Maryland utility regulators ordered a new audit of Potomac Edison last week, after the FirstEnergy-owned utility admitted in a rate case that it owes nearly $1.7 million in refunds to Maryland customers it wrongly charged for bribes, lobbying, corporate sponsorships, advertising, and other expenses.
“… the actions of the management and executives of FirstEnergy entailed in the Ohio bribery scandal caused harm to Potomac Edison-Maryland,” the Maryland Public Service Commission said in the order. “This Commission’s duty to the ratepayers of that entity requires us to exercise due diligence in ensuring that no financial harm affects the Company’s ratepayers.”
The new audit will seek to ensure that Potomac Edison’s wrongful charges to customers in Maryland are fully accounted for and refunded.
The commissioners also approved a $28 million rate increase for Potomac Edison, less than the over $50.4 million rate hike the utility initially proposed earlier this year. FirstEnergy referred to the rate increase as an “adjustment” this week in a press release that made no mention of the new audit or the $1.7 million in refunds.
FirstEnergy admitted in 2021 that it paid $60 million in bribes to now-convicted former Ohio House Speaker Larry Householder between 2017 and 2020, as part of a deferred prosecution agreement with federal prosecutors. FirstEnergy also agreed to pay a $230 million penalty for its role in the scheme.
In exchange, Householder secured a $1 billion bailout for nuclear and coal plants owned by the bankrupt FirstEnergy Solutions via passage of House Bill 6, which included another “under the radar” provision that provided FirstEnergy’s other Ohio utilities with millions in unearned revenue at Ohio ratepayers’ expense. The 2019 Ohio law also rolled back the state’s clean energy standards for utilities, which FirstEnergy had long opposed.
FirstEnergy also admitted it paid $22 million over nine years to two consulting firms owned by Samuel Randazzo, an influential energy attorney and lobbyist, including a secret $4.3 million payment made shortly before Randazzo’s appointment as chairman of the Public Utilities Commission of Ohio in 2019. Randazzo resigned in 2020 after the FBI raided his home, but has not been charged in the ongoing federal investigation.
In 2021, the Maryland PSC authorized an initial investigation into whether FirstEnergy used any money from Potomac Edison to fund lobbying and bribes in connection with HB 6. The investigation was led by the Maryland Office of People’s Counsel.
Potomac Edison initially responded to the Maryland investigation by proposing to create a small $38,000 “regulatory liability” to address HB 6-related refunds to Maryland customers in a future rate case.
Records obtained from Potomac Edison and made public by the People’s Counsel show the regulatory liability included money paid to Generation Now and “HWO” (Hardworking Ohioans), two groups controlled by Householder. Generation Now pleaded guilty to racketeering in connection with the bribes paid by FirstEnergy.
Potomac Edison also included “Randazzo payments” and “Tony George payments” in its regulatory liability. George is an influential Cleveland-area businessman who served as an intermediary between FirstEnergy and Householder. George has not been charged.
The Maryland PSC shut down the investigation earlier this year and deferred any remaining issues to Potomac Edison’s rate case, a move that drew sharp protest from People’s Counsel David Lapp. At the time, the commission was still led by then-chairman Jason Stanek, who was appointed by former Governor Larry Hogan and departed in June at the end of his term. Since then, several new commissioners appointed by current Governor Wes Moore have joined the commission, including new chairman Frederick Hoover.
In March of this year, Potomac Edison laid out its proposal to refund nearly $1.7 million to Maryland customers in testimony by company witness Raymond Valdes that the utility filed with its new rate hike request.
Potomac Edison’s $38,000 regulatory liability ballooned into more than $200,000 of the proposed $1.7 refund.
Approximately $1 million of Potomac Edison’s proposed refund was for sponsorships and advertisements paid for by Maryland customers, according to Valdes’ testimony. The remaining $378,000 was for miscellaneous expenses that included payments related to “FE Foundation, FE Products, IT for FE Products, trade association dues, lobbying, and vendors.”
Payments disclosed by Potomac Edison during the earlier Maryland investigation provide a sneak peak of what the new audit may find. During the investigation, Potomac Edison provided a long list of outside payments it made in response to an information request by the advocacy group Solar United Neighbors.
Potomac Edison’s response to SUN’s data request revealed that Potomac Edison paid for multiple dark money groups and political operatives involved in the FirstEnergy investigation in Ohio, as first reported by the Akron Beacon Journal and EE News.
Sports teams in Cleveland got money from Potomac Edison (which serves customers in parts of Maryland, Virginia, and West Virginia, but not Ohio) including $625,000 for Cavaliers Holdings and $200,000 for the Cleveland Indians (now Guardians) paid between 2016 and 2021, according to the Energy and Policy Institute’s analysis of the list of payments.
Potomac Edison also paid a total of $1 million during those same years for the public relations firm Eric Mower & Associates, which was behind FirstEnergy’s “Brighter Future” and Browns Stadium ad campaigns.
Commissioners hand FirstEnergy a partial win on internal investigations
While the new audit order marked a reversal from earlier denials by the Stanek-led commission, the current commissioners did maintain Stanek’s rejection of the People’s Counsel’s renewed request to compel Potomac Edison to hand over information from still-secret internal investigations FirstEnergy conducted in response to the Ohio criminal investigation. The Maryland PSC initially ordered FirstEnergy to turn over that information in a 2021 order by then-commissioner Odogwu Obi Linton, but reversed that decision upon appeal by Potomac Edison in a 2022 order by the Stanek-led commission.
The People’s Counsel is currently challenging the Stanek-led commission’s related rulings in a case before the Circuit Court for Baltimore City.