After $60M Bribery Charges, Questions Renewed over Ratepayer Subsidies for Nuclear Power

Tom Johnson | July 28, 2020 | Energy & Environment
New Jersey opted for $300 million annual subsidies only after bitter legislative battle. Will Ohio nuclear scandal initiate new round of skirmishes?
Credit: Nuclear Regulatory Commission
The Ohio House in July 2019 voted to have consumers pay $150 million a year to rescue the financially failing Davis-Besse plant, pictured, and the Perry plant.

FirstEnergy Corp. CEO Chuck Jones was more than halfway through his second-quarter earnings call Friday, when he could no longer hold in his frustrations. “It’d be really nice,’’ he said softly, ‘’we have 15 minutes left if we could actually talk about the great quarter that we had at some point here.’’

Unfortunately for him, analysts were not interested. Instead, they sought to gauge the Ohio energy giant’s risks and exposure following the announcement three days earlier of its role in the $60 million bribery scandal related to the bailout of two nuclear plants formerly owned by the company. The federal investigation led to the arrest of Ohio’s speaker of the House, his chief political aide and three lobbyists.

Credit: ohiohouse.gov
Larry Householder, speaker of the Ohio House of Representatives

The alleged scheme involved using funds from FirstEnergy, its former subsidiary and operator of the plants, and another subsidiary, to help pass a bill last year to keep the plants open with a $1.3 billion subsidy paid for by utility customers. Once enacted into law, funds funneled to a dark-money nonprofit set up by the Ohio Speaker Larry Householder were used to block a referendum seeking to overturn the law.

The scandal has revived questions about whether these aging nuclear plants deserve the subsidies and how they were awarded. New Jersey was one of four states to allow ratepayer subsidies to avoid closing nuclear power plants.

At this juncture, there are more questions than answers relating to FirstEnergy’s , involvement. FirstEnergy, which owns Jersey Central Power & Light and its subsidiaries, is cooperating with the investigation, Jones said. “I believe First Energy acted properly in this matter,’’ Jones told analysts. None of the money from the bailout went to FirstEnergy, he said.

FirstEnergy source of some funds

In the call, peppered repeatedly with questions about the probe, Jones acknowledged about one-quarter of the $60 million in funds diverted to the nonprofit Generation Now came from FirstEnergy. “We do make prudent decisions to spend corporate funds on issues that we believe that are important to our customers and shareholders,’’ he said.

The lobbyists arrested and identified in the 82-page affidavit never worked for FirstEnergy on the nuclear bailout bill, according to Jones. “Who they worked for, I’m not sure, but I know they did not work for us.’’

The Justice Department affidavit never specifically identified companies or entities involved in the scheme, leading to confusion about where in the corporate structure the illegal activity is coming from, according to one analyst.

Renewed criticism about ratepayer subsidies

Still, the affidavit renewed criticism from some in the energy sector over states subsidizing bailout of nuclear power plants, a process that has also occurred in New York, New Jersey and Illinois. In New Jersey, Public Service Enterprise Group and Exelon Corp. won subsidies amounting to $300 million a year to prevent their three plants in South Jersey from closing after a bitter two-year legislative battle.

“This should raise questions in New Jersey whether the ZEC (zero-emission certificate) legislation is necessary,’’ said Glen Thomas, president of the P3 Group, a coalition of energy suppliers that opposes nuclear subsidies. “We now know in Ohio the only reason these bills passed (was) legislators were being bribed.’’

Last week, Ohio Gov. Mike DeWine, reversing a stance he took only the day before, called for the repeal of the law, saying Householder’s alleged bribery scheme ‘’tainted’’ it.

Others were more circumspect. Paul Patterson, an analyst with Glenrock Associates, asked Jones a question on Friday’s call wondering what, if any, illegal activity was cited in the affidavit against the company. Jones said he would let his prepared remarks answer that question.

“If this is the rules that are set up, and if you are so dependent on government policies, then why are people so surprised that they then try to influence policies,’’ Patterson said in an interview with NJ Spotlight.

According to the Justice Department affidavit, companies in the alleged scheme paid out $60.8 million over a three-year period. Householder was elected speaker in January 2019. Three months later, HB6, the nuclear bailout bill, was introduced and it passed in late May 2019.

Money kept flowing

Even after the bill was enacted, the money still flowed freely, according to the affidavit. At least $450,000 was paid out to 15 signature-collection firms so they would be conflicted by working on behalf of the ballot campaign, the affidavit said. In addition, funds were found to bribe workers collecting signatures, including to find out details about how well the signature signups were going.

In the end, the groups opposing the subsidy failed to collect enough signatures to put the issue on the ballot.

“These are matters of utmost public concern,’’ said Steven Goldenberg, a lawyer actively involved in the nuclear subsidy case in New Jersey. “It is critical they are decided on their merits, not on behalf of undue political influence.’’