Ohio House Bill 6 Updates: More bill charges on the way while cases continue

BY: KATHIANN M. KOWALSKI, ENERGY NEWS NETWORK – SEPTEMBER 6, 2024

This monthly newsletter from Energy News Network provides updates on Ohio’s ongoing utility corruption scandal. Click here to subscribe.

FirstEnergy’s utility customers took heavy hits from severe thunderstorms and tornadoes last month. Nearly half a million of its Ohio utility customers lost power, with extended outages causing many to lose food and incur other expenses in addition to property damage due to the extreme weather.

All of the company’s utility customers can also expect hits from higher energy bills next year after FirstEnergy’s pending rate case ends. On July 31, the company asked Ohio regulators to let it double the increased charges sought — from roughly $94 million per year to $190.3 million annually.

Yet state regulators still have not resolved multiple FirstEnergy cases involving millions of dollars and issues related to House Bill 6, the 2019 nuclear and coal bailout law at the heart of Ohio’s ongoing corruption scandal. And none of those cases will be decided before voters cast their ballots this fall.

Other recent developments include:

The State of Ohio settled potential criminal charges against FirstEnergy for $20 million, without stating how the figure was arrived at or making any provision for restitution to Ohio ratepayers.
Federal prosecutors urged the Sixth Circuit Court of Appeals to uphold former Ohio House Speaker Larry Householder’s criminal conviction and 20-year sentence.
Ohio regulators approved more than $100 million in challenged expenses for two 1950s-era coal plants for which subsidies are mandated by HB 6.

In the dark

Grid reliability is back in the spotlight after tornadoes and severe thunderstorms knocked out power to approximately 495,000 of FirstEnergy’s Ohio utility customers on August 6.

FirstEnergy Ohio President Torrence Hinton and other company executives provided a briefing on the company’s response to the Public Utilities Commission of Ohio after its September 4 meeting. “We haven’t had this amount of customers out for about 30 years,” Hinton said.

Restoring power took roughly a week, with outages lasting more than three days for more than 100,000 of those customers, data from the company show.

The outages likely won’t count against the utilities’ reliability requirements for this year because of the extreme nature of the storms.

Some Ohio lawmakers like House Rep. Dick Stein, R-Norwalk, have already expressed concern about reliability, although they have framed it as a consequence of retiring coal-fired power plants and have called for more electricity from fossil fuels or nuclear energy.

However, the vast majority of electric grid reliability problems stem from bad weather and distribution issues. Those problems are likely to worsen as infrastructure ages and fossil fuel-driven climate change makes extreme weather more common.

“Without immediate and meaningful action, climate change will continue to cause extreme weather and drive up costs for all Ohioans,” 14 Democratic Ohio House representatives wrote in an August 14 letter, calling for regulators to address the effectiveness and reliability of the state’s current energy strategies, which are heavily depending on fossil fuels and nuclear power.

About 1,000 power outages linger 7 days after storms (FOX 8 News)

Doubling increased charges

FirstEnergy asked the PUCO this summer to let it double its proposed increase for rates and riders for its three Ohio utilities to $190.3 million per year, compared with the $94 million sought just two months earlier.

The requested increase is “primarily due to lower current revenues, higher operating expenses and higher rate base balances” than estimated, said Santino Fanelli, FirstEnergy’s director for Ohio rates and regulatory affairs, in testimony filed with the PUCO on July 31.

Fanelli also said the requested increase reflects the use of actual cost and revenue data instead of estimates for the first five months of the rate case’s test year. A pending billwould give utilities more leeway in using estimates, and some advocates worry companies might pad them on the high side.

In late June the PUCO selected Blue Ridge Consulting Services to help it review financial data, management policies and other information. The commission’s staff will then likely prepare a report with recommendations. Ratepayers will also have a chance to comment at local public hearings, which have not yet been scheduled but will likely include a virtual session.

Ohio ratemaking reform bill would give more favors to utilities, critics say (Energy News Network)

Slap on the wrist?

FirstEnergy agreed to pay $20 million to settle its state criminal liability related to HB 6, but it’s unclear how lawyers for the utility, the Ohio Attorney General’s office and the Summit County prosecutor’s office arrived at the number.

The amount is just under one-third of the bribes the company admitted to paying when it settled federal criminal charges against it in July 2021. The law’s nuclear bailouts would have been $1.3 billion if they hadn’t been stayed and then repealed.

The agreement with the state acknowledges the company’s cooperation but does not require any compensation to ratepayers, said Ashley Brown, a former PUCO commissioner.

Spokesperson Steve Irwin at the Ohio Attorney General’s office framed the settlement as “an important step in bringing the disgraced corporate leaders who used their positions of power to betray FirstEnergy’s ratepayers and employees and the people of Ohio to account for their crimes.” Irwin noted that the company is required to provide evidence, access to witnesses and testimony in the pending cases against former FirstEnergy executives Chuck Jones and Michael Dowling and in a civil proceeding relating to HB 6. “FirstEnergy today is not the company it was five years ago,” he added, noting steps taken to reform the company’s internal ethics program.

FirstEnergy President and CEO Brian Tierney echoed the theme in a press release, saying the company is “a stronger organization today.”

Others are more critical.

“It is really disappointing to see the Ohio Attorney General’s office let FirstEnergy off the hook for its crimes with what amounted to more of a wink-wink than a slap on the wrist,” said Dave Anderson, policy and communications manager for the Energy and Policy Institute. He contrasted the August settlement with the potential remedies spelled out in the Ohio Attorney General’s initial civil complaint in a 2020 case, where potential punishments included corporate dissolution of FirstEnergy and penalties of triple the damages caused by allegedly wrongful actions.

Ohio Attorney General Dave Yost settles with FirstEnergy for $20 million (Ohio Capital Journal)

Regulatory cases continue

Ohio voters can’t expect a resolution to any of FirstEnergy’s four HB 6-related regulatory cases before casting their votes this fall. Nineteen candidates on the ballot for Ohio’s General Assembly are among those who voted for HB 6 in 2019.

An audit in one case isn’t due before the end of September, and no date for an evidentiary hearing has been set. Two other cases about how FirstEnergy spent money from two bill riders won’t get an evidentiary hearing until next February.

A fourth regulatory case about corporate separation is set to start its hearing on October 9, when early voting will be underway. That date may move, however, because several depositions won’t take place until November and December. Depositions are sessions where witnesses answer lawyers’ questions under oath before a hearing or trial.

Questions in some of those depositions will likely follow up on information from recently produced documents. Possible topics also include why FirstEnergy fired various individuals besides former executives Jones and Dowling in the wake of Householder and others’ arrests in 2020.

FirstEnergy’s chief ethics officer knew about $4.3 million payment the company said was a bribe (Cleveland.com)

Rubber stamping?

Ohio regulators have approved more than $100 million in challenged 2020 expenses for two 1950s-era coal plants. HB 6 lets the plants’ Ohio utility owners pass costs on to ratepayers through 2030. By then the total subsidies could be around $1 billion, according to RunnerStone, a consultant for the Ohio Manufacturers’ Association.

“Consumers once again got stuck with the bill,” said Ohio Consumers’ Counsel Maureen Willis when the August 21 ruling came out.

The PUCO found that while the auditor, London Economics International, made several recommendations and conclusions critical of the coal plants’ practices and spending, the firm hadn’t come straight out and said any amount should be disallowed.

Paul Arbaje, an energy analyst for the Union of Concerned Scientists, said the ruling “sets a disturbing precedent. Coal-fired electricity is not only terribly destructive to our climate and public health, but it’s also completely uneconomical and has been for a long time.”

Higher capacity prices in the PJM grid region will take effect next June and could offset some of next year’s coal subsidies under HB 6. However, critics say the old plants will still be a bad deal for Ohioans. And higher capacity prices will affect wholesale electricity prices across the regional grid footprint, likely raising energy expenses overall.

HB 6 coal plant charges mount up again in Ohio (Energy News Network)

Coal company got big payback from HB 6 (Energy News Network)

Federal court filings

Briefing has been completed in lobbyist Matt Borges’ appeal from his federal criminal conviction alongside former Ohio House speaker Larry Householder last year. The court has not yet scheduled oral argument.

Federal prosecutors filed their brief in the Householder case on August 26, arguing that the trial court got both Householder’s conviction and his 20-year sentence right. Three groups also filed a friend-of-the-court brief on August 30, countering Householder’s argument that bribes were campaign donations and a form of speech protected under the Constitution.

“The First Amendment provides no protection for the corrupt and knowing exchange of campaign contributions for official acts,” wrote lawyers for the Campaign Legal Center, the Environmental Law & Policy Center and the Brennan Center for Justice at New York University School of Law.

A July court filing in FirstEnergy’s deferred prosecution agreement case acknowledged the company has performed its obligations under that 2021 settlement, which resulted in a $230 million penalty. FirstEnergy must continue to cooperate in any other criminal cases the federal government brings relating to facts stated in that HB 6 case. However, the federal government has yet to bring criminal charges against any current or former FirstEnergy executives who allegedly made the bribes.

A separate case at the Sixth Circuit Court of Appeals involves FirstEnergy’s challenge to Judge Algenon Marbley’s May 6 ruling that the company must produce its internal investigation to lawyers in shareholder litigation. The appeals court docket includes friend-of-the-court briefs filed by several law firms and a malpractice insurance carrier, expressing concern about whether the ruling could erode attorney-client privilege.

Scandal-tainted FirstEnergy demands appeal of ‘shockwave’ privilege ruling (Reuters)

FirstEnergy backed by dozens of law firms in ‘shockwave’ privilege appeal (Reuters)

This article first appeared on Energy News Network and is republished here under a Creative Commons license.

Posted by: David Dupont on September 6, 2024.