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Released September 09, 2020 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--It's been a difficult, scandal-ridden summer for two Midwestern electricity companies -- Commonwealth Edison (ComEd) (Chicago, Illinois), a unit of Exelon Corporation (NASDAQ:EXC) (Chicago, Illinois), and Energy Harbor Corporation (Akron, Ohio), the owner of uneconomic nuclear and coal power plants in the Midwest. For more on the scandals, see July 23, 2020, article - Dark Money: Ohio, Illinois Officials Allegedly Raked in Fortunes from Energy Company Bribes.
More shoes appear ready to drop for Energy Harbor, an independent company today but formerly a subsidiary of FirstEnergy Corporation (NYSE:FE) (Akron, Ohio). It's harder to say what the future holds for ComEd, which settled its charges with the U.S. Justice Department (Washington, D.C.), but is still the subject of an investigation by the U.S. Securities and Exchange Commission (SEC) (Washington, D.C.).
In Ohio, efforts are underway to repeal legislation, House Bill 6 (H.B. 6), that last year granted FirstEnergy Solutions about $1.3 billion in subsidies over seven years to keep open two uneconomic Ohio nuclear plants, two uneconomic coal plants (one in Ohio, one in Indiana) and six Ohio solar farms.
The subsidies are scheduled to be recovered from customers starting next January, but lawmakers in the Ohio legislature are considering at least three bills to undo H.B. 6, which was passed in mid-2019. For more on the passage of H.B. 6, see July 19, 2019, article - Ohio Enacts Law Subsidizing Nuclear, Coal and Solar Plants.
"This is likely the largest bribery, money-laundering scheme ever perpetrated against the people of the state of Ohio," U.S. Attorney David DeVillers said July 21, after Ohio House Speaker Larry Householder and four others were arrested. "This was a quid pro quo. This was pay to play."
The five defendants have pleaded not guilty. Federal officials have said the investigation is ongoing.
After the initial arrests, DeVillers said: "We're not done with this case. There are a lot of federal agents knocking on a lot of doors."
FirstEnergy Solutions filed for Chapter 11 bankruptcy protection in early 2018, its financial health weighed down by uncompetitive nuclear and coal plants. Those facilities have not been able to compete with lower-priced gas-fired generation and renewable generation. Earlier this year, FirstEnergy Solutions exited bankruptcy proceedings with a new name: Energy Harbor.
Energy Harbor owns and operates the Davis-Besse Nuclear Station, located in northwest Ohio, and the Perry Nuclear Station, located in northeast Ohio. Davis-Besse is a one-unit plant with 908 megawatts (MW) of generating capacity. It began operating in 1977. The Perry plant, which began generating electricity in 1987, is a one-unit, 1,268-MW facility.
After years of fruitless efforts, last summer FirstEnergy Solutions succeeded in getting Ohio lawmakers to enact a law giving it financial subsidies for the Davis-Besse and Perry nuclear plants.
This summer, on July 21, federal agents arrested five people, including Larry Householder, at the time the Speaker of the Ohio House of Representatives, and Juan Cespedes, a FirstEnergy Solutions lobbyist, and alleged they were part of a wide-ranging $60 million bribery scheme involving legislative efforts to win the $1.3 billion subsidy for FirstEnergy Solutions. Householder, who faced federal investigations earlier in his career, stepped down as speaker but kept his seat.
On September 3, Householder pleaded not guilty to one charge of federal racketeering. The other four defendants also pleaded not guilty. No trial date has been set. If convicted, the defendants face up to 20 years in prison.
Ohio's new House Speaker, Bob Cupp, took the first steps toward repealing H.B. 6 by creating a new select committee on energy policy and oversight, and referred to it three draft bills that would undo H.B. 6.
If the legislature doesn't act, Ohio Attorney General Dave Yost, a Republican, has threatened to sue to block the subsidies from going into effect next January. Yost also issued document preservation orders to dozens of people said to be at or near the scandal.
Ohio Governor Mike DeWine and Ohio Senate President Larry Obhof, both Republicans, have urged that H.B. 6 be repealed. Surveys show the measure is unpopular. H.B. 6 imposed a monthly charge of 85 cents on all Ohio residential customers' electric bills to support the two nuclear plants, and an additional charge of up to $1.50 per month to support the two financially ailing coal plants, Kyger Creek Generating Station and Clifty Creek Generating Station.
Losing the financial support in H.B. 6 could plunge Energy Harbor right back into bankruptcy court.
Over in Illinois, electricity distributor ComEd quickly tried to put its scandal in the rear-view mirror on July 17 by accepting a $200 million fine and agreeing to a three-year deferred prosecution agreement in a bribery case involving the powerful speaker of the state House of Representatives, Michael Madigan.
In a statement July 17, Christopher M. Crane, chief executive at ComEd parent Exelon, said: "We are committed to maintaining the highest standards of integrity and ethical behavior. In the past, some of ComEd's lobbying practices and interactions with public officials did not live up to that commitment. When we learned about the inappropriate conduct, we acted swiftly to investigate. We concluded from the investigation that a small number of senior ComEd employees and outside contractors orchestrated this misconduct, and they no longer work for the company. ... We apologize for the past conduct that didn't live up to our own values, and we will ensure this cannot happen again."
The $200 million fine cannot be recovered in customer bills. The investigation stemmed from lobbying activities connected to passage of a 2011 law to modernize the ComEd electric system. If officials at the utility continue to cooperate with federal officials and refrain from corruptly trying to influence public officials for three years, the original charge will be dropped. However, if evidence emerges that ComEd officials continued to engage in the proscribed activities, they could be charged and the agreement could be voided.
To prevent a recurrence of corruption in its lobbying, Exelon said it implemented four new policies that apply to employees who interact with public officials. These policies lay out specific rules, procedures and tracking mechanisms governing: interactions with public officials; vetting and monitoring of lobbyists and political consultants; employment referrals or requests from public officials; and vendor referrals or requests from public officials.
The federal investigation uncovered evidence that ComEd officials arranged jobs, contracts and payments for associates of the Illinois Speaker in exchange for assistance with legislation favorable to the utility.
ComEd's deal with the U.S. Attorney's office resolved the U.S. Department of Justice (Washington, D.C.) investigation of ComEd, but a separate investigation by the SEC is ongoing. And class-action lawsuits have started piling up at ComEd's door.
The ComEd scandal erupted as corporate parent Exelon was seeking legislation in Illinois to provide financial aid to three in-state nuclear plants operated by its generation subsidiary. Without some type of financial support, the company said its Braidwood, Byron and Dresden nuclear plants could be retired early.
Exelon's public pressure campaigns on nuclear subsidies have worked before. In 2016, Illinois enacted a law granting the company about $235 million a year to keep two uneconomic nuclear plants, Quad Cities and Clinton, operating. For more on that, see December 20, 2016, article - Exelon Wins Financial Aid for Two Uneconomic Nuclear Plants.
Earlier that same year, Exelon secured legislation in New York granting it hefty payments to keep open two struggling nuclear plants in that state. For more on that, see August 3, 2016, article - Cash on the Barrel: New York Clean Energy Standard Includes Multibillion-Dollar Support for Nuclear Power's Carbon-Free.
On August 27, Exelon said it planned to retire its Byron and Dresden nuclear power plants in the fall of 2021.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
More shoes appear ready to drop for Energy Harbor, an independent company today but formerly a subsidiary of FirstEnergy Corporation (NYSE:FE) (Akron, Ohio). It's harder to say what the future holds for ComEd, which settled its charges with the U.S. Justice Department (Washington, D.C.), but is still the subject of an investigation by the U.S. Securities and Exchange Commission (SEC) (Washington, D.C.).
In Ohio, efforts are underway to repeal legislation, House Bill 6 (H.B. 6), that last year granted FirstEnergy Solutions about $1.3 billion in subsidies over seven years to keep open two uneconomic Ohio nuclear plants, two uneconomic coal plants (one in Ohio, one in Indiana) and six Ohio solar farms.
The subsidies are scheduled to be recovered from customers starting next January, but lawmakers in the Ohio legislature are considering at least three bills to undo H.B. 6, which was passed in mid-2019. For more on the passage of H.B. 6, see July 19, 2019, article - Ohio Enacts Law Subsidizing Nuclear, Coal and Solar Plants.
"This is likely the largest bribery, money-laundering scheme ever perpetrated against the people of the state of Ohio," U.S. Attorney David DeVillers said July 21, after Ohio House Speaker Larry Householder and four others were arrested. "This was a quid pro quo. This was pay to play."
The five defendants have pleaded not guilty. Federal officials have said the investigation is ongoing.
After the initial arrests, DeVillers said: "We're not done with this case. There are a lot of federal agents knocking on a lot of doors."
FirstEnergy Solutions filed for Chapter 11 bankruptcy protection in early 2018, its financial health weighed down by uncompetitive nuclear and coal plants. Those facilities have not been able to compete with lower-priced gas-fired generation and renewable generation. Earlier this year, FirstEnergy Solutions exited bankruptcy proceedings with a new name: Energy Harbor.
Energy Harbor owns and operates the Davis-Besse Nuclear Station, located in northwest Ohio, and the Perry Nuclear Station, located in northeast Ohio. Davis-Besse is a one-unit plant with 908 megawatts (MW) of generating capacity. It began operating in 1977. The Perry plant, which began generating electricity in 1987, is a one-unit, 1,268-MW facility.
After years of fruitless efforts, last summer FirstEnergy Solutions succeeded in getting Ohio lawmakers to enact a law giving it financial subsidies for the Davis-Besse and Perry nuclear plants.
This summer, on July 21, federal agents arrested five people, including Larry Householder, at the time the Speaker of the Ohio House of Representatives, and Juan Cespedes, a FirstEnergy Solutions lobbyist, and alleged they were part of a wide-ranging $60 million bribery scheme involving legislative efforts to win the $1.3 billion subsidy for FirstEnergy Solutions. Householder, who faced federal investigations earlier in his career, stepped down as speaker but kept his seat.
On September 3, Householder pleaded not guilty to one charge of federal racketeering. The other four defendants also pleaded not guilty. No trial date has been set. If convicted, the defendants face up to 20 years in prison.
Ohio's new House Speaker, Bob Cupp, took the first steps toward repealing H.B. 6 by creating a new select committee on energy policy and oversight, and referred to it three draft bills that would undo H.B. 6.
If the legislature doesn't act, Ohio Attorney General Dave Yost, a Republican, has threatened to sue to block the subsidies from going into effect next January. Yost also issued document preservation orders to dozens of people said to be at or near the scandal.
Ohio Governor Mike DeWine and Ohio Senate President Larry Obhof, both Republicans, have urged that H.B. 6 be repealed. Surveys show the measure is unpopular. H.B. 6 imposed a monthly charge of 85 cents on all Ohio residential customers' electric bills to support the two nuclear plants, and an additional charge of up to $1.50 per month to support the two financially ailing coal plants, Kyger Creek Generating Station and Clifty Creek Generating Station.
Losing the financial support in H.B. 6 could plunge Energy Harbor right back into bankruptcy court.
Over in Illinois, electricity distributor ComEd quickly tried to put its scandal in the rear-view mirror on July 17 by accepting a $200 million fine and agreeing to a three-year deferred prosecution agreement in a bribery case involving the powerful speaker of the state House of Representatives, Michael Madigan.
In a statement July 17, Christopher M. Crane, chief executive at ComEd parent Exelon, said: "We are committed to maintaining the highest standards of integrity and ethical behavior. In the past, some of ComEd's lobbying practices and interactions with public officials did not live up to that commitment. When we learned about the inappropriate conduct, we acted swiftly to investigate. We concluded from the investigation that a small number of senior ComEd employees and outside contractors orchestrated this misconduct, and they no longer work for the company. ... We apologize for the past conduct that didn't live up to our own values, and we will ensure this cannot happen again."
The $200 million fine cannot be recovered in customer bills. The investigation stemmed from lobbying activities connected to passage of a 2011 law to modernize the ComEd electric system. If officials at the utility continue to cooperate with federal officials and refrain from corruptly trying to influence public officials for three years, the original charge will be dropped. However, if evidence emerges that ComEd officials continued to engage in the proscribed activities, they could be charged and the agreement could be voided.
To prevent a recurrence of corruption in its lobbying, Exelon said it implemented four new policies that apply to employees who interact with public officials. These policies lay out specific rules, procedures and tracking mechanisms governing: interactions with public officials; vetting and monitoring of lobbyists and political consultants; employment referrals or requests from public officials; and vendor referrals or requests from public officials.
The federal investigation uncovered evidence that ComEd officials arranged jobs, contracts and payments for associates of the Illinois Speaker in exchange for assistance with legislation favorable to the utility.
ComEd's deal with the U.S. Attorney's office resolved the U.S. Department of Justice (Washington, D.C.) investigation of ComEd, but a separate investigation by the SEC is ongoing. And class-action lawsuits have started piling up at ComEd's door.
The ComEd scandal erupted as corporate parent Exelon was seeking legislation in Illinois to provide financial aid to three in-state nuclear plants operated by its generation subsidiary. Without some type of financial support, the company said its Braidwood, Byron and Dresden nuclear plants could be retired early.
Exelon's public pressure campaigns on nuclear subsidies have worked before. In 2016, Illinois enacted a law granting the company about $235 million a year to keep two uneconomic nuclear plants, Quad Cities and Clinton, operating. For more on that, see December 20, 2016, article - Exelon Wins Financial Aid for Two Uneconomic Nuclear Plants.
Earlier that same year, Exelon secured legislation in New York granting it hefty payments to keep open two struggling nuclear plants in that state. For more on that, see August 3, 2016, article - Cash on the Barrel: New York Clean Energy Standard Includes Multibillion-Dollar Support for Nuclear Power's Carbon-Free.
On August 27, Exelon said it planned to retire its Byron and Dresden nuclear power plants in the fall of 2021.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
