Environmental groups call on regulator to audit coal subsidies in corrupt utility bailout

By: - April 7, 2023 4:50 am

A field of coal is seen near the Gavin Power Plant on September 11, 2019 in Cheshire, Ohio. (Photo by Stephanie Keith/Getty Images)

Correction: The Public Utilities Commission responded to a question for this story on Wednesday. It has been updated.

Ohio’s utility regulator played a central role in a historic bribery and money laundering scandal. Now environmental groups are calling on it to perform legally mandated audits of hundreds of millions in coal subsidies that were part of the corrupt 2019 legislation. 

The regulator, the Public Utilities Commission of Ohio, is required to evaluate whether the subsidies are “prudently incurred costs” once every three years, but it has failed to do so, spokespeople for the groups said in a press conference outside PUCO’s Columbus headquarters on Wednesday. The ratepayer-financed bailouts are flowing to two aging, coal-fired generating plants — one of which is in Indiana — that are owned by a consortium or utilities known as the Ohio Valley Electric Corp., or OVEC.

“The PUCO’s job is to look out for ratepayers,” the Sierra Club’s Molly Nichols said in prepared remarks she provided. “Instead they are looking out for the utility’s shareholders, continuing to make us pay off the OVEC economic losses and debt. We have already paid over $300 million for these plants and are expected to pay up to $850 million by 2030. These plants are also spewing pollution — damaging our air, water, and public health.”

A PUCO spokesman said such audits — the first of which was supposed to be completed in 2021 — are “pending.”

Senior PUCO figures were deeply involved in bailout legislation that last month resulted in the racketeering convictions of former Ohio House Speaker Larry Householder and former Ohio Republican Party Chairman Matt Borges. Both played roles in a scheme in which more than $60 million in dark money from Ohio utilities funded a $1.3 billion utility bailout. 

In January 2019, as the utilities essentially bought Householder the speakership, a utility lobbyist provided Householder’s fixer with the resume of Pat Tully, a PUCO senior advisor. Within weeks, Tully was working for the House Republican Caucus, helping to draft House Bill 6, the corrupt utility bailout. 

Working with Tully was Sam Randazzo, Gov. Mike DeWine’s nominee to chair the PUCO, who had just received $4.3 million from Akron-based FirstEnergy — the company that paid the biggest share of the bribes, and got most of the bailout. Randazzo resigned from the commission after the FBI searched his Columbus condo in 2020.

Perhaps as a sweetener to other utilities, HB 6 also extended subsidies to the OVEC coal plants to ratepayers statewide. Columbus-based AEP, which also contributed dark money to the bailout scheme, is at 40% the biggest owner of the consortium.

Coal-fired electricity generation has become increasingly uncompetitive because the fracking boom has made natural gas much cheaper and renewables have become cheaper as well. In addition, coal is the most polluting major energy source as the Intergovernmental Panel on Climate Change is warning of a dystopian future if we don’t act quickly and decisively to address the problem.

AEP last month argued for continuing the subsidies because coal was cheaper than natural gas for a time last year as prices for the latter spiked in response to disruptions caused by war in Ukraine. Those prices have since plummeted and are closer to their 10-year averages.

As the state’s regulator, the PUCO is supposed to be protecting Ohio ratepayers, but it’s neglected at least part of that job even though it’s specifically required to by the corrupt bailout law. 

It’s legal-speak, but HB 6 orders the PUCO to the evaluate the “prudence and reasonableness of the actions of electric distribution utilities with ownership interests in the legacy generation resource, including their decisions related to offering the contractual commitment into the wholesale markets, and exclude from recovery those costs that the commission determines imprudent and unreasonable.”

In other words, the law directs the PUCO to investigate whether the utilities owning the OVEC coal plants are ripping off ratepayers and take action if it finds they are. And the law lays out a schedule for such audits to take place.

“The initial determination shall be made during 2021 regarding the prudence and reasonableness of such actions during calendar year 2020,” the law says. “The commission shall again make the determination in 2024, 2027, and 2030 regarding the prudence and reasonableness of such actions during the three calendar years that preceded the year in which the determination is made.”

Yet it’s 2023 and none of those audits has been completed.

“This is referencing audits currently pending before the PUCO, thus cannot comment on pending proceedings,” PUCO spokesman Matt Schilling said in an email.

The PUCO has said it paused all audits of FirstEnergy while the federal criminal investigation goes forward, but it’s hard to see how that applies to the OVEC subsidies.

A consumer activist called on the PUCO to conduct the audits and protect Ohio ratepayers.

“As utility bills are skyrocketing, customers are not aware of the extra charges that they are incurring, such as subsidies for coal — not even used for their own electricity,” Larry Bresler of Utilities for All said in written remarks provided by the Sierra Club. “We must demand bill transparency from the PUCO…”



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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.