Ohio corruption scandal hits home in Maryland – and utility customers can foot the bill

Two summers ago, the powerful speaker of the Ohio House of Representatives and four of his political associates were arrested in a high-profile corruption scandal. Aftershocks are still being felt in Maryland.

It’s a scandal of breathtaking proportions and one that has had far-reaching consequences in Ohio and beyond. Then-House Speaker Larry Householder (R) and the four officers were charged in a federal criminal complaint with accepting $61 million in bribes from a major energy company, FirstEnergy Corp. , to pass legislation that provided for a $1.5 billion taxpayer. financed the bailout of the company’s nuclear power plants.

The scandal has affected the administration of Ohio Gov. Mike DeWine (R), top lawmakers and lobbyists and regulators. FirstEnergy’s CEO and other executives have resigned, as has the person DeWine appointee to head the state agency that regulates utilities, which has been accused of accepting a bribe from $4.3 million. Two of Householder’s associates pleaded guilty to the charges. A lobbyist who was charged with lawmakers committed suicide.

The householder resigned as speaker shortly after his arrest and was kicked out of the legislature months later, but not before being re-elected to his House seat in November 2020. He is due to stand trial in next January. FirstEnergy agreed to pay a $230 million fine last July and said it would cooperate with federal criminal investigators in exchange for a delayed prosecution on a wire fraud charge.

Why should anyone care in Maryland?

FirstEnergy is the parent company of Potomac Edison, the electric utility that serves more than a quarter of a million customers in western Maryland. And a state consumer watchdog is trying to figure out how much the Ohio scandal is costing taxpayers here.

Based on what he has learned so far, David S. Lapp, who heads the Office of People’s Counsel (OPC), a state agency that represents the interests of residential customers in legal and regulatory affairs involving energy utilities, calls the impact of the FirstEnergy case in Maryland “a situation prone to customer abuse that must be corrected.”

“We are concerned that the current arrangement has resulted in Maryland customers paying costs that have nothing to do with the service provided to them, and it may continue to do so in the absence of necessary changes to protect consumers in Maryland,” he said.

Because utility law is so specialized and complex, much of Lapp’s quest to learn more has taken the form of arcane filings with the Maryland Public Service Commission (PSC), which regulates most state public services. Spokespersons for FirstEnergy and the PSC declined to comment, citing the ongoing nature of the matter.

Last summer, at Lapp’s request, the PSC agreed to a limited investigation into FirstEnergy’s practices and its impact in Maryland, but not as broad as Lapp’s research.

So far, Potomac Edison, without providing details, has suggested the Ohio scandal cost the company’s taxpayers about $38,000.

“To put this figure into context, $38,000 represents only 0.03% of Potomac Edison’s total approved distribution revenue requirement,” the company wrote in one of its filings.

Lapp is skeptical of the claim and questions the methodology used to arrive at the figure.

“Potomac Edison thwarted our efforts on almost every front to find out how Maryland customers ended up footing the bill for the bribery scandal,” he said.

“A worrying lack of independence”

Documents that FirstEnergy has submitted to various investigative agencies – some in response to the ongoing Maryland PSC investigation – have revealed interesting information not directly related to the OPC’s request for information. Most notable: Potomac Edison made a $163,000 contribution in 2017 to a “dark money” political organization started by associates of President Trump called America First Policies Inc.

The donation came just as FirstEnergy was seeking financial and regulatory support from the Trump administration for its troubled nuclear and coal plants – which have become the basis of the political scandal in Ohio.

The $163,000 donation was first reported last month by the Akron Beacon Journal, which had access to company documents submitted to the Federal Energy Regulatory Commission and obtained by a renewable energy advocacy group. , which were turned over to Maryland for its investigation.

Asked by the newspaper, a FirstEnergy spokesman declined to say whether the $163,000 was billed to Potomac Edison customers. But consumer watchdogs and regulators believe Potomac Edison’s donation was only a fraction of the payments FirstEnergy and its affiliates made to the Trump-aligned 501c4 group that year.

The Federal Energy Regulatory Commission completed an 84-page audit earlier this year that found FirstEnergy misallocated costs or misaccounted for $70.9 million in lobbying and political spending between 2015 and 2021. A significant percentage of the funds went to black money political groups who don’t have to declare their contributions – and at least some worked to pass Ohio legislation that provided for the taxpayer-funded bailout. for FirstEnergy’s nuclear power plants.

More information about the Ohio scandal and its connection to Maryland and other states may well come out in the coming months.

The Ohio Public Utilities Commission has several ongoing investigations into FirstEnergy, though a Buckeye State consumer watchdog recently accused the commission of slowing down its investigative process. The New Jersey Public Utilities Commission has launched an investigation similar to Maryland’s, to see how Jersey Central Power & Light, the state’s second-largest electric utility and a subsidiary of FirstEnergy, was affected by the scandal. from Ohio.

The upcoming trials of Householder and others may provide even more information.

And there were significant revelations in a lawsuit by FirstEnergy shareholders who sued the company for damages caused to their investments by the scandal; a $180 million settlement is pending.

It’s hard to say how far the Maryland investigation will go.

The OPC had requested a 14-point investigation, focusing primarily on FirstEnergy’s financial condition and how it might affect its operations in Maryland.

Among the information sought by the consumer watchdog:

  • whether Potomac Edison funds were used to bribe Ohio officials or pay legal fees related to the racketeering case;
  • whether FirstEnergy or Potomac Edison had taken steps to protect Potomac Edison and its ratepayers from any economic fallout related to the scandal; and
  • whether the PSC should consider ordering FirstEnergy to divest its ownership of Potomac Edison because of the scandal.

On a side note, the OPC also asked the PSC to explore how corporate robber Carl Icahn’s attempts to obtain significantly more shares of FirstEnergy than he currently owns could impact Potomac Edison and its taxpayers.

The PSC decided to take a narrower approach, focusing primarily on whether FirstEnergy used, is using, or intends to use Potomac Edison funds to pay bribes, lobbying fees, legal fees or any other costs associated with the Ohio scandal and whether the Maryland utility’s ability to access parent company funds for its operations has been compromised. But the commission agreed to review Icahn’s investments in the company as well.

Since the commission agreed to take on the case in late July, the People’s Advocate and Potomac Edison attorneys have responded with a series of filings and counter-filings that have provided only a glimpse of what makes under investigation and what it could mean for consumers. Potomac Edison’s legal team includes J. Joseph “Max” Curran III, a partner at the law firm Venable LLP, a former PSC commissioner and brother of retired judge Katie Curran O’Malley (D), a presidential candidate state attorney general. .

One thing is clear, Lapp said, is that Potomac Edison has “a disturbing lack of independence” from its parent company – and that FirstEnergy is dishonest when it actually admits criminal behavior but claims its subsidiaries are barely touched.

In its latest filing to the CPS, dated March 28, the People’s Council Office asked the commission to continue and expand its investigation.

“It is essential that the Commission obtain a full and complete understanding of the extent of the impact of the scandal on Potomac Edison, how these impacts may have occurred and what needs to be done to prevent such events from occurring. not happen again in the future,” Lapp and his colleagues said. wrote. “The Commission must oversee the implementation of safeguards for Potomac Edison ratepayers to ensure their protection.”

In a filing dated April 7, Potomac Edison responded that “circumstances surrounding FirstEnergy have changed significantly – and all for the better” since the Ohio scandal broke, and that the PSC must take a measured approach accordingly. of his investigation.

“FirstEnergy has emerged from unfortunate circumstances as a stronger parent company of Potomac Edison, led by new management and new board members, and, most importantly, throughout this ordeal, Potomac Edison has continued to deliver its customers a strong, reliable and affordable electrical distribution service,” the company’s attorneys wrote. “These improved circumstances provide a context against which the Board should assess next steps.”

Potomac Edison goes on to say that the OPC’s calls for the Public Service Commission to expand its investigation are driven by “unsubstantiated rhetoric, not facts.”

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