Decision Closing Investigation Exposes Potomac Edison Customers to Untold Costs and Risks, People’s Counsel Says in Filing
BALTIMORE – A recent Public Service Commission decision that shut down an investigation into scandal-ridden FirstEnergy Corp.’s control over Maryland utility Potomac Edison exposes the utility’s residential customers to overcharges and other adverse effects, the People’s Counsel told the Public Service Commission in a filing today.
Potomac Edison has admitted that its utility customers contributed funding that helped finance FirstEnergy’s far-reaching, multi-year racketeering and bribery scandal tied to Ohio legislation supporting its troubled nuclear plants. The scandal has resulted in federal criminal charges, civil and regulatory proceedings in multiple states, and the termination of FirstEnergy’s chief executive officer and other executives. In the summer of 2021, FirstEnergy entered into a deferred federal criminal prosecution agreement that requires it to pay $230 million related to the scandal. More background is here.
“Potomac Edison admitted utility customer dollars have been channeled to organizations that funded bribes paid to Ohio officials, but the Maryland Commission’s ruling inexplicably says there is ‘no evidence’ that the customer funding had ‘anything to do with’ FirstEnergy’s misconduct,” said Maryland People’s Counsel David S. Lapp. “By denying this fact, the Commission justifies closing an investigation without ascertaining for itself how much customers have contributed. Instead, it has blindly accepted FirstEnergy’s unsubstantiated assertions.”
Specifically, OPC’s filing explains that Potomac Edison customer funds went toward a FirstEnergy subsidiary’s payments to entities such as “Generation Now,” “Hardworking Ohioans,” and the “Sustainability Funding Alliance of Ohio,” as well as to other entities known in the federal deferred prosecution agreement as “Vendors A-D”—some or all of which helped finance the $60 million bribery scandal.
In addition to the scandal-related charges, OPC’s filing explains that a FirstEnergy subsidiary routinely charges Potomac Edison hundreds of thousands of dollars for FirstEnergy’s political contributions; contributions to Ohio sports teams, charitable and religious activities and other non-Maryland-related entities; payments to other FirstEnergy affiliates; and millions of dollars in charges for otherwise undefined “Non 3rd Party Vendor Activity.” OPC learned from its limited investigation that the utility cannot identify a single instance where Potomac Edison had disputed a charge assessed by the FirstEnergy subsidiary.
OPC’s filing observes that Commissioner Michael T. Richard accurately summarized the problems in his dissent to the order, stating that “there is still work to be done to understand the impacts on Potomac Edison customers resulting from the FirstEnergy bribery scandal and the misallocation of funds.” Regulatory commissions in other states—including New Jersey, West Virginia and Ohio—have ongoing proceedings to protect customers of the FirstEnergy utilities operating in their respective jurisdictions.
The Commission’s order closing the investigation establishes a dangerous precedent for Maryland customers, OPC’s filing points out. The order claims the Commission cannot exercise jurisdiction to examine actions of FirstEnergy that directly impact Potomac Edison customers or costs that FirstEnergy’s affiliates bill Potomac Edison, essentially making those charges unreviewable, even though they are passed on to Potomac Edison’s Maryland customers—and the only information about the costs comes from FirstEnergy employees. The order is contrary to Maryland law, which allows the Commission to exert jurisdiction over such operations as necessary to ensure just and reasonable rates for utility customers.
“FirstEnergy and its subsidiaries control Potomac Edison, and the costs the utility passes on to customers, but the Commission’s order denies it has the ability to effectively review those costs,” Lapp said. “That result is contrary to Maryland law, and most importantly, it leaves Maryland customers at risk of paying for all sorts of costs that have nothing to do with their utility service.”
OPC’s filing asks the Commission to reverse its decision because of its legal and factual errors, so that it can determine why and how Potomac Edison customers ended up funding criminal conduct; the extent to which customers have paid for the criminal scheme; and what can and should be done to prevent its future occurrence.
OPC’s filing also asks the Commission to reverse its decision that it is not required to review an agreement between corporate investor Carl Icahn and FirstEnergy giving Icahn two seats on FirstEnergy’s board—and other special benefits—despite the new owners having “substantial influence” over Potomac Edison. The Commission’s order characterizes the changes as a “personnel decision,” contrary to Maryland law and previous Commission decisions.
The Commission’s order was a 3-1 decision, with one commissioner in the majority having departed from the Commission since the order was issued and another departing at the end of this month. For undisclosed reasons, Commissioner Odogwu Obi Linton did not participate in the decision. In 2021, Commission Linton was assigned to evaluate OPC’s motion to compel documents in the possession of FirstEnergy, but his decision granting the motion in December 2021 was overturned by a majority of the Commission.
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers of electric, natural gas, telecommunications, private water and certain transportation matters before the Public Service Commission, federal regulatory agencies and the courts.
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