Ohio utility regulator front and center in massive bailout scandal
Ohio’s utility regulator is at the center of a massive bribery and money laundering scandal that has been the focus of a trial here since late last month. In 2019, its chairman and a very recent senior official played a central role in writing corrupt bailout legislation that would give more than $1 billion in subsidies to companies the Public Utilities Commission of Ohio was supposed to be regulating.
But did their role in the process violate any PUCO rules? The answer is unclear.
When it comes to being a consumer watchdog, the PUCO doesn’t have the best track record.
Since 2008, it has granted more than $1 billion in electric rate increases that were later declared illegal by the Ohio Supreme Court. But, thanks to the way the increases — or “riders” — were written, there’s no way to force utilities to return those ill-gotten gains to ratepayers.
In at least one of those instances, a regulator might have known the rate hike was illegal when he voted to grant it.
In June of 2019 — as Akron-based FirstEnergy was funneling millions through dark-money groups to pass the bailout that is the subject of the trial here — the Supreme Court struck down an increase that had already paid the company a non-refundable $460 million. Asim Haque, who months earlier was chairman of the PUCO, sent a FirstEnergy executive a text suggesting that Haque knew the increase was illegal when he voted for it. Haque then said he was just kidding.
Then, just last month, the PUCO approved an increase of more than 50% in fixed rates for Columbia Gas without making the company go through a formal process to show that it needs the money. That means that after five years throughout much of Ohio, it likely will cost nearly $60 a month just to have gas service — regardless of whether you live in a 500 square-foot apartment or if you live in a mansion on a five-acre lot. Any payments for gas itself will be in addition to that amount.
It doesn’t appear that Columbia owner NiSource needed the money. Last year, before the PUCO allowed the rate hike, NiSource’s profits came in $217 million — or 41% — higher than expected. Then, a month after the increase was granted, NiSource announced it was increasing its profit forecast for 2023.
In a press release, the company boasted of “strong regulatory execution” — including by winning the fixed-rate increase from the PUCO.
And then there’s House Bill 6, the 2019 law that is the subject of the trial in federal court here that has been ongoing since Jan. 23.
Former Ohio House Speaker Larry Householder and former Ohio Republican Party Chairman Matt Borges are on trial for their participation in what prosecutors say is likely the biggest bribery and money laundering scandal in Ohio history. They allege that $61 million that mostly came from FirstEnergy was used to make Householder speaker in 2019, and then to pass and protect the $1.3 billion bailout. Most of that money was intended to prop up FirstEnergy’s failing nuclear and coal plants.
No current or former PUCO employees have been charged in the scandal. But, to put it charitably, the conduct of at least two of them was puzzling — given that the agency’s mission is to protect ratepayers who don’t have a choice about buying the utilities’ products.
In January 2019, Householder won the speakership and was beginning his push for a FirstEnergy bailout. At the same time, FirstEnergy lobbyist Ty Pine sent PUCO senior advisor Pat Tully’s resume to Jeff Longstreth, Householder’s right-hand man, according to testimony in the trial. Within weeks, Tully had moved from his PUCO job to one as senior advisor for energy policy in the House Republican Caucus.
Sam Randazzo, a former FirstEnergy consultant, was confirmed as Gov. Mike DeWine’s nominee to chair the utility commission in April 2019. When he nominated Randazzo, DeWine brushed off warnings that his nominee had “opaque and undisclosed” ties to FirstEnergy.
In the Householder trial, Tully testified that while Randazzo was still a nominee, he met with Tully, Householder and Rep. Nino Vitale R-Urbana. From there, Tully worked with Randazzo to help draft the utility bailout, HB 6, and to reconcile it with draft legislation submitted by FirstEnergy. The bill secured final passage in July 2019 — months after Randazzo had taken the helm at the utility commission.
In other words, Ohio’s top utility regulator helped write a law that gave a billion-dollar bailout to a company he was supposed to be regulating on the ratepayers’ behalf. And he was heading an agency that over the previous decade had awarded electric utilities more than $1 billion in illegal, non-refundable rate hikes.
Randazzo would later resign after the FBI in 2020 raided his Columbus condo. And in a deferred prosecution agreement, FirstEnergy admitted that it paid him $4.3 million just before he became PUCO chairman.
But does the PUCO have any rules against the role Randazzo played in drafting HB 6?
Asked if the agency had a policy prohibiting a commissioner from helping write legislation affecting a utility he or she is supposed to be regulating, spokesman Matt Schilling initially seemed to say that it did not.
“The PUCO is a state agency and will always be responsive to requests for information or technical assistance to the Ohio General Assembly on matters related to utilities and commercial transportation,” Schilling said in an email last week.
But in answer to a follow-up, Schilling seemed to say something different. He was asked if that means PUCO believes there was nothing inherently improper about its chairman helping to draft legislation creating subsidies for utilities the agency regulates.
“No, I never stated anything like that,” Schilling replied. “The PUCO does not comment on ongoing proceedings or court cases.”
So what about commission employees doing as Tully did when he had a FirstEnergy lobbyist passing out his resume? After all, you might pull punches as a regulator if you’re hoping to land a job with one of the companies you’re supposed to be regulating.
Schilling’s response might not be very reassuring. He cited a law that “prohibits Commission employees from seeking employment with utilities regulated by the Commission.”
But Schilling also sent along agency guidance that contains a pretty big loophole.
“Although this law prohibits Commission employees from soliciting Commission-regulated utilities for employment, it does not prevent employees from considering employment opportunities with these utilities in instances in which the utility approaches the employee,” it said.
It seems that, after the fact, it might be difficult for the PUCO to figure out who approached whom when an employee jumps ship for a well-paid utility job. And its protections against conflicts of interest during the hiring process don’t seem ironclad.
“However, if you are contacted by a utility concerning a possible job offer, you must immediately advise your supervisor of the contact so that your supervisor can limit your duties to matters which do not involve the utility in question while any discussions are taking place,” the guidance said.
In Tully’s case, he didn’t end up directly on FirstEnergy’s payroll. But he did help write a law that the company paid more than $60 million for.
This story was republished from the Ohio Capital Journal under a Creative Commons license.