FirstEnergy ordered to return $43M to Ohio customers

Utility overcharged for renewable energy purchased on the alternative energy market
Associated Press
Aug 8, 2013

Ohio utility regulators on Wednesday ordered FirstEnergy to credit $43.3 million back to customers after the company overcharged them for renewables purchases in Ohio's developing alternative energy market.

The unanimous action by the Public Utilities Commission of Ohio for the first time puts a dollar figure on excess costs the Akron-based utility paid a subsidiary for renewable energy and then passed on to customers.

The company said it disagrees with the commission's decision and plans to appeal.

"The ruling does not change the fact that purchasing the renewable energy credits was the only option available to us under Ohio's clean energy law," FirstEnergy spokesman Doug Colafella said in an email. "The decision suggests we should have ignored Ohio law and it penalizes us for following the law."

An audit of the overcharges by Exeter Associates Inc. indicated FirstEnergy paid 15 times more than any other company in the country to subsidiary FirstEnergy Solutions to buy the credits it would use to help meet Ohio's new renewable energy standard.

The standard requires utilities to provide 25 percent of their energy from renewable sources by 2025.

Portions of the audit were blocked from public view because of confidentiality claims by the company, and PUCO Chairman Todd Snitchler said Wednesday those figures will remain secret.

Snitchler said he's confident the figure contained in Wednesday's order is fair. An analysis by the Natural Resources Defense Council had put the excess payments at between $96 million and $126 million.

"I can't speak to how they arrived at that number, but we think this number is very much within the realm of what was appropriate," Snitchler said. "We believe that we made the right decision based on the evidence that was presented in the record."

Dan Sawmiller, with the Sierra Club's Ohio Beyond Coal Campaign, commended the commission's order but said public access is lacking in the case, "leaving customers in the dark about what types of renewables are being provided, where they are coming from and at what cost."

Brian Kaiser, director of green jobs and innovation for the Ohio Environmental Council, said the commission did the right thing.

"We think FirstEnergy deserves the penalty it received, and it was right for the PUCO to order the company to return the money it took from its customers," he said. "We think FirstEnergy's games with customers' money need to stop."

Snitchler said it's unlikely the specific scenario in the FirstEnergy case — which involved renewable energy credits purchased in 2009 to 2011 — would be repeated in today's more well-developed market for solar, wind and other renewable energy sources.

But he said the order still is instructive to other utilities.

"This would certainly give a utility the opportunity to consider how they were going to procure those RECs to make sure that they were in compliance and didn't run into a situation where they would be where we are here today," he said.

The Ohio Legislature is considering changes to the state renewables and energy efficiency standards. Snitchler said he hopes lawmakers will take the ruling into account as they look to clarify the law.



BULLISDEEP's picture

The WORLD is flat too.

Peninsula Pundit

An much better article on this finding is in the Cleveland Plain Dealer.
What is not mentioned in the article above is that the biggest reason FE was guilty of this was that they bought Renewable Energy Credits for 15 times the market rate at the time.
And who did they buy these overpriced credits from?
Its' own subsidiary, FirstEnergy Solutions.
Ah, the plot thickens......

Really are you ...

good. Do the same thing with oil.


The amount of destruction and the aftermath caused by Hurricane Sandy was due in part to the lack of infrastructure maintenance caused by costs associated with excessive govt. regulation of the energy providers.

Keep scr*wing around regulating and fining 'em.

Eventually, consumers will get to enjoy rolling brown outs and black outs.

The Big Dog's back

Just because you cower at the thought of big business doesn't mean everyone does. koch brothers paying you?

Licorice Schtick

He's full if it. It's deregulation that permits utilities to neglect their infrastructure.

The Hero Zone's picture
The Hero Zone

If I remember correctly this regulation has killed astronauts. A reason why the insulation fell off, damaging the space shuttle in the latest explosion, was because they were forced by EPA regulations to switch to another formulation that caused it to be more brittle.

If I want a loan to buy my building I have to have an EPA test done BEFORE submitting the paperwork. Which means that I am out of pocket paying $15k before the bank has the opportunity to laugh at me and reject my application leaving me with that bill.

Licorice Schtick

You have no idea what you've talking about.

The Hero Zone's picture
The Hero Zone

Thank you for your insightful comment. It was both chock full of resources and reasoned opinion that really made me think. We all learned something from this, your contribution to the discussion will be noted.

Since I clearly have no idea what I'm talking about I guess I will just have to cite sources to prove my shame to you that I am an ignorant pundant who actively works to deceive people on a daily basis.

"In July 2005, NASA reported that they changed the foam insulation a decade earlier, switching from a foam-blowing agent that used an environmentally damaging chlorofluorocarbon (CFC) to one using a more benign hydrofluorocarbon (HFC) blowing agent. The newer HFC-blown foam insulation is a significant change since it is reported to be more brittle than the originally specified insulation material."

Table 1. Potential Environmental Risk for Banks
1. Liability from the banks’ own operations.
2. Commercial lending and credit extension (debt) risks
a. Reduced value of collateralized property
➤ Cost of cleanup is capitalized into property value
➤ Property transactions may be prohibited until cleanup occurs
b. Potential lender liability
➤ Cleanup of contamination on collateralized property in which the bank takes an interest
➤ Personal injuries
➤ Property damages
c. Risk of loan default by debtors
➤ Cash flow problems due to cleanup costs or other environmental liabilities
➤ Reduced priority of repayment under bankruptcy

Yeah, I guess the loan officer at the bank had absolutely no idea what he was talking about. At all. I mean, geeze, thanks Licorice for detailing things for me. I could have gotten myself in deep there. You know, not being thorough or talking to professionals and all. Phew!

Wow...I was just so ignorant there. If you want to rub all the details I missed in my face, this unworthy commenter must kneel before you to allow you, my superior, to do so. Please. Rub it in. Right here.

Licorice Schtick

I was not trying to be mean; while what I said is obviously true, I should have been more diplomatic. Your sarcasm betrays your thin skin.

The notion that "this [whichever regulation 'this' refers to] regulation has killed astronauts" is patently absurd.

Your first link is to an insulation industry site. That's not an objective source. Greedy corporations kill people. Despite being hampered by subversion by greedy selfish people, the EPA saves lives.

You second link is irrelevant. Yes, lenders have various due diligence hurdles, but most are not mandated by the government, and they are not uniform.

If you can't buy the building you want, it's not because of the EPA, it's because of any or all of a number of other reasons which you don't understand. I suspect your cluelessness is because you're a real estate noob, but I could be wrong. How many deals have you done?

You're whining and lazily blaming the government for your failure to accomplish what other succeed at. If you are born into modest means, then yes, the plutocracy has horribly stacked the deck against you, but that's another topic. Your ego and lack of fortitude is also your enemy. If you really want to succeed, figure out what successful people do, and do it.

The Hero Zone's picture
The Hero Zone

Ah, thank you for your superior citing of professional, non-biased sources that outshine my own inferior ones. I read them all and was moved into accepting a humble resignation to your points. Since I am clearly incompetent I will continue to further illustrate just how I pale in comparison to you so I bear my shame to my peers.

Shameful Point 1: NIA is a not-for-profit trade association representing both the merit (open shop) and union contractors, distributors, laminators, fabricators, and manufacturers that provide thermal insulation, insulation accessories, and components to the commercial, mechanical, and industrial markets throughout the nation. Since 1953, the northern Virginia–based association has been the voice of the insulation industry and is dedicated to keeping the commercial and industrial insulation industry up to date on the latest industry trends and technologies.

Shameful Point 2: Even if this site clearly misleads the public every day into lethal choices and is an untrustworthy source, the quote was from NASA itself directly. Perhaps they are also a biased lie-factory like an industry-representing organization.

Shameful Point 3: EPA regulations changed. The newer insulation, made to guidelines, was more brittle. It broke off. The heat entered the uninsulated portion and caused the explosion per physics. The astronauts died. NASA reports this as fact. I beg your forgiveness that my beta mind can only correlate real events or that I can't see the truth behind the words. Gunshot victims must only die from cardiac arrest or organ failure, clearly the small piece of metal has nothing to do with it.

Shameful Point 4: Such is your alpha level of operations I was blind to you when you were in my building with the loan officer going through it and looking for any/all options and necessities it takes to move me into a position of ownership. I wish your invisible hand was guiding me when I was told and cited regulation stipulating the exact thing I (apparently falsely) reported. So too did I miss you at my discussion with others about applying for a brownfield grant that would mitigate the cost of the NECESSARY testing for my site as there was no other option if I wanted to go through a commercial lender. But, bankers are clearly not objective and are greedy and kill people. You saved my life.

* * * * *

The non-sarcasm starts here. Honestly.

You very much should have been more diplomatic and engaged in enlightened, thoughtful discussion instead of using one misspelled sentence to wholly reject any kind of thought or information someone puts out there. My sarcasm doesn't betray my thin skin, it acted as a medium through which I actually cited my sources and a way to indicate I didn't appreciate your lack of tactful dialog.

So, with your broad thinking and judgement, I only have that to work with especially since you continue to fail to give me correct information besides alluding to either your profession as a seasoned commercial/industrial realtor (or lender) or as a literal rocket scientist. Which are you so that I can have context to what you say and take it as meaningful instead of judgmental? Informative and not bombastic? You try to correct me like I am wrong and then refuse to go any further into the point to show me how I was wrong. You just can't do that.

As for blaming the government for my failures? I bring up those points as they were hurdles I had to discover so that I could overcome them. I hardly played a violin for myself while writing my initial article. Usually when people encounter facts or obstacles they enjoy sharing them with others so that it helps them overcome their problems. I am waiting on this from you since I appreciate you wishing to help me by correcting me. It's a compliment since you are so moved by me, but a compliment that needs followup.

I tell Big Dog this all the time. I have an open mind and harbor no animosity toward anyone here. Tell me then, support it, give me context to what it is you disagree with and convince me otherwise. Instead I either get vagaries, no reply, no support, or a change in topic. Teach me (and others since this is an open forum). Make me your foil, catalyst, or example and teach everyone here to be better.

Licorice Schtick

The utilities are monopolies. Regulation is the ONLY thing keeping them from charging anything they want for lousy service while letting the infrastructure crumble. Deregulating monopoly utilities is idiocy that can only result in the consumer getting skewered.

The part of "dereg" that permits price competition for the actual commodity being delivered is great, but the utility companies fight that.

If an electric utility is permitted to charge whatever they want for delivering the power, and then keep it all rather than reinvest some of it, they have no incentive to maintain the grid. And that's exactly what's happening. Ensuring high-quality utility infrastructure requires, among other things, strict regulation of the monopoly part of the business.

swiss cheese kat's picture
swiss cheese kat

Probably would have been cheaper in the long run to ignored Ohio law.

Stop It

Simple terms.

Regulation means that you can buy a lightbulb and it will screw into a standard lamp socket anywhere in the USA.

Deregulation means you have 37 different chargers to recharge all the batteries you have in all your different so-called "wireless devices" wherein, the battery costs more to replace than buying another device brand new.

Think ink cartridges and cell phone batteries.