Editor's note: This story has been updated to include a statement provided by FirstEnergy Corp.
COLUMBUS — The office charged with defending Ohio consumers in utility matters says a House-added budget provision would subject 1.1 million FirstEnergy customers to “price gouging” — a conclusion that the Akron-based company says does not take into account potential benefits for its customers.
Among the many amendments added to the two-year budget bill is one changing the calculation of “significantly excessive earnings” for FirstEnergy. This would change how the Public Utilities Commission of Ohio determines if utilities have earned excessive profits that require a refund of millions of dollars to energy customers.
Under the provision, FirstEnergy’s Ohio Edison profits would be averaged with the lower profit margins of its Toledo Edison and Cleveland Electric Illuminating companies.
“This change would artificially dilute Ohio Edison’s high profits, on paper, for calculating whether it is improperly charging customers for significantly excessive monopoly profits,” said Jeff Jacobson, who testified Wednesday before the House Finance Committee on behalf of the Ohio Consumers’ Counsel. “Instead of the intended consumer protection under the 2008 law, the bill would protect FirstEnergy from refunding significantly excessive monopoly profits to a million Ohio Edison consumers.”
Debate over the new budget provision comes at the same time that the House is debating a separate controversial bill that would provide roughly $150 million a year to save a pair of nuclear power plants owned by FirstEnergy Solutions, the former power generation arm of FirstEnergy that is trying to climb out of bankruptcy. The new “clean air” subsidy would be funded via monthly electric bill charges, including $2.50 for residential customers, while current charges for energy efficiency and renewable energy programs would be eliminated.
FirstEnergy Solutions and FirstEnergy have spent millions on lobbying and public-relations firms in Ohio and Pennsylvania, where another nuclear plant is located, according to the Energy and Policy Institute. In the past two-year election cycle, FirstEnergy political-action committees and executives donated about $1.3 million in disclosed contributions to Ohio candidates and party funds — about 70 percent to Republicans.
That does not include potential contributions to dark money groups.
The consumer protections under the 2008 law are already “woefully inadequate,” said Jacobson, a former lawmaker who verbally flogged himself for his role in drafting and approving the law. By allowing utilities to charge Ohioans for “significantly excessive profits” rather than just “excessive” profits,” Jacobson said, the law allows utilities to earn a 17 percent profit, instead of 10 percent.
But even those protections go away under the proposal, Jacobson said, and FirstEnergy’s Ohio Edison could earn a 26 percent profit without having to refund millions to its customers in 36 counties, a situation he called “insidious.”
FirstEnergy spokesman Mark Durbin said that each year since the law’s inception, the PUCO has determined that the company passes the excessive earnings test.
“Because our three utilities operate under a single PUCO-approved rate plan, we believe it is appropriate to apply a single [test] to our three Ohio utility companies,” Durbin said. “This change to a single, or aggregate [test] would provide FirstEnergy’s Ohio utilities more flexibility to allocate investments across their entire footprint, which benefits our customers.”
A national average profit margin for electric utilities is 9.6 percent, Jacobson said, citing Regulatory Research Associates.
“So we're allowing a utility to earn three times more than the country’s average?” said Rep. Mark Romanchuk, R-Mansfield, who has been critical of the way the Public Utilities Commission of Ohio approves profit margins.
In December, the PUCO and FirstEnergy reached an agreement allowing the company to keep $42 million in “excessive earnings.” The Consumers’ Counsel opposed the agreement, arguing the amount constituted excessive earnings, and FirstEnergy also should have been required to count a distribution modernization rider that it collected in 2017.
The Ohio Manufacturers’ Association also is opposing the provision, saying in written testimony that it “will provide the opportunity for FirstEnergy to reap another windfall.”