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An FBI investigation shows Ohio’s abysmal energy law was fueled by corruption

Electric utilities’ corruption problem is much bigger than FirstEnergy’s alleged bribery of Larry Householder.

Republican Gov. Mike DeWine of Ohio gives his victory speech on November 6, 2018, in Columbus, Ohio. While DeWine has called for Larry Householder’s resignation, he has not called for the repeal of the coal bailout.
justin Merriman/Getty Images

Update, July 23: On Thursday, the day after this article was first published, Ohio Gov. Mike DeWine called for the repeal of HB 6, the energy bill passed in 2019 now tied to a bribery scandal in the Ohio legislature.

On Tuesday, the news broke that the FBI had arrested Ohio Speaker of the House of Representatives Larry Householder, the architect of HB 6, a law that passed in July 2019. That bill, widely recognized as the worst energy policy in the country, gutted Ohio’s renewables and energy efficiency laws while bailing out several coal and nuclear plants.

As I wrote in my book, Short Circuiting Policy, the law was a multibillion-dollar gift to FirstEnergy, a private electric utility that has resisted climate policy for decades. It turns out it was a gift paid for with $61 million in bribes.

Spending a few million to get more than a billion dollars? Not a bad return on investment.

Unfortunately, this kind of corruption is not an aberration for the electric utility industry. Across the country, most private utilities are resisting the clean energy transition, and many are buying off politicians with campaign contributions to do it. What’s more, the industry celebrates it — the Edison Electric Institute, the national private utility association, gave FirstEnergy an award for its work to pass HB 6.

Corruption like this within the electric utility industry is a barrier to solving the climate crisis. But the way forward is clear: Citizens must demand that politicians stop taking money from these fossil fuel companies and start holding them accountable.

Something is rotten in the state of Ohio

In March 2018, FirstEnergy spun off its debt into FirstEnergy Solutions, a subsidiary that went through bankruptcy. To deal with its financial problems, the company sought billions in subsidies from the Ohio legislature for its ailing coal and nuclear plants. And it had a champion in Speaker Householder, who was there every step of the way, working diligently within the legislature to get FirstEnergy its money.

By July 2019, the legislative session was over and FirstEnergy had not secured its bailout. Householder kept working, calling his colleagues back to the chamber with little notice. With narrow margins, he delivered the votes, and that same day Gov. Mike DeWine signed the FirstEnergy bailout into law.

At the time, many wondered: Why the urgency, Mr. Speaker? Did you really have to call all the legislators back from their vacations to pass this coal bailout? It appears the FBI was wondering the same thing.

It now seems clear that Householder was working directly with FirstEnergy and its affiliated companies. The utility funneled $61 million through an organization called Generation Now, which Householder, his political affiliates, and FirstEnergy lobbyists controlled. Based on its tax status, it was supposed to be a “social welfare” organization, acting in the public interest.

Instead, it is alleged in the FBI affidavit that Generation Now engaged in a conspiracy to financially benefit the utility and its affiliated companies through this dirty energy bailout — and to line Householder’s and his associates’ pockets while they were at it.

The dark money campaign funded political ads, mailers, and lobbying in support of HB 6.

It also put lobbyists across the state on retainer, creating conflicts of interest to tie them up, so they could not work for the clean energy advocates who wanted to stop the bill.

The dirty details in the FBI affidavit

The 82-page, 250 paragraph FBI affidavit — a collage of colorful text messages and political ads — is stunning in its simplicity: This is bribery.

The alleged participants in the scheme even used the term “pay to play” when describing what Householder and his associates were up to, saying that the funding from FirstEnergy for their political aims was “unlimited.”

Before the FBI arrests, many journalists and watchdog groups suspected that Householder was corrupt. He was a controversial choice for speaker — his last time in the role, during the early 2000s, he found himself under federal investigation for money laundering. Householder was only elected speaker last year after a contentious fight. Somehow candidates supporting his leadership found themselves with well-funded campaigns.

We now know, according to the affidavit, that FirstEnergy funneled millions of dollars to 21 candidates who pledged to support Householder’s rise to power. All of these politicians supported Householder’s speakership, and only one voted against the bailout.

Per the FBI, Householder also benefited financially from the arrangement with FirstEnergy. According to the affidavit, at least $300,000 was used to settle a lawsuit against him, more than $100,000 went toward his Florida vacation home, and another $97,000 went directly to his campaign expenses. Householder also received personal favors from FirstEnergy, like a flight to President Trump’s inauguration on a corporate jet.

The corruption allegedly did not end when HB 6 became law. When groups wanted to let the public decide whether to overturn this draconian policy through a petition for a ballot initiative, FirstEnergy wired $38 million in funds to Generation Now. This money funded ads that falsely claimed the Chinese government would use your personal information if you signed the petition. It also paid for bribery, harassment, and even physical assault of people collecting signatures.

It was an anti-democratic dark money campaign, and it worked. Facing this well-funded opposition, the advocates failed to get enough signatures. Ohio voters were never given a chance to overturn the bailout. HB 6 remains law.

Given the investigation is ongoing, FirstEnergy and its affiliated companies are not yet named as defendants — they are referred to only as “Company A” in the affidavit. It’s likely more charges will be coming. In the six-month period leading up the bill’s passage, Householder had 30 phone calls with FirstEnergy’s CEO, Chuck Jones. The coming months will not be good ones for Mr. Jones.

We are only at the beginning of the end of this story. As US Attorney for Ohio’s Southern District David M. DeVillers put it in Tuesday’s press conference, “there are going to be a lot of busy FBI agents here in the Southern District of Ohio.” The same day, FirstEnergy acknowledged that it had received subpoenas. If I were a senior executive for FirstEnergy or its affiliated companies, I would be wondering when my subpoena would be arriving.

It’s not just a nuclear bailout — it’s a utility scheme to stop the clean energy transition

While the FBI has largely framed the policy as a nuclear bailout, that is a narrow view of Ohio’s terrible energy law. This bill also saved three large coal plants from closing.

It’s clear that FirstEnergy Solutions (now called Energy Harbor) used part of its nuclear bailout funds to save the Sammis coal plant that was scheduled to close. The law was written explicitly so that the utility would never have to open up its books to legislators. And the amounts the utility said it required to keep its nuclear plants open fluctuated continuously.

A few days after Gov. DeWine signed the law, a FirstEnergy Solutions spokesperson said they would no longer have to close the Sammis coal plant. This wasn’t surprising since the FirstEnergy Solutions CEO, John Judge, had previously said securing HB 6’s passage would allow them to invest $40 million to $50 million to keep this coal plant open. It seems that through some creative accounting, part of the nuclear bailout ended up funding a coal plant.

The law also contained funding for several other coal plants that FirstEnergy Solutions has an ownership stake in — the so-called OVEC plants. Based on bankruptcy filings, I estimate that the OVEC coal bailout was worth $1.7 billion just for Ohio’s two big utilities, including FirstEnergy Solutions.

If HB 6 remains law, a lot more money will be spent bailing out these dirty coal plants than the state’s ailing nuclear fleet.

The law also gutted the state’s clean energy laws, which had been in place for more than a decade. The energy efficiency policy alone had saved ratepayers over $5 billion, yet the legislature rolled it back. The popular renewable energy goals, which Gov. John Kasich had already undermined, were eliminated in HB 6.

No matter how you slice it, this law cost Ohioans billions of dollars. And since these are monopoly utilities we’re talking about, if folks want to stop funding FirstEnergy’s corrupt activities by simply paying the monthly electricity bills, they can’t. There is no choice.

exelon nuclear
Steam billows from the cooling towers at Exelon’s nuclear power generating station in Byron, Illinois.
Scott Olson/Getty Images

A pattern of utility corruption

The Ohio case, while extreme, is not an aberration. Corrupt electric utilities using ratepayer funds to roll back climate policy is not limited to Ohio. As I described in Short Circuiting Policy, it is an unfortunately common pattern.

Last week, the Illinois utility ComEd — whose parent company is Exelon — admitted to engaging in bribery and agreed to pay a $200 million fine. It’s very likely that another speaker, Michael Madigan, is involved in that case — the Illinois governor has already called on him to resign.

In Arizona, which I examine in my book, the FBI similarly launched an investigation into an elected official over its ties to a private electric utility, Arizona Public Service. As we now know, Arizona Corporation Commission Chair Gary Pierce met privately with then-Arizona Public Service CEO Don Brandt numerous times. The utility also funneled over $700,000 through a dark money group to Pierce’s son’s failed bid for secretary of state.

Arizona Public Service also secretly spent tens of millions on campaigns to elect its own regulators in order to secure favorable decisions, including clean energy rollbacks and generous rate hikes. In 2018 alone, it spent upward of $40 million to successfully block a clean energy ballot initiative. The new CEO, Jeff Guldner, played a key role in directing the utility’s dark political spending.

And this isn’t a new strategy. Throughout the 1990s, electric utilities including FirstEnergy and Arizona Public Service were key funders of climate denial.

Virginia provides one hopeful counterexample, which shows us one solution to the problem of corrupt electric utilities. In 2017, grassroots activists started a campaign to push politicians to pledge not to accept money from electric utilities, most prominently Dominion. This electric utility has an atrocious track record of ripping off customers, polluting the climate, and perpetuating environmental racism.

By the 2019 election, Virginia state candidates refusing Dominion money won nearly 50 seats. Shortly thereafter, the legislature passed a landmark law requiring 100 percent clean electricity. Once the Virginia politicians stopped taking money from the electric utility, they could finally pass climate legislation.

The dogged folks at the Energy and Policy Institute — a utility watchdog that has turned up real-time facts in most of these cases — paint a clear picture for those paying attention: Most electric utilities are resisting the clean energy transition and using corruption to do it.

We must change this pattern. Politicians must pledge to stop taking money from electric utilities and the fossil fuel industry. Instead, they should change the law, disallowing ratepayer funds to be used for political work.

It’s time to repeal Ohio’s corrupt law

Now that it’s clear that Ohio’s draconian energy policy was passed based on bribery and corruption, legislators should act immediately to repeal the law.

While Gov. Mike DeWine has called for Householder’s resignation, he has not called for the repeal of the corrupt coal bailout. That’s perhaps not surprising, since DeWine has himself taken money from FirstEnergy. DeWine’s staff even made plans to fly legislators on a taxpayer-funded plane to make Householder’s last-minute vote for the bailout. The day after DeWine signed the law, he attended a Trump fundraiser hosted by coal baron Bob Murray. He seems quite cozy with the fossil fuel industry.

If DeWine is not in bed with FirstEnergy, then he should be calling for HB 6 to be reversed immediately. This law was passed by corrupt politicians. The effort to overturn it by popular will was thwarted by a corrupt utility. If DeWine can’t see this invalidates Ohio’s energy law, then perhaps he has a bigger problem.

We cannot allow utility corruption to continue to stall clean energy progress. This FBI affidavit is a wake-up call to all politicians: Stop taking electric utilities’ money.

Leah C. Stokes is an assistant professor at the University of California Santa Barbara. Her book, Short Circuiting Policy, examines the case of Ohio’s coal bailout and other examples of utility corruption. Find her on Twitter @leahstokes.

Correction: An earlier version of this story misstated the first name of Michael Madigan.

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