Ohio-based utility holding company FirstEnergy Corp. has cut a deal with the U.S. Justice Department on a fraud case derived from the company’s actions dating back to mid-2019, when it paid key Republican legislators to pass legislation bailing out two uneconomic nuclear power plants.
The case ended up ousting the Ohio House Republican Speaker, Larry Householder, as well as a spate of federal racketeering charges and repeal of most of the bailout legislation (HB 6). The company spent some $60 million to defeat a citizen referendum to kill the bill, which Republican Gov. Mike DeWine eventually eviscerated.
Under the terms of the deal, reported in POWER magazine, and outlined in a company statement, Akron-based FirstEnergy admitted to conspiring with elected state officials and their allies to direct millions of dollars to then-Speaker Larry Householder in exchange for passing the legislation that would have provided the utility company with some $1.3 billion in subsidies.
In return, the Justice Department approved a three-year “deferred prosecution” if the company agreed to pay within 60 days $115 million to the feds and $115 million to a state agency that assists customers in paying their electric utility bills. FirstEnergy also agreed to, in the words of the Justice Department, “continue to cooperate fully with the U.S. in all matters related to the company’s conduct described in the agreement and other conduct under investigation by the government, among other obligations.”
The crux of the case was that the utility set up a phony non-profit organization under a provision of the U.S. Tax Code 501 (c)(4) that allowed it to hide the source of its “donations.”
In its statement, FirstEnergy said, “Central to FirstEnergy Corp.’s effort to influence the legislative process in Ohio was the use of 501(c)(4) corporate entities. FirstEnergy Corp. used the 501(c)(4) corporate form as a mechanism to conceal payments for the benefit of public officials and in return for official action. FirstEnergy Corp. used 501(c)(4) entities in this way because the law does not require disclosure of donors to a 501(c)(4) and there is no ceiling that limits the amount of expenditures that can be paid to a 501(c)(4) entity for the purpose of influencing the legislative process. This effort would not have been possible, both in the nature and volume of money provided, without the use of a 501(c)(4) entity.”
If the company complies with the provisions of the deal over the next three years, the Justice Department will not prosecute. The scandal led to the ouster of the company’s CEO and several other top executives who either knew or should have known about the scheme.
Davis-Besse is an 894-MW Babcock pressurized water that went into service in 1978 and has had a long history of troubling incidents, although it is currently running well. Its lifetime capacity factor in 79%. Perry is a 1,256-MW General Electric Mark 3 boiling water reactor with a lifetime capacity factor of 81%, which also went into service in 1978. Neither plant has been successful bidding into the PJM Interconnection’s wholesale competitive market.
[Disclaimer: I am a customer of Potomac Edison, one of FirstEnergy’s utility distribution companies].
–Kennedy Maize
(kenmaice@gmail.com)