By John Stang
After a federal audit showed FirstEnergy Corp. put $10.9 million of lobbying costs into the wrong accounts, the company has until early April to come up with a plan to fix this and several other accounting problems, which could result in refunds to ratepayers.
A Federal Energy Regulatory Commission audit report released Feb. 4 outlined a wide array of accounting deficiencies at FirstEnergy and some of its 63 subsidiaries. These include former subsidiary FirstEnergy Solutions, which changed its name Energy Harbor and split entirely from FirstEnergy in the wake of declaring bankruptcy in 2018. Energy Harbor owns and operates the financially struggling Davis-Besse and Perry reactors in Ohio.
The audit also linked lobbying cost problems with FirstEnergy’s $60 million bribery scandal involving now-expelled Ohio House Speaker Larry Householder (R).
FirstEnergy Solutions “improperly recorded approximately $10.9 million of lobbying costs in utility operating expense accounts, rather than in … [the account for] Expenditures for Certain Civic, Political and Related Activities”, the audit report said.
FERC gave FirstEnergy 60 days from last Friday to produce an analysis showing how the company could refund some of this money to ratepayers and how to deal with other monies improperly distributed to the wrong funds. Besides lobbying, the audit found accounting problems in construction funds, vegetation management, amortization of assets, billing practices and accounting for fuel.
The FERC audit noted that FirstEnergy and its subsidiaries spent almost $71 million for lobbying or non-operating purposes, with some not sufficiently documented from 2010 to 2019. FirstEnergy also sent almost $23 million to Sustainability Funding Alliance of Ohio, Inc., and IEU-Ohio Administration Company, which were two small entities associated with Sam Randazzo, a former chairman of the Public Utilities Commission of Ohio, who helped FirstEnergy score a massive rate hike to Ohioans.
The audit report said FirstEnergy sent another almost $29 million from 2003 to 2020 to 16 entries owned by one unidentified individual. The Cleveland Plain Dealer identified that individual as Tony George, a Cleveland businessman who is also a major fundraiser for both Republicans and Democrats.
FirstEnergy agreed to tackle most of FERC’s recommendations to improve its accounting, and is discussing some of the recommendations that it disagrees with, according to the audit report.
The FERC report arrived a few weeks after a separate audit report — released Jan. 14 — that concluded FirstEnergy’s additional charges to Ohio customers from 2017 to 2019 might not have been used as intended to improve the state’s power grid.
Nor could the January audit prove that the money went to bribe the Ohio House’s former speaker and other state lawmakers, who rammed a controversial nuclear-related bill through the state general assembly in 2019.
All that the audit — called for in 2020 by the Ohio Consumers’ counsel — could confirm was that FirstEnergy employees of three subsidiaries did not know they were supposed to route roughly $400 million toward grid improvements. Consequently, they did not adequately track the money internally and the money ended up in a general pool, according to the audit by Daymark Energy Advisors.
From January 2017 to July 2019, PUCO allowed three subsidiaries of FirstEnergy — Cleveland Electric Illuminating Company, Ohio Edison and Toledo Edison — to charge customers extra for the grid improvements. The extra charges were called the “Distribution Modernization Rider.”
FirstEnergy and its subsidiaries were allowed to collect at least $168 million annually with the Distribution Modernization Rider. Neither PUCO nor FirstEnergy had a definition written down for a Distribution Modernization Rider, the audit report said. FirstEnergy’s subsidiaries had no significant capital expenditures that could be linked to improving the power grid.
In 2021, FirstEnergy agreed to pay a $230 million fine for its role in a major bribery scandal involving two Ohio reactors and Householder, the now-ousted former Ohio House speaker. Half the fine will go to the federal government and half will go to the state. FirstEnergy has said all $230 million will come from cash that FirstEnergy had on hand.
FirstEnergy used two intermediary organizations — Partners for Progress and Generation Now — to move roughly $53 million of the $60 million it is accused of using to bribe former House Speaker Larry Householder (R) and four lobbyists and campaign allies.
The company is accused of bribing these officials to help elect a slate of freshman legislators who would put Householder in charge of the Ohio state house in order to pass a bill into law that would raise rates on all Ohio utility customers. The measure, House Bill 6, would provide $150 million in annual subsidies to help FirstEnergy’s financially struggling Davis-Besse Nuclear Power Station and Perry Nuclear Power Plant. The Ohio General Assembly passed House Bill 6 in 2019.
In 2020, the FBI arrested Householder, three lobbyists and a former campaign chairman on money laundering charges. Householder and one lobbyist are fighting the charges. Two of the five have pleaded guilty. One lobbyist, Neil Clark, died by suicide. Householder was stripped of his speakership and formally ejected from the legislature. The Ohio General Assembly unanimously repealed House Bill 6 in its 2021 session.
