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Nuclear energy

FirstEnergy's Ohio Utilities Face Over $500M in Proposed Fines for HB 6 Regulatory Violations

Strategic Insights

— 2 min read

Three cases at the Public Utilities Commission of Ohio (PUCO) had their evidentiary hearing in June, exploring whether FirstEnergy violated Ohio law requiring corporate separation between utilities and unregulated affiliates. Another case examines how FirstEnergy used more than $450 million collected from customers under a bill rider that was later found to be unlawful. The third case considers whether charges to an account that was meant for expenses related to utilities' capital equipment were improper. FirstEnergy has admitted to funneling roughly $60 million to dark money groups connected to former Ohio House Speaker Larry Householder and paying $4.3 million to Sam Randazzo, former chair of the PUCO, shortly before his appointment, in return for helping to pass HB 6 and doing other favors for the company at the commission.

Key Takeaways:

  • The Ohio Manufacturers' Association Energy Group and the Office of the Ohio Consumers' Counsel filed briefs calling for FirstEnergy's Ohio utilities to pay more than $500 million in fines for regulatory violations in three PUCO cases related to HB 6.
  • The utilities claim that any remedy should be much smaller, with FirstEnergy's proposed resolution being about $6.6 million, plus interest, and a "measured remedy" for concealing a side deal with Randazzo.
  • FirstEnergy's utilities argue that they did not favor their unregulated affiliate, FirstEnergy Solutions, but rather used the bribes to public officials to boost the financial standing of their regulated utilities.
  • Evidence shows that more than two-thirds of the total rider payments went back to customers under a 2021 settlement in a case about significantly excessive earnings, undermining claims that the utilities needed the rider money.
  • The PUCO's review of the cases has been described as a piecemeal approach, with regulators not ordering a full-scale investigation and management review of FirstEnergy's utilities.
  • Lawyers for the manufacturers' group argue that FirstEnergy has failed to sustain its burden of proof and that its actions in furtherance of HB 6 and the bribes have and still are causing harm to customers.
  • FirstEnergy has announced multiple reforms, but critics say that good corporate governance hinges on companies knowing there will be consequences for violations, and that regulators should require steep financial penalties or even revoke the companies' ability to do business as monopoly distribution utilities.

Statistics:

  • $450 million: The amount collected from customers under the bill rider that was later found to be unlawful.
  • $60 million: The amount funneled by FirstEnergy to dark money groups connected to former Ohio House Speaker Larry Householder.
  • $4.3 million: The amount paid by FirstEnergy to Sam Randazzo, former chair of the PUCO, shortly before his appointment.
  • $6.6 million: The amount proposed by FirstEnergy as a fine for regulatory violations.
  • 2021: The year in which a settlement was reached in a case about significantly excessive earnings, with more than two-thirds of the total rider payments going back to customers.
  • 2019: The year in which the Ohio Supreme Court ruled that the bill charge was not refundable because it hadn't yet been ruled unlawful.

Sources:

  • [Brief of the Ohio Manufacturers' Association Energy Group](https://dis.puc.state.oh.us/DocumentRecord.aspx?DocID=bf782f5f-919c-4434-b2cc-5391d924b08b)
  • [Testimony of John Seryak and Ashley Brown](https://dis.puc.state.oh.us/DocumentRecord.aspx?DocID=bf782f5f-919c-4434-b2cc-5391d924b08b)
  • [Audit by Daymark Energy Advisors](https://dis.puc.state.oh.us/DocumentRecord.aspx?DocID=8f0f9fbb-7fc7-4ed1-9c32-cd08850f7934)
  • [PUCO announcement](https://puco.ohio.gov/news/puco-to-lift-stay-on-firstenergy-hb6-investigations)

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