In 2018, FirstEnergy Corp. was looking for help.
Efforts by the Ohio utility to secure bailouts for its coal and nuclear plants had been rebuffed by federal regulators. But the power company had a plan to change its fortunes.
Over the next two years, FirstEnergy channeled millions of dollars to a dark money group allegedly controlled in secret by Larry Householder, a Republican state lawmaker who became speaker of the Ohio House in 2019.
The dark money group in turn rained television advertisements down on the state in an effort to drum up support for a bailout of FirstEnergy's power plants.
Yet the energy company's name was nowhere to be seen on the ads.
Many of the TV spots sounded like they were crafted by environmentalists. One shows utility workers striding purposefully past wind turbines and standing near solar panels; a female narrator then hopefully declares, "Clean air and clean energy begin with clean government."
In another, a young father who is described as a energy worker says, "Big Oil wants us gone." News reports later identified him as an employee of a FirstEnergy nuclear plant.
In July 2019, with Householder at the head of the Ohio House, state lawmakers approved a bailout for FirstEnergy worth $1.3 billion. The law subsidized a pair of nuclear plants owned by the company and two coal plants operated by a consortium of utilities, including FirstEnergy. It also gutted the state's renewable energy portfolio and its energy efficiency standards.
Federal investigators arrested Householder and four associates on racketeering charges last month. He's accused of accepting about $60 million from FirstEnergy in exchange for bailing out the company's power plants.
The scandal revealed the sustained, coordinated and ultimately successful attacks by FirstEnergy on wind and solar programs in Ohio. The company has supported a freeze on clean energy mandates, backed anti-wind politicians, and pushed for a federal bailout of its coal and nuclear plants in Washington.
"The utility has captured the rulemakers and stacked the deck against clean energy and in favor of the status quo," said Geoff Greenfield, president and founder of Third Sun Solar LLC, a developer in Athens, Ohio.
Greenfield laid off 20 people following passage of the subsidy law, known as H.B. 6, last year. He said efforts to attract investors and employees have been hampered by the state's opposition to the clean energy industry.
"They see how our state treats renewables, and it basically undermines their faith in Ohio," Greenfield said. "Investors say, 'I have lots of places to invest my money, and Ohio doesn't look like a favorable economic environment or as favorable. I'm going to invest elsewhere.'"
The bailout's cost to the climate is potentially enormous.
The two coal plants subsidized by the legislation emitted 12.6 million tons of carbon dioxide last year, or about what's released by 2.5 million cars annually. A third coal plant, the second-largest in the state, elected to reverse its closure plans and stay open following the legislation's passage.
Renewable developers say the bill is the latest in a long line of attacks on their industry.
In 2014, FirstEnergy backed a law freezing the state's clean energy mandates. Ohio lawmakers imposed stringent setback requirements on new wind turbines that year. The author of that provision, Keith Faber, received $64,000 in campaign contributions from FirstEnergy going back to 2000, making the utility his fourth-largest contributor, according to the National Institute on Money in Politics.
Faber, a Republican, is now Ohio's auditor, but served as the Senate president at the time the setback provision was passed.
Renewable development in Ohio grew slowly as a result. Wind generation in the state was 3.5 million megawatt-hours in 2018, according to the U.S. Energy Information Administration, up from 2.3 million MWh in 2014.
Contrast that to neighboring Indiana, where wind generation jumped from 6.9 million MWh to 10.8 million MWh over that period, or nearby Illinois, where wind grew from 20 million MWh to 23.8 million MWh.
Solar has not fared much better. Solar output was 238,110 MWh in 2018, up from 112,114 MWh four years earlier. Combined, wind and solar represented 1.5% of Ohio's energy mix in 2018. By comparison, renewables accounted for more than a third of power generation in Iowa and Kansas that year, and 16.5% of electricity output in Texas.
"This is a singular instance of a state weakening its renewable standard and committing to coal and nuclear power at substantial expense to state ratepayers," said Gregory Wetstone, president and CEO of the American Council on Renewable Energy. "That is not a path other states have gone down, and we find out the root of it was bribery. I think it says a lot about where this country and states are going."
FirstEnergy has consistently sought a bailout of its power plants from policymakers in Columbus, Ohio, and Washington. One of those plans was scuppered by the Federal Energy Regulatory Commission after President Trump's Energy Department backed a FirstEnergy proposal to subsidize its coal and nuclear plants (Climatewire, July 24).
FirstEnergy has sought to cast its efforts as an attempt to ensure the resilience of the grid.
"I continue to believe that our country is heading into a difficult place if you allow nuclear plants that are perfectly good and coal plants that are needed for resiliency in the winter to continue to close prematurely," Charles Jones, FirstEnergy's CEO, told a utility conference in 2018.
In Ohio, the utility framed the bailout of its two former nuclear plants, Davis-Besse and Perry, as a clean energy bill. Saving the power plants, it argued, would save the largest source of zero-carbon electricity generation in the state.
FirstEnergy is not named by federal investigators in the criminal complaint outlining the charges against Householder and other defendants. But prosecutors point right at the company in other ways (Climatewire, July 22).
Company executives have sought to distance themselves from the scandal by placing the blame on FirstEnergy Solutions, a former subsidiary in charge of running the company's power plants.
The utility began divesting itself from its power generation affiliate in 2016. FirstEnergy Solutions subsequently filed for bankruptcy protection in 2018, but the split was not made official until earlier this year, when the subsidiary emerged from Chapter 11 under the banner of a new company, Energy Harbor Corp.
The separation means FirstEnergy will not receive subsidies from the bill, nor be greatly affected if lawmakers should decide to repeal the legislation, which is now being discussed.
Jones, the CEO, told analysts in a recent earnings call that FirstEnergy Solutions became a separate company in 2016. He said an independent board was responsible for making decisions on everything from business to political matters.
"And from Nov. 16, I've had no input into any of the decisions they've made," he said.
Jones nevertheless acknowledged that 25% of the $60 million in alleged bribes passing through Generation Now, the dark money group, came from FirstEnergy. The utility boss had to release a clarification last week acknowledging that FirstEnergy and FirstEnergy Solutions shared lobbying services. Jones had initially told financial analysts the opposite.
Filings with the Securities and Exchange Commission show FirstEnergy Solutions paid its parent $152 million in shared services, including lobbying, in 2019, a fact noted by federal investigators in their complaint.
"While FES received support from FirstEnergy's External Affairs team to varying degrees, that support decreased over time, particularly, as the FES bankruptcy approached," Jones said in his clarification.
A jet and cash
Evidence compiled by federal investigators paints a more damning picture of the company. Householder traveled on FirstEnergy's jet to Washington in January 2017. News stories identified the destination as Trump's presidential inauguration.
A month later, a Householder aide named Jeff Longstreth opened a 501(c)(4), which was not subject to campaign finance disclosure laws. The group was christened Generation Now.
The scheme allegedly worked like this: FirstEnergy shuffled money to Generation Now, which channeled it into advertising to support 21 of Householder's allies running in Republican primaries and the general election during the spring and fall of 2018.
Most of the candidates backed by Householder won that year, helping the lawmaker beat former Speaker Ryan Smith in a bitter battle to lead the Ohio House in January 2019. Generation Now spent $4.6 million in the election, with half of that money coming from FirstEnergy, according to federal investigators.
The utility and Householder then stepped up efforts to pass the bailout bill, which was filed a few weeks later. FirstEnergy wired Generation Now $9.5 million when the legislation was before the House and $7.4 million when it was pending in the Senate, federal investigators said.
A poll conducted by the Yale Program on Climate Change Communication shortly after the bill's passage found that 54% of state voters were opposed to the bailout law. It also found that more than 60% of Ohioans supported developing more renewable energy.
Later, the utility channeled $38 million through Generation Now into a campaign to defeat a ballot measure seeking to overturn the bailout law. The measure never gained enough signatures to be placed on the ballot. That came after Householder's team allegedly bribed signature gatherers.
Neil Clark, a Householder aide charged in the alleged scheme, explained the benefits of the arrangement in a recorded call: "It's a secret; a (c)4 is a secret. Nobody knows the money goes to the speaker's account; it is controlled by his people, one of his people, and it's not recorded."
Evidence obtained by federal investigators suggests FirstEnergy executives were aware of the alleged scheme. Investigators do not name Jones, the CEO, but lengthy public statements made by him are attributed to the CEO of "Company A Corp." in the criminal complaint.
In one document recovered by the government, the same CEO suggests to a FirstEnergy Solutions lobbyist that the company support Householder's bid to become speaker. And when Householder was elected to the job in January, he received a call from that same CEO. A similar call was placed on the day the bill passed in July.
In all, investigators allege that the pair spoke by phone 30 times between January and July, when the bailout bill was pending before the Legislature.
Jones has denied any involvement, telling analysts recently, "The CEO referenced in some of that affidavit wasn't me" (Greenwire, July 24).
Lobbyists and payoffs
FirstEnergy's push for a bailout came amid a revolution in Ohio's power sector.
The state's once-mighty coal industry was drowning in a wave of cheap natural gas. Where coal accounted for more than 80% of electricity generated in the state in 2010, the fuel was responsible for 47% in 2018. No state has retired more coal capacity than Ohio since 2013, according to an E&E News review of federal figures.
The state's nuclear power stations were likely to follow suit without intervention from state lawmakers. Neither Davis-Bessie nor Perry is likely to cover its costs this year or next without state assistance, according to Joseph Bowring, the market monitor for PJM Interconnection LLC, the 13-state wholesale power market including Ohio.
In that regard, Ohio is part of a larger pattern.
State officials in Connecticut, Illinois, New Jersey and New York have all taken measures to prop up nuclear stations in recent years. Bowring said such efforts reflect a healthy wholesale market.
"Competition rewards those with the lowest costs and punishes those with higher costs," Bowring said in an interview. "If units are uneconomic and can't make money in the competitive market, the logical thing is for those units to be replaced by lower-cost, more efficient units, regardless of the technology."
What's unique about Ohio is the manner in which state lawmakers tied aid for nuclear facilities to coal plants and the repeal of clean energy standards.
The bill provides $150 million annually to Davis-Besse and Perry, the two nuclear plants. It imposed a $1.50 surcharge on customers' monthly bills to support two coal plants owned by the Ohio Valley Electric Corp. One analyst estimated that the subsidies are worth $60 million annually. And it watered down the state's renewable portfolio standard by removing a requirement for solar generation, exempting industrial customers from the mandate and making the standard voluntary after 2026.
Supporters of the bill said it would remove a burden on industrial customers by eliminating the renewable and efficiency mandates, while capping how much they could charge on plants already losing money.
"Most of all, customers are going to see a net bill reduction," said Kevin Murray, executive director of the Industrial Energy Users-Ohio, a trade group that supported the bill.
Consumer advocates and market analysts question that argument. Bowring, the PJM market monitor, asked, "How are they lowering costs by making customers pay for units that would otherwise go out of business?"
Howard Learner, president and CEO of the Environmental Law and Policy Center in Chicago, said utilities resistant to change have increasingly looked to lawmakers to bail out aging coal and nuclear plants. He pointed to a recent $200 million fine paid by Commonwealth Edison Co. over its lobbying practices in Illinois.
"When utilities can't make their case on the law and facts at public utility commissions in Illinois and Ohio, they've turned to the legislature to hard-wire rate increases that involve hundreds of millions if not billions of dollars," Learner said. "Investing in lobbyists and payoffs and political campaign contributions is a lower-cost investment to achieve hundreds of millions if not billions in benefits."
The climate consequences can be serious.
In Ohio, FirstEnergy Solutions made the decision to keep open W.H. Sammis, the second-largest coal plant in the state, after the bailout law passed.
Sammis emitted 12.3 million tons of CO2 in 2013, according to EPA data. But the plant has run less and less in recent years. It ran only 20% in 2019, down from 61% in 2014.
Last year, it reported CO2 emissions of 4.6 million tons, or what 900,000 cars emit annually.
The result is a one-two punch to climate and consumers, forcing them to pay for polluting plants that are no longer economic, said Leah Stokes, a professor at the University of California, Santa Barbara, who has written extensively about Ohio's bailout law.
She said FirstEnergy represents one of the most egregious cases of utility corruption, but is part of a larger pattern of power companies' approach to climate policy.
"The goal is to slow down the clean energy transition so they can pay down the debt on their fossil fuel infrastructure and build new gas," she said. "In that way, it is part of a national trend, which is climate delay from electric utilities."
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