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FirstEnergy should do more to comply with Ohio’s corporate separation rules, audit finds

The Plain Dealer  Cleveland logo The Plain Dealer Cleveland 9/13/2021 Jeremy Pelzer, cleveland.com

COLUMBUS, Ohio—FirstEnergy Corp.’s three Ohio utilities should make a number of changes to make the various parts of its company more compliant with the state’s corporate separation rules, an independent audit has concluded.

The audit, ordered and released Monday by the Public Utilities Commission of Ohio, found no major violations of the state’s corporate separation requirements, which are designed to prevent affiliates of a utility from being “cross-subsidized” in a way that gives them an edge over their competitors.

However, the audit identified eight minor violations, and recommended that FirstEnergy share some profits from subsidiary FirstEnergy Products with customers, separate two other subsidiaries — FirstEnergy Home and FirstEnergy Advisors — into separate organizations within the company, and do more to proactively look for violations, among other steps.

FirstEnergy Home and FirstEnergy Products provide a variety of products and services, such as home outdoor lighting installation and tree removal. FirstEnergy Advisors provides customers advice on which electricity suppliers they should choose.

FirstEnergy Products’ revenue was collected via customers’ utility bills, and utility customers can be transferred to FirstEnergy Products when they call about service-related issues. FirstEnergy’s competitors don’t have those advantages, the audit stated, so a “profit-sharing” mechanism should be set up for the benefit of customers.

In addition, products offered through FirstEnergy Products and FirstEnergy Home are taking advantage of the utility name in a way not allowed under Ohio’s administrative code, the audit stated.

Overall, the audit noted that the company “leans heavily” on federal corporate separation requirements, which differ in many ways from state rules.

“FirstEnergy needs to build a more robust and effective compliance plan solely focused on Ohio-specific corporate separation requirements,” the audit concluded.

The audit also criticized FirstEnergy’s passive approach to following corporate separation rules. “The company’s assumption is that compliance is happening until it is not happening and thus becomes an issue,” the audit stated.

FirstEnergy Corp. spokeswoman Jennifer Young said in a statement that the company is reviewing the audit report.

“We appreciate the auditor’s feedback and are open to making any necessary improvements in corporate separation compliance,” Young stated.

The audit, conducted by Massachusetts-based Daymark Energy Advisors, is one of four probes of FirstEnergy the PUCO has ordered in the wake of the House Bill 6 scandal, in which $60 million in FirstEnergy money was used to secure the passage of the controversial energy law that helped benefit the Akron-based utility.

The Daymark audit didn’t scrutinize Energy Harbor, the former FirstEnergy subsidiary that owns two nuclear power plants that received a (since-rescinded) $1-billion-plus bailout under HB6.

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