COLUMBUS, Ohio – The Ohio Supreme Court has struck down a FirstEnergy charge that had been added to power bills and has cost customers well over $150 million a year.
The court ruled Wednesday that the Public Utilities Commission of Ohio’s authorization of the charge, which began appearing on customers’ bills in 2017, was improper. The charge was called a “distribution modernization rider.” But PUCO placed no conditions on the company to ensure that it would, in fact, use the money for upgrades to the distribution system, the court concluded.
Rather, PUCO may have wanted the rider to provide more money to FirstEnergy Corp. to improve its credit rating, as the commission’s staff members suggested. PUCO staff had indicated that the rider could serve as an incentive for FirstEnergy to modernize its power distribution systems.
“The PUCO’s staff’s wishful thinking cannot take the place of real requirements, restrictions, or conditions by the commission for the use of DMR funds,” wrote Ohio Justice Michael P. Donnelly, in the court’s lead opinion.
Donnelly stated commission failed to place conditions on rider to protect ratepayers if the money wasn’t used for its intended purpose.
“And in fact, the commission made it clear that there are no plans for FirstEnergy to take on any modernization projects in the immediate future,” he wrote.
Justices Judith L. French and Melody J. Stewart joined Justice Donnelly’s opinion.
Will customers get their money back?
While the Supreme Court said the charge must immediately stop, the 2.1 million northern Ohio customers of FirstEnergy Companies -- Ohio Edison, Toledo Edison, and the Cleveland Electric Illuminating Company – will not see a refund, said J.P. Blackwood, spokesman for Ohio Consumers’ Counsel Bruce Weston.
“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,” Blackwood said. "Meanwhile, a couple blocks away from the court at the Statehouse, hearings are in progress on legislation (House Bill 6) supported by FirstEnergy, AEP, DP&L and others 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.”
Last legislative session, state Rep. Mark Romanchuk, a Richland County Republican, sponsored a bill that would have required customers to get refunds when courts found utility charges were improper. The bill was never voted out of committee.
Romanchuk has tracked riders that were stuck down by the court, not only from FirstEnergy, but from other electrical utilities that operate in the state.
“You’re well over $1 billon that’s been collected that was later deemed to be unlawful that should have returned to ratepayers," he said.
Romanchuk would like to see reforms not only in refunds but also in how customers can see riders on their power bill.
“All the different riders that are on people’s bills, they’re not broken out and itemized," he said.
It’s unclear whether there is the appetite for such reforms in the legislature, since a majority in the Ohio House voted to bail out FirstEnergy Solutions’ nuclear power plants.
However, Romanchuk said that the PUCO could take the initiative by specifying in documentation with all riders it approves that if the court strikes it down, money must be returned.
Who appealed the decision?
Several groups opposed the charge and had appealed it to the Ohio Supreme Court, including the Ohio Consumers’ Counsel, the Ohio Manufacturers’ Association Energy Group and the Sierra Club.
PUCO approved the charge in 2016, beginning in 2017 and lasting for three years.
The charge was to collect $132.5 million annually from ratepayers.
But the commission adjusted the amount for federal corporate income taxes, raising it to $204 million in 2017. After the federal corporate income tax rate was reduced in 2017, the amount was lowered to $168 million for 2018 and 2019.
The rider was a way for the company to force its customers to bail it out of financial woes, said Neil Waggoner, Ohio campaign representative of the Sierra Club Beyond Coal Campaign.
The Sierra Club also opposes House Bill 6, the bailout bill of nuclear power plants owned by FirstEnergy Solutions, an entity that was split in the company’s bankruptcy proceedings. HB 6 passed the House and is in the Senate.
“The court made the right decision," Waggoner said. "As such, maybe Ohio regulatory bodies and the state legislature should stop granting FirstEnergy bailouts.”
What does FirstEnergy say?
Officials at Akron-based FirstEnergy Corp., unsurprisingly, believes the rider benefits customers by enhancing the company’s ability to modernize the system and invest in advanced technologies, said Mark Durbin, a FirstEnergy spokesman.
“A third party appointed by the PUCO just this week determined that we have appropriately used DMR funds in support of grid modernization,” he said.
He also said the company is not required to refund the charges.
Which side did the justices agree with?
Justice R. Patrick DeWine concurred in judgment only. He wrote a separate opinion, concluding the PUCOs definition of “incentive” is inconsistent with the commonly understood meaning of the word because it does not guide the utility to a particular course of action. Because the rider placed no conditions of the receipt of the money, it was not an incentive.
Justice Sharon L. Kennedy dissented, stating the rider meets the definition of “incentive” in state law. She wrote that nothing in the law requires an incentive “has to be conditioned or restricted or even related to the action being encouraged."
Justice Patrick F. Fischer and Chief Justice Maureen O’Connor also dissented in a separate opinion. Fischer wrote that the rider relates to the utility’s distribution service, and because it is designed to foster modernization of Ohio’s electric grid, “it is an incentive for modernization.”