JCP&L faces more questions about Ohio bribery scandal

New Jersey regulators want to know if customer money went to finance bribes
Credit: (AP Photo/Jay LaPrete, File)
Former Ohio House Speaker Larry Householder

Jersey Central Power & Light is in trouble with regulators again.

The state’s second-largest electric utility, already facing an audit of its operations from the New Jersey Board of Public Utilities, now has to explain to officials how money collected from its customers was used to pay for expenses at its parent company, FirstEnergy Corp.

New Jersey officials, as well as those in Maryland, also are asking if some of the money spent by FirstEnergy went to pay for expenses connected to a $60 million alleged bribery scandal in Ohio. That scandal led to the firing of the CEO of FirstEnergy and two other top executives, as well as the indictment of Ohio House Speaker Larry Householder last year.

READ: JCP&L facing new audit to examine its spending

WATCH: Power utilities get failing grades in storm response

Diverting funds

In the past few weeks, FirstEnergy, JCP&L, and its 13 other utilities acknowledged in filings with the Federal Energy Regulatory Commission that money was improperly collected from those companies and diverted to the parent company.

JCP&L detailed parts of its internal investigation in those filings.

“FirstEnergy recently identified certain transactions, which, in some instances, extended 10 or more years, including vendor service that were improperly classified, misallocated to FirstEnergy utility and transmission companies or lacked proper documentation. These transactions resulted in amounts collected from customers that were immaterial to FirstEnergy and JCP&L,’’ the filing said. The statement also said the utility and transmission companies will be working with the appropriate regulatory agencies to address these expenditures.

Presumably, that would involve giving ratepayers credits or refunds for money that was inappropriately expended.

In New Jersey, officials from JCP&L met with the New Jersey Division of Rate Counsel late in March to inform the office of the misallocation of funds, said Stefanie Brand, the counsel’s director. At that time, JCP&L attributed the problem to a “mistake,’’ she said.

“From what they told us, it wasn’t a lot of money,’’ said Brand, adding it was in the neighborhood of $500,000. “As a matter of principle, we need to get that money back,’’ she said.

No comment from the BPU

The BPU did not respond to messages seeking comment about the FirstEnergy question.

In Maryland, the Office of the People’s Counsel, an organization representing ratepayers, is also asking questions about the misallocations, specifically relating to Potomac Energy, a utility serving 260,000 customers in Maryland.

This week, the office petitioned the Maryland Public Service Commission to investigate FirstEnergy’s actions, including where the money from utility customers was spent. “Moreover, according to industry reports, Potomac Energy’s Maryland customers have helped fund FirstEnergy’s alleged bribery and racketeering activities,’’ the filing said.

The alleged scandal involved a scheme purportedly engineered by Householder and others to pass a bill in Ohio that would provide ratepayer subsidies to avert the closing of two nuclear power plants formerly owned by a FirstEnergy subsidiary.

In a quarterly earnings call last month, FirstEnergy announced it is discussing a deferred prosecution agreement with the U.S. Department of Justice. In such a case, an allegation of corporate fraud might be settled by the defendant agreeing to pay a fine and implement corporate reforms to prevent it from happening again.

FirstEnergy deferred questions about its filings with FERC. Jennifer Young, a spokeswoman, and others declined to answer questions about how much money was diverted from the utilities; whether any of it was spent on expenses related to the Ohio scandal; and questions about possible refunds to ratepayers.

Many of those questions may be answered in the BPU audit awarded last week to the Liberty Consulting Group. Besides focusing on that issue, the audit is intended to make a comprehensive examination of the company’s management and other operations. In recent years, the BPU has often faulted the utility’s operations when extreme storms led to prolonged  outages for its more than 1 million customers.

The BPU did not respond to questions about JCP&L’s actions in the matter.

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