FirstEnergy Had Big Stake in Tainted Nuclear Plant Bailout

CLEVELAND—FirstEnergy Corp. was once blamed for its part in triggering North Americas largest blackout nearly 20 years ago. Now, the multistate power company is again facing intense scrutiny—this time for its role in an alleged $60 million bribery scheme that has ensnared one of Ohios most powerful politicians.

While FirstEnergy and its executives have denied wrongdoing and havent been criminally charged, federal investigators say the company secretly funneled millions to secure a $1 billion legislative bailout for two unprofitable Ohio nuclear plants then operated by an independently controlled subsidiary called FirstEnergy Solutions.

Officials from the Akron-based corporation, including CEO Chuck Jones, have long insisted FirstEnergy Corp. had no financial stake in rescuing the plants because they were operated by FirstEnergy Solutions. Yet nearly all of the money used to fund the scheme, authorities said, came from the corporation itself.

Critics say the bailout bill, known as HB6, helped smooth the way for FirstEnergy to officially shift ownership of the nuclear plants and two coal-burning power plants to its creditors in federal bankruptcy court in February. Shedding the plants allowed the corporation to focus on its profitable business of powering 6 million customers in Ohio and other states.

Ashley Brown, executive director of the Harvard Electricity Policy Group at Harvard Universitys John F. Kennedy School of Government and a member of the Public Utilities Commission of Ohio from 1983 to 1993, said the bailout legislation clearly benefited FirstEnergy Corp.

“I think theres no question that FirstEnergy was acting in its own self-interest,” Brown said. “Ordinarily, theres nothing particularly wrong with that. But HB6 skewed everything.”

Company A

After its bailout-driven success, FirstEnergys fortunes took an unwelcome turn on July 21.

Thats when federal authorities released a criminal complaint detailing how “Company A”—a clear reference to FirstEnergy—spent $60 million to get well-known Republican Larry Householder selected as Ohios House speaker, finance his bailout passage efforts, and prevent Ohioans from having their say about the legislation at the polls.

FirstEnergys stock price plummeted nearly 35 percent within two days and has yet to rebound. Independent board members have called for an internal investigation and shareholders have filed at least four potential class-action lawsuits alleging FirstEnergys executives committed fraud and concealed an “illicit campaign” to secure the bailout.

“The companys most senior executives, including its CEO defendant Jones, were directly involved in and oversaw these efforts, placing the company and its shareholders at extreme risk of legal, reputational and financial harm,” one lawsuit stated.

FirstEnergy said in a statement this week that it backed the bailout because the corporation has a stake in Ohios economic success, the stability of its electric grid, and maintaining reliable energy sources.

The plan to separate from the nuclear plants and complete the bankruptcy process didnt depend on securing the bailout, the company stated.

U.S. Attorney David DeVillers was asked about FirstEnergy during a July 21 news conference in Columbus.

“Individuals that work for Company A and Company A in and of itself, were going to continue to investigate this, and were going to investigate it wherever it leads and whoever it is and whoever they work for,” DeVillers responded.

The corporation funneled $38 million to a dark money group to finance a dirty tricks campaign that prevented bailout opponents from gathering enough signatures to place a referendum on the ballot, federal authorities alleged.

FirstEnergy also benefited from a last-minute change to the bailout legislation that essentially allowed the utility to charge retail customers more for lost revenue, a sweetener that Jones said made roughly one-third of the companys business “recession-proof.”

While the utility said the add-on would stabilize rates for customers, an analysis released by the Ohio Manufacturers Association estimated FirstEnergy could reap $355 million in unearned revenue through 2024.

Federal investigators said the add-on “likely came as a result of the successful influence campaign” waged by Householder and his four associates, all of whom were indicted on federal racketeering charges in July. The associates have pleaded not guilty, while Householder has been given more time to find a new attorney.

Cornered Junkyard Dog

FirstEnergy began looking six years ago for ways to subsidize the Perry and Davis-Besse nuclear plants in northern Ohio as they struggled to compete with cheaper natural gas power generation.

The companys top priority was to save the plants, Jones told investors in 2017. That same year, one state lawmaker backing FirstEnergys attempts to get financial help told energy conference attendees that the company was in “substantial financial trouble.”

The company created the mess by taking on too much debt when it invested in coal and nuclear plants, said Ohio State University economist Ned Hill, a vocal critic of the bailout.

FirstEnergy acted “like a cornered junkyard dog” to keep the plants from shuttering, he said.

But with state and federal officials reluctant to help, the FirstEnergy Solutions subsidiary announced in March 2018 that it would close the plants in 2021. The subsidiary filed for bankruptcy three days later, saying it had $7.2 billion in assets and $3.1 billion in debt as of Dec. 31, 2016.

By that time, according to federal authorities, the bribery scheme had already been set in motion.

Two months after Householder flew on a company plane to President Donald Trumps inauguration in January 2017, FirstEnergy wired $250,000 into the bank account of Generation Now—a dark money group created to promote “social welfare” under a provision of federal tax law that shields its funding sources or spending. Authorities say Householder controlled Generation Now as part of the alleged scheme.

Of the $60 million eventually funneled by FirstEnergy to Generation Now through the end of 2019, $42 million came from an entity called FirstEnergy Services that is overseen by Jones and his corporate team, the criminal complaintRead More – Source