The Ohio Supreme Court on Wednesday ordered the Public Utilities Commission to remove riders on FirstEnergy Corp. customer bills that since 2017 brought the Akron utility as much as $204 million a year.

The majority court ruling said the main problem is that the so-called distribution modernization rider, which was supposed to be used to modernize FirstEnergy’s electric grid, did not mandate that the money be spent to improve the grid. A minority of justices dissented and said the rider approved by the PUCO was handled properly.

The court majority said the PUCO failed to place conditions on the additional funds that would allow the rider to act as an incentive to modernize the grid.

The majority ruling said the rider brought in $168 million to $204 million annually since it was first imposed in 2017; a state consumer advocate said FirstEnergy took in more than $440 million in total. The court also said that customers cannot get a refund on rider money already collected by FirstEnergy, because there is no legal means to do so.

PUCO officials in 2016, while considering allowing the rider, projected average residential customers would pay no more than $3 a month additional on their electric bills.

“We’re still reviewing the court’s decision and evaluating our options,” FirstEnergy spokesman Mark Durbin said. “We continue to believe that [the rider] provides benefits to our customers by enhancing our ability to modernize our system and invest in advanced technologies.”

Durbin said a third party appointed by the PUCO this week determined that FirstEnergy appropriately used the rider funds in support of grid modernization.

The court directed the PUCO to ensure FirstEnergy’s utility companies immediately stop collecting distribution modernization rider revenues while also recognizing that no refunds will be given on rider revenue collected to date, Durbin said.

The PUCO is reviewing the court’s decision and will respond at a future date, commission spokesman Matt Schilling said.

The commission will wait for the court’s remand order that will specify how the commission may proceed, he said.

The court typically issues remand orders in a matter of days to a week after a ruling, he said.

The now-ended FirstEnergy rider was due to expire at the end of this year, Schilling said. The Akron utility had an application before the PUCO to extend the rider another two years starting in 2020, he said.

“Today’s 4-3 decision by the court, which the Ohio Consumers’ Counsel and others sought, is a significant victory for Ohio families and businesses beleaguered by subsidy charges on their electric bills,” said Merrilee Embs, spokesperson for Ohio Consumers’ Counsel Bruce Weston.

“The court ordered an immediate reduction in electric bills for 2 million FirstEnergy consumers, but unfortunately not a refund of the $442 million that consumers paid to date,” Embs said. “Without a refund, this decision is another victory for utilities who have thwarted consumer attempts at the PUCO, the legislature and the court to enable refunds of utility charges that the court finds to be improper.”

Embs said that just a couple blocks away from the court at the statehouse, hearings are in progress on the House Bill 6 legislation supported by FirstEnergy and other utilities “to charge millions of Ohioans even more money to subsidize nuclear and coal power plants. The utilities have too much influence in this state and that needs to be reformed.”

FirstEnergy shares closed down 6 cents, or 0.1 percent, to $43.45 Wednesday. Shares have ranged from a low of $34.30 to a high of $44.11 over the past 52 weeks.

PUCO staff intended the rider to provide FirstEnergy with sufficient funds to improve its credit rating and assure continued access to credit that would allow the utility to borrow capital to make grid improvements.

The court’s majority opinion said the rider did not qualify as a proper incentive and that the PUCO did not explain how the rider operates as an incentive.

“The PUCO staff’s wishful thinking cannot take the place of real requirements, restrictions or conditions imposed by the commission for the use of [distribution modernization rider] funds,” the court’s majority wrote.

The ruling noted that 19 parties appealed the PUCO’s decision approving the rider.

FirstEnergy critics said the court ruling eliminates a bailout for FirstEnergy.

“Today’s decision is a victory for customers that have borne the burden of FirstEnergy’s unlawful bailout for the past two years,” Neil Waggoner, Ohio campaign representative of the Sierra Club Beyond Coal Campaign, said in a news release. “The decision further highlights the fact that FirstEnergy’s frequent and systemic bad decision making has led them to a point where they can only operate if Ohio electric customers are routinely bailing them out.

“The court’s ruling overturns a FirstEnergy bailout that has cost customers hundreds of millions of dollars, a bailout FirstEnergy has sought to extend for two more years and would cost additional hundreds of millions of dollars, at the same time FirstEnergy Solutions is seeking a legislative bailout that will cost customers, again, hundreds of millions of dollars,” Waggoner said. “The court made the right decision. As such, maybe Ohio regulatory bodies and the state legislature should stop granting FirstEnergy bailouts.”

Shannon Fisk, managing attorney at Earthjustice, which represented Sierra Club before the PUCO and the Ohio Supreme Court, also issued a statement in the same news release.

“Bailouts shouldn’t be a business model for utilities,” Fisk said. “I am glad that the Ohio Supreme Court is blocking FirstEnergy’s attempt to force utility customers to pay for the company’s bad business decisions. FirstEnergy wants massive corporate welfare and expects hardworking families in Ohio to pay for it. Ohioans want clean energy investments that will create jobs, not bailouts of aging and costly coal and nuclear plants.”

 

Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com. Follow him @JimMackinnonABJ on Twitter or www.facebook.com/JimMackinnonABJ