Since FirstEnergy cannot prove it spent $456 million to modernize its power grid as legally required, an Ohio state consumer watchdog agency wants the Public Utilities Commission of Ohio to penalize the Akron corporation three times that amount, in accordance with state law.
That translates to a penalty of almost $1.4 billion.
The Ohio Consumers Counsel, the state’s legal watchdog for utility customers, made the request in an April 19 filing to the Public Utilities Commission of Ohio (PUCO).
This request follows a Daymark Energy Advisors audit that concluded FirstEnergy and three subsidiaries intermingled revenue from ratepayers so much that it is impossible to confirm if $456 million actually went to modernize the grid as required.
From January 2017 to July 2019, PUCO allowed FirstEnergy companies 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, or DMR.
The consumer counsel’s filing argued that since the Ohio Supreme Court concluded in 2020 that these extra charges were illegal, they should have been refundable to the ratepayers. Instead, FirstEnergy decided to keep the money.
A “key conclusion of Daymark was that ‘given that the [PUCO’s] intent of Rider DMR was clearly to enable grid modernization, either directly or indirectly, it should have been incumbent on FirstEnergy to track such spending,” the consumer counsel’s filing argued. “The FirstEnergy Utilities’ decision not to track DMR funds – making itself essentially unauditable – should not be allowed as a shield against any repercussions from its fiscal irresponsibility.”
FirstEnergy contested the consumer council’s request in its own April 19 filing with PUCO, arguing that a lack of proof did not necessarily mean that it did not do the required grid modernization work, and the penalty is not justified.
”The inability to distinguish the funds the Companies collect from customers through Rider DMR is a reality of how the cash management process works. Given the inability to distinguish (Distribution Modernization Rider) funds from the rest of the Companies’ cash on hand, it is impossible for the Companies to pinpoint Rider DMR funds and dedicate them to any given expenditure.
And contrary to the Audit Report’s findings, specific identification of Rider DMR funds is not necessary to demonstrate compliance with the Commission’s Rider DMR directives,” FirstEnergy’s filing argued.
FirstEnergy has been dealing with several political and financial scandals since 2019.
In 2019, the U.S. justice department charged former Ohio House Speaker Larry Householder (R) and four power-broker and lobbyist allies with masterminding $60 million in bribes and illegal contributions to elect Householder as House speaker and to pass House Bill 6, which raised customers’ monthly electric bills, and to provide $150 million in annual subsidiaries to keep the financially struggling Davis-Besse and Perry nuclear reactors afloat in Ohio. The Ohio General Assembly later revoked House Bill 6.
In 2021, FirstEnergy agreed to pay a $230 million fine for its role in the bribery scandal involving the 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. No one at FirstEnergy has been criminally charged in this matter.
