This periodic newsletter provides updates on Ohio’s ongoing utility corruption scandal and is a joint project of the Energy News Network and Eye on Ohio, the nonprofit, nonpartisan Ohio Center for Journalism.

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New developments in the saga surrounding House Bill 6, Ohio’s nuclear and coal bailout law, include:

  • Massive outages during a June heat wave trigger criticism of lawmakers, regulators and utilities in the wake of HB 6.
  • FirstEnergy and other parties use a dismissal motion to get around a judge’s push for fact-finding before he approves a settlement agreement.
  • FirstEnergy’s proposal to combine three Ohio utilities sparks concerns about excess profits and transparency.
  • A former chair of the Public Utilities Commission of Ohio texted he knew a charge was likely unlawful but FirstEnergy would keep the money anyway.
  • The Cleveland City Council has called for FirstEnergy to relinquish naming rights for the Cleveland Browns stadium.
  • A pending bill would let the Ohio consumers’ counsel nominate one PUCO commissioner.

Hot stuff

House Bill 6 didn’t directly cause Ohio’s massive power outages in mid-June. Many trees fell during a major storm. And a heat wave greatly increased electricity demand and strained an aging grid, leading to intentional utility outages to minimize equipment damage. 

Such extreme weather is more likely as climate change continues. And the gutting of Ohio’s clean energy standards and subsidies to old coal plants thwarted steps utilities and policymakers should have taken to make the grid more resilient in the face of climate change, critics said.

“Mike DeWine had the opportunity to invest in modernizing our utility systems and diversifying our energy generation in Ohio,” said Spencer Dirrig, political director for the Conservation Ohio PAC. “Instead, Gov. DeWine chose to side with the corrupt utilities bankrolling his political campaigns, signing the worst energy bill in the nation and subjecting Ohioans to higher costs and power services. Responsibility for this crisis lands squarely at the governor’s feet.”

“The obvious link is the elimination of energy efficiency programs,” said Ashley Brown, a former member of the Public Utilities Commission of Ohio. Steps to reduce peak demand, use of time-of-day pricing and other demand-response programs could have let utilities handle the situation much better. 

Instead, utilities’ incentive under HB 6 was just to “throw electricity at customers and that’s it — and use dirty coal plants to do it,” Brown said. Money spent on coal plants added to greenhouse gas emissions that drive climate change, instead of making the grid more resilient. “Ohio is rapidly marching backward,” he said.

“The power outages and rolling blackouts are a case of electric utilities putting profit above the service provided to residents,” said Trish Demeter, acting interim director for the Ohio Environmental Council. “For years, utilities have used their profits to lobby elected officials at the Statehouse to allow them to take more of our money and provide less effective services.”

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Settlement could prevent document disclosures

A federal court filing could let FirstEnergy and other parties make an end run around a judge’s efforts to get more facts before approving a settlement.

The settlement affects three pending cases and would resolve claims brought on behalf of the company for alleged wrongdoing by its directors and officers. The settlement would provide some reimbursement to the company and pay off legal fees, mostly from insurance.

The judge in one case gave a preliminary thumbs up to the deal last month. U.S. District Court Judge John Adams, who presides in one of the other cases, wanted discovery to move ahead first. When that didn’t happen, Adams ordered the parties to explain why he shouldn’t order other lawyers to step in.

On June 10, FirstEnergy and other parties moved to dismiss the case “without prejudice.” In theory, that means it could be refiled later. But approval of the settlement deal in another case would block future cases with the same claims. Separate filings argued no new counsel should be appointed in light of all the work that went into the settlement. Adams has not yet ruled on the filings.

At issue is how much oversight courts can practically exercise over settlements in shareholder derivative cases. The parties’ move also may shield important facts from coming to light.

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Combining utilities

FirstEnergy is looking to combine its three Ohio utilities, CEO Steven Strah said at the company’s May 17 shareholder meeting. “It’s still early in the comprehensive review process,” said spokesperson Jennifer Young. Any combination would need regulatory review, she noted.

The plan could provide administrative efficiencies and easier access to capital. FirstEnergy Service Company, an unregulated affiliate, already performs some common activities for utilities. Recent audits noted poor tracking of utility funds after they went into a joint money pool.

FirstEnergy’s plan also “could circumvent a 2008 law requiring refunds of too-high profits charged to consumers,” said Merrilee Embs, spokesperson for Ohio Consumers’ Counsel Bruce Weston. HB 6 had let FirstEnergy average its calculations among its three utilities, which let it keep millions more in profits compared to making determinations for each one separately. That change was repealed last year.

Strah’s meeting comments also touted progress toward reducing greenhouse gas emissions. However, it could take until 2050 for FirstEnergy to transition away from coal in West Virginia.

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Text talk

Utility influence in Ohio government apparently goes further back in time than FirstEnergy’s dealings with former PUCO Chair Sam Randazzo. Asim Haque chaired the Public Utilities Commission of Ohio before Randazzo. After he left to work at PJM, Haque texted a former FirstEnergy vice president that he knew a credit support rider “would likely be held unlawful and could not be refunded.”

Haque sent the texts on the same day the Ohio Supreme Court case held the charge unlawful. But because the PUCO didn’t make the charge refundable, the court let FirstEnergy keep roughly $456 million.

Critics said the texts were inappropriate and further undermine public confidence in the fairness and integrity of the PUCO. Haque said his remarks were tongue-in-cheek. He also noted that the 2016 ruling gave FirstEnergy much less than the company had sought.

Haque’s comments don’t explain why the PUCO refused to make the charge refundable. Even more unusual was that the idea for the rider apparently originated with the PUCO as an alternative to a virtual power purchase plan that was widely opposed.

“Clearly someone was intervening to force his hand,” suggested former PUCO commissioner Ashley Brown. 

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Regulatory reform

A bill introduced on May 31 would require the governor to name one PUCO commissioner from candidates nominated by the Ohio consumers’ counsel. Republican Reps. Laura Lanese of Grove City and Gayle Manning of North Ridgeville are primary sponsors of HB 690. Additional co-sponsors include both Republicans and Democrats.

The bill is “especially important given the PUCO is out-of-balance with two of five commissioners having formerly worked for the utility industry,” said Ohio Consumers’ Counsel Bruce Weston. “Just recently the PUCO even had three of five commissioners who had worked for utilities — until a FirstEnergy scandal led the former PUCO chair to resign.” The bill has not yet been assigned to a committee.

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‘The Bribery Bunch’

Ohio Citizen Action continues its Crime with DeWine campaign, calling for the governor to refuse campaign money from utilities and take affirmative steps to prevent corruption. A June 7 parody of The Brady Bunch theme garnered 62,000 views in the week after its release.

“The Bribery Bunch is our campaign’s ‘elevator speech,’” said CEO Rachael Belz. “In one minute, it quickly tells the story of how we got to where we are today with Ohio’s most appalling scandal.”

No charges have been brought against DeWine and Husted. However, they “are decision-makers that allowed HB 6 to become law,” Belz said. Much of the law remains on the books. And neither DeWine nor Husted has taken steps to reduce utility influence and reform regulation in the wake of HB 6.

“They’re now responsible for continuing the culture of corruption in Ohio by not dealing with it,” Belz said.

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The name game

A June 7 resolution by Cleveland City Council calls for removal of FirstEnergy’s name from the Browns football stadium. The resolution formally condemns FirstEnergy’s role in the HB 6 corruption scandal.

However, the resolution is not binding. Roughly seven years remain on the $102 million naming rights contract between FirstEnergy and the Cleveland Browns.

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Kathi is the author of 25 books and more than 600 articles, and writes often on science and policy issues. In addition to her journalism career, Kathi is an alumna of Harvard Law School and has spent 15 years practicing law. She is a member of the Society of Environmental Journalists and the National Association of Science Writers. Kathi covers the state of Ohio.