied.”
“We are concerned that the current arrangement has led to Maryland customers paying for costs that have nothing to do with the service provided to them, and it may continue to do so absent changes necessary to protect Maryland consumers,” he said.
Because utility law is so specialized and complex, much of Lapp’s quest to learn more has taken the form of arcane filings before the Maryland Public Service Commission (PSC), which regulates most utilities in the state. Spokespeople for both FirstEnergy and the PSC declined to comment, citing the ongoing nature of the case.
Last summer, at Lapp’s request, the PSC agreed to a limited investigation of FirstEnergy’s practices and its impact in Maryland — though not nearly as wide-ranging a probe as Lapp was seeking.
So far, Potomac Edison, without providing details, has suggested that the Ohio scandal has cost the company’s ratepayers about $38,000.
“To place this figure in context, $38,000 represents only 0.03% of Potomac Edison’s total approved distribution revenue requirement,” the company wrote in one of its filings.
Lapp is skeptical about the assertion and questions the methodology used to arrive at the figure.
“Potomac Edison has stymied our efforts at most every front to learn how Maryland customers ended up footing the bill for the bribery scandal,” he said.
‘A disturbing lack of independence’
The documents that FirstEnergy has submitted to various investigative agencies — some in response to the ongoing Maryland PSC probe — have turned up some interesting tidbits that aren’t directly related to the OPC’s request for information. The most notable: that Potomac Edison made a $163,000 contribution in 2017 to a “dark money” political organization launched by associates of President Trump called America First Policies Inc.
The donation was made just as FirstEnergy was seeking financial and regulatory support from the Trump administration for its struggling nuclear and coal plants — which became the basis for the political scandal in Ohio.
That $163,000 donation was first reported last month by the Akron Beacon Journal, which got access to company documents submitted to the Federal Energy Regulatory Commission and obtained by a renewable energy advocacy group, which were turned over to Maryland for its investigation.
Asked by the newspaper, a FirstEnergy spokesperson declined to say whether the $163,000 was billed to Potomac Edison customers. But consumer watchdogs and regulators believe the Potomac Edison donation was just a fraction of the payments FirstEnergy and its subsidiaries made to the Trump-aligned 501c4 group that year.
The Federal Energy Regulatory Commission completed an 84-page audit earlier this year that found FirstEnergy had misallocated costs or improperly accounted for $70.9 million in lobbying and political expenditures between 2015 and 2021. A significant percentage of the funds went to dark money political groups that don’t have to report their contributions — and at least some worked to pass the Ohio legislation that provided the taxpayer-funded bailout for FirstEnergy’s nuclear plants.
More information about the Ohio scandal and its connection to Maryland and other states could well come out in the months ahead.
The Public Utilities Commission of Ohio has several investigations of FirstEnergy underway, though a consumer watchdog in the Buckeye State recently accused the commission of slow-walking its fact-finding process. The New Jersey Public Utilities Commission has launched an investigation similar to Maryland’s, to see how Jersey Central Power & Light, the state’s second largest electric utility and a subsidiary of FirstEnergy, has been impacted by the Ohio scandal.
Upcoming trials of Householder and others may yield still more information.
And there have been some important disclosures in a lawsuit from FirstEnergy shareholders who have sued the company for damages to their investments caused by the scandal; a $180 million settlement is pending.
Just how far the Maryland probe will go is hard to say.
The OPC had requested a 14-point investigation, mainly looking into FirstEnergy’s financial standing and how that might affect its operations in Maryland.
Among the information the consumer watchdog was seeking:
- whether Potomac Edison funds were used to bribe Ohio officials or pay legal fees related to the racketeering case;
- whether FirstEnergy or Potomac Edison had taken steps to protect Potomac Edison and its ratepayers from any economic fallout connected to the scandal; and
- whether the PSC should consider ordering FirstEnergy to divest its ownership of Potomac Edison because of the scandal.
As an ancillary issue, the OPC also asked the PSC to explore how attempts by corporate raider Carl Icahn to obtain substantially more shares in FirstEnergy than he currently owns might impact Potomac Edison and its ratepayers.
The PSC decided to take a narrower approach, focusing mainly on whether FirstEnergy used, is using, or intends to use any funds from Potomac Edison to pay for the bribes, lobbying costs, legal fees or any other costs associated with the Ohio scandal and whether the Maryland utility’s ability to access funds from the parent company for its operations has been compromised. But the commission did agree to look into Icahn’s investments in the company as well.
Since the commission agreed to take the case in late July, the people’s counsel and Potomac Edison attorneys have responded with a round of filings and counter-filings that have provided only glimpses of what’s being investigated and what it might mean for consumers. Potomac Edison’s legal team includes J. Joseph “Max” Curran III, a partner at the law firm Venable LLP, a former commissioner on the PSC, and brother of retired Judge Katie Curran O’Malley (D), a candidate for state attorney general.
One thing that’s clear, Lapp said, is that Potomac Edison has “a disturbing lack of independence” from its parent company — and that FirstEnergy is being disingenuous when it effectively admits to criminal behavior but says its subsidiaries are barely being impacted.
In its most recent filing to the PSC, dated March 28, the Office of People’s Counsel asked the commission to continue and expand its investigation.
“It is critical that the Commission obtain a full and complete understanding of the extent of the scandal’s impact on Potomac Edison, how those impacts were able to occur, and what must be done to prevent similar occurrences in the future,” Lapp and his colleagues wrote. “The Commission must oversee the implementation of safeguards for Potomac Edison ratepayers to ensure their protection.”
In a filing dated April 7, Potomac Edison replied that “circumstances surrounding FirstEnergy have changed substantially — and all for the better” since the Ohio scandal broke, and that the PSC must take a measured approach to its probe as a result.
“FirstEnergy has emerged from the unfortunate circumstances as a stronger parent company to Potomac Edison, led by new management and new board members, and, importantly, throughout this ordeal, Potomac Edison has continued to provide its customers with strong, reliable, and affordable electric distribution service,” the company’s lawyers wrote. “These improved circumstances provide context within which the Commission should evaluate next steps.”
Potomac Edison goes on to say that the OPC’s calls for the Public Service Commission to expand its investigation are driven by “unsupported rhetoric, not facts.”
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