State utility regulators are weighing whether FirstEnergy’s use of customer‑funded riders during the 2019 House Bill 6 bribery scandal violated state law, following three weeks of hearings before the Public Utilities Commission of Ohio (PUCO).
At issue is the company’s use of the Distribution Modernization Rider (DMR), a surcharge FirstEnergy placed on customers’ electric bills, ostensibly to fund grid modernization, but allegedly diverted to support political schemes connected to a $60 million corruption plot that secured the passage of HB 6.
“We hope, at the end of the day, the PUCO will agree with us and levy the appropriate forfeitures and other penalties on FirstEnergy that they so richly deserve,” Ohio Consumers’ Counsel attorney John Varanese, representing consumer advocates, said at the hearing. He urged the commission to impose “daily fines of tens of thousands of dollars” to hold the company accountable.
Independent auditor Paul Corey of Oxford Advisors testified that FirstEnergy’s rider revenues were co-mingled in a general “regulated money pool,” making it nearly impossible to track operations.
“It was never entirely clear,” he testified. He added that PUCO staff instructed him to remove sections highlighting that issue and the increased dividends reportedly funded by the rider from final drafts of his report.
“They told us to delete it,” Corey said under oath.
Corey’s findings suggest FirstEnergy’s dividend payments, previously averaging $150 million annually, surged to roughly $375 million after the DMR was rolled out, with that shift concealed from ratepayers. The Ohio Supreme Court later ruled the DMR unconstitutional, but FirstEnergy retained approximately $546 million in surcharge revenues; the PUCO declined to order refunds.
Consumer watchdogs remain skeptical of PUCO oversight.
“OCC has repeatedly questioned the PUCO’s audit process, emphasizing how draft, non-public audit reports shared solely with utilities can lead to compromised results from a so-called independent auditor,” OCC told WOSU Public Media.
Varanese further challenged the commission’s integrity, noting: “This was an unprecedented event in Ohio’s regulatory history where FirstEnergy captured both the PUCO and the general‑assembly leadership and bought them off.”
FirstEnergy, for its part, maintains it has strengthened its internal controls since the scandal broke. In a 2021 deferred-prosecution agreement, the company admitted to wrongdoing, paid $230 million in criminal penalties, and $180 million to settle shareholder lawsuits.
“We are pleased to have reached a resolution with the SEC as we continue to turn a new chapter,” CEO Brian Tierney said in a subsequent news release.
A company spokesperson told the Ohio Capital Journal, “FirstEnergy takes compliance and ethics seriously and has implemented extensive reforms.” They declined further comment on the ongoing PUCO review.
Legal analysts say the PUCO’s finding could reverberate through the enforcement of ratepayer protections and lobbying restrictions.
In comments to the Capital Journal, energy‑sector attorney Randi Leppla said, “The integrity of the rider process depends on clear accountability,” arguing the hearings highlight systemic flaws in how utilities are regulated.
The hearings also featured input from Ohio Consumers’ Counsel Maureen Willis, who asserted FirstEnergy is attempting to “block testimony” and “obscure details about the HB 6 scandal.”
“FirstEnergy is trying to obscure details about the HB 6 scandal,” WFMJ-TV quoted Maureen Willis, agency director of the Ohio Consumers’ Counsel, as saying in a statement. “Their latest attempt to block testimony from the OCC and others in the PUCO investigations should be rejected. The PUCO has said it will ‘follow the facts wherever they lead’ — now is the time to show those were not empty words.”
PUCO staff acknowledged the magnitude of the inquiry, noting in opening remarks the need to verify whether monies collected from ratepayers were diverted to political or charitable spending or were included, directly or indirectly, in any rates or charges.
Regulators have invited more submissions and expert testimony ahead of a final decision expected later this summer.
