MORGANTOWN – Mon Power/Potomac Edison and the state Public Service Commission have tentatively agreed to an accounting firm to perform a “Focused Management Audit” in connection with the companies’ recent rate-hike requests, and in connection with what PSC chair Charlotte Lane has termed the “FirstEnergy lobbying scandal in Ohio.”
On May 31, the companies began a rate-increase case with the PSC, seeking a $207.5 million (13%) rate hike – for infrastructure their energy assistance program. The hike would cost the average residential customer $18.07 per month – raising a bill from $120.20 to $138.27.
The PSC explains in the separate case concerning the audit that a Focused Management Audit is an in-depth investigation of one or several specific areas of a utility’s management and operations.
Anticipating the request, the PSC ordered the audit on March 2, saying, “We believe that a focused audit is the best way to review the companies’ adherence to accounting for direct and indirect lobbying and image building expenses … and to ensure that the cost of such activities is not included in operating expense accounts, plant accounts, or other accounts that are normally considered in determining ratemaking revenue requirements.”
FirstEnergy is the companies’ parent company. On Aug. 4, an energy publication called Energy Drive reported that FirstEnergy President and CEO Brian Tierney said the company received a subpoena from the Ohio Organized Crime Investigations Commission related to its bribery scandal.
Energy Drive said Tierney related that the commission’s investigation appears to cover issues fleshed out in a deferred prosecution agreement from July 2021 between FirstEnergy and the U.S. Attorney’s Office for the Southern district of Ohio. Under the agreement, FirstEnergy paid a $230 million penalty for bribing Ohio lawmakers to ensure the passage of a ratepayer-funded bailout for nuclear and coal-fired power plants.
In response to the PSC order, Mon Power and Potomac Edison provided a suggested list of accounting firms to perform the audit. On Monday, PSC legal staff recommended Rhode Island-based Van Reen Accounting. On Tuesday, the companies agreed with the recommendation.
The statement of work drafted by legal staff says, “The scope of this work will include an analysis of the lobbying and image building costs directly and indirectly charged to the companies, including costs related to Ohio House Bill 6, from 2018 to 2022; and the costs directly and indirectly charged to the Expanded Net Energy Charge (ENEC) cost recovery accounts during the same time period.”
PSC told The Dominion Post on Tuesday that they do not believe the Ohio scandal had any bearing on Mon Power/Potomac Edison rates in West Virginia, or that the companies did any similar lobbying at the West Virginia Capitol.
PSC referred us to a newspaper op-ed by Lane published in Charleston in March.
She said any expenses on a utility’s books related to illegal activities would be excluded from rate recovery. “But, just as importantly, ratepayers should be aware that expenses related to lobbying for passage of legislation or image building activities are never allowed for ratemaking, even if they did not represent illegal activities.”
The companies have not had a base rate case in West Virginia since 2014, she said, so they have had no opportunity to attempt to pass on any questionable payments for legislative lobbying.
She pointed out that Ohio, Maryland, Pennsylvania and New Jersey – the states that have identified disallowed expenses – recently completed base rate cases for FirstEnergy and in those states, FirstEnergy requested recovery in rates for those impermissible expenses.
“We will closely scrutinize all expenses to make sure expenses for illegal activities, as well as expenses for legislative lobbying and image enhancement, either directly incurred or indirectly incurred through affiliated intercorporate charges, are not passed on to West Virginia ratepayers,” she said.
FirstEnergy told The Dominion Post on Tuesday, “FirstEnergy is committed to a strong culture of compliance, and its West Virginia operating companies, Mon Power and Potomac Edison, will cooperate fully with the audit ordered by the Public Service Commission.”
email: dbeard@dominionpost.com
