Randazzo indictment sparks renewed calls for full regulatory review in Ohio

Randazzo indictment sparks renewed calls for full regulatory review in Ohio

Despite critics’ calls for an investigation and other actions following a criminal indictment against Ohio’s former utilities commission chair, it’s unclear whether regulators will shift course any time soon.

Sam Randazzo, who previously chaired the Public Utilities Commission of Ohio, has been charged with conspiracy to commit bribery, wire fraud and other crimes linked to Ohio’s ongoing corruption scandal, along with embezzlement charges. He has pleaded not guilty.                                                                                                            

FirstEnergy admitted in 2021 that a $4.3 million payment was a bribe meant to help secure passage of Ohio’s coal and nuclear bailout law, House Bill 6, and to get other favorable regulatory treatment for the company and its utilities.

Randazzo has denied liability or wrongdoing. Before leaving the PUCO in November 2020, however, Randazzo shaped the commission’s limited response to HB 6 after the former speaker of the Ohio House of Representatives and others were arrested that summer.

The indictment describes Randazzo’s alleged involvement in helping to shape HB 6. The indictment also discusses actions Randazzo allegedly took to help FirstEnergy avoid a full ratemaking case in 2024, to limit the company’s legal duty to refund significantly excessive earnings, to “burn” an audit report on an unlawful credit support rider, and more.

“The fox was literally running and in control of the henhouse,” said Neil Waggoner, the Sierra Club’s federal deputy director for energy campaigns. “And there’s been no discussion or conversation about that fact and what needs to be done internally to make sure something like this doesn’t happen again.”

Although the indictment wasn’t released until December 4, facts about Randazzo’s alleged crimes first became public in November 2020. Randazzo resigned after agents from the Federal Bureau of Investigation conducted a search at his home and FirstEnergy disclosed it had made a $4.3 million payment to an entity associated with Randazzo shortly before he took office.

“The PUCO has four open and ongoing investigations into related matters,” spokesperson Matt Schilling said when the Energy News Network asked what comments Chair Jenifer French or other commissioners have in response to the indictment.

But those four cases all deal with FirstEnergy, not alleged wrongdoing by Randazzo. And all four cases have been frozen for more than a year, following requests by U.S. Attorney Kenneth Parker which referred to an ongoing federal investigation.

“The Commission has repeatedly stated in its entries and orders that it will follow two principles: ‘It is of utmost importance that our investigations do not interfere with the criminal investigation by the United States Attorney or the action brought by the Ohio Attorney General,’ and, ‘to follow the facts wherever they may lead,’” Schilling said.

French sought to reassure PUCO staff in a Dec. 4 email after the indictment was released.

“[I]f you are like me, then you were likely upset with the news you heard today concerning the former chairman of the PUCO,” she wrote. “As I shared with you when I first joined the PUCO, and as I still believe today, I am personally very proud to be a part of this amazing agency, and that’s because of all of you.”

‘Everything Randazzo touched…’

“The PUCO should investigate and review all the FirstEnergy cases that were decided during former Chair Randazzo’s reign as chairman,” said J.P. Blackwood, a spokesperson for the Office of the Ohio Consumers’ Counsel. “That would include cases the PUCO has previously declined to reopen/investigate/overturn, as well as any matters that came before Chair Randazzo.” Those cases include a 2019 order approving roughly half a billion dollars for grid modernization charges to consumers.

“What the regulators need to do is a comprehensive investigation of what happened in the entire situation,” said attorney Rob Kelter at the Environmental Law & Policy Center.

The group asked PUCO to review the 2019 grid modernization ruling and three other FirstEnergy cases within days of Randazzo’s resignation. The PUCO denied that motion on Dec. 30, 2020. Questions now go well beyond the cases where ELPC initially asked for a review.

“The commission has done nothing yet to determine how this happened, who was involved, what took place,” Kelter continued. FirstEnergy paid a fine to the federal government as part of its deferred prosecution agreement. But otherwise, “FirstEnergy has suffered very little consequences so far, other than a few senior executives losing their jobs.”

“Everything Randazzo touched is questionable,” said Ashley Brown, a former PUCO commissioner. “How could they not have a legitimacy problem?” 

In December 2020, Brown and former commissioners Todd Snitchler and J. Michael Biddison asked Gov. Mike DeWine to order an independent audit that would include a review of interactions between Randazzo and FirstEnergy. That would have included any actions Randazzo took part in or supervised which appeared to show favoritism or undue benefits for FirstEnergy or any of its affiliates.

That audit never happened.

DeWine spokesperson Dan Tierney said their office had not yet reviewed the indictment but noted that it “alleges very serious acts. Our office has full faith in the criminal justice system to adjudicate these serious allegations in an appropriate manner.”

Tierney did not answer the Energy News Network’s question about whether DeWine discussed anything related to the PUCO or its leadership when he and Lt. Gov. Jon Husted dined with former FirstEnergy executives Chuck Jones and Mike Dowling on Dec. 18, 2018, as previously reported by the Dayton Daily News. Husted’s spokesperson likewise did not answer, deferring instead to whatever DeWine’s spokesperson said.

According to the indictment, Randazzo met with Jones and Dowling that same day, and an executive of the company later texted with him that evening to firm up payment plans.

Following FirstEnergy’s admissions in its 2021 deferred prosecution agreement, the Sierra Club also asked Ohio Attorney General David Yost and Ohio Inspector General Randall J. Meyer for an independent investigation into all of Randazzo’s decisions which he was in office. More than two years later, Waggoner still has not gotten any answer.

The whole response from the DeWine administration has “either been crickets or been totally incompetent,” Waggoner said.

More than $1 billion at stake

The four stayed cases involve millions in alleged overcharges or wrongful spending, as well as potential penalties of up to $1.4 billion. Regulators denied the Office of the Ohio Consumers’ Counsel’s request to lift the stay on those cases in October, indicating its intent to push ahead on other FirstEnergy matters.

One of those cases deals with the company’s charges for customers who don’t shop for their own generation provider. That case also seeks to add additional charges for riders under a so-called electric security plan, or ESP. Roughly $1.4 billion could be at stake, Energy News Network’s review of FirstEnergy’s filings showed.

At a minimum, the PUCO should stay portions of that case dealing with a charge called a delivery capital recovery rider, Blackwood said. That same rider is also under investigation in one of the four stayed cases.

“The Commission speaks through its written entries and orders, and I cannot speculate on the outcome of pending or future cases,” Schilling said when the Energy News Network asked about the possibility of an order splitting off the rider charge requests from the rest of the case. An evidentiary hearing has been going on at the PUCO for several weeks now, with briefing due to follow in the coming weeks.

The regulators should also hold up action on another grid modernization case where FirstEnergy wants to collect millions more from consumers, Blackwood said. The case is a follow-up to the earlier grid modernization case approved while Randazzo was chair.

Also pending before the PUCO are several cases dealing with House Bill 6’s coal subsidies for two 1950s-era coal plants.

Action by lawmakers may ultimately be needed to force regulatory reform. FirstEnergy will now have to go through a full ratemaking case in 2024, which should include a detailed review of its full financial situation.

Yet Kelter pointed to allegations in the indictment detailing alleged efforts by the company and Randazzo to avoid that. For Kelter, the case proves the value of forcing a utility to come in for a full rate case if it needs additional revenue, instead of asking for piecemeal riders.

“Just look at the lengths FirstEnergy went to in 2019 to avoid coming in for a rate case in 2024…. The absurdity of this is beyond belief,” Kelter said. He testified on the subject in connection with Senate Bill 102 on Dec. 5.

State Rep. Casey Weinstein also pointed to a proposed anti-corruption act and a bill to refund the HB 6 coal subsidies.  

“The Sam Randazzo indictment is a stark reminder of Ohio’s largest ever political corruption scandal,” Weinstein said. “It is unacceptable that Republicans have done absolutely nothing in its wake and that the corrupt HB 6 remains law for which Ohioans are still paying millions.”

“While we can’t comment on the actions taken by the U.S. Attorney’s Office for the Southern District of Ohio, FirstEnergy has taken significant steps to put past issues behind us,” FirstEnergy spokesperson Jennifer Young said. “Today we are a different, stronger company with a sound strategy and focused on a bright future.”

Randazzo indictment sparks renewed calls for full regulatory review in Ohio is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.

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