Four Types of Scandals Utility Companies Get Into With Money From Your Electric Bills
By Patrick Wilson, Richmond Times-Dispatch
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Across the country, electric utilities have worked the levers of power to win favorable treatment from state policymakers.
This week, a Richmond Times-Dispatch and ProPublica investigation found that Dominion Energy, Virginia’s largest public utility, successfully lobbied to reshape a major climate bill to cover its massive offshore wind project. The move shifted risk from the company’s shareholders to its ratepayers. As a result of the legislation, a typical residential customer’s bill is projected to increase by nearly $30 per month over the next decade.
Dominion says its wind project is necessary to meet the state’s new renewable energy goals. The utility’s lobbying success underscores its ability to work through the legislative process in Richmond, where special interests have taken on outsized roles in policymaking.
Elsewhere, utilities have gone much further, crossing the line into potentially criminal behavior.
In Illinois, the largest electric utility acknowledged in July it gave jobs and money to associates of the state House speaker in return for favorable legislation, according to a deferred prosecution agreement with the company in federal court.
In Ohio, a power company allegedly funneled $60 million into a slush fund for a legislative leader in exchange for his backing of a bailout of two nuclear plants. The utility has not been charged, but the elected official now faces a racketeering charge in what prosecutors said was “likely the largest bribery, money laundering scheme ever perpetrated” in the state.
“The temptation for a utility to take its customers’ money and spend it on influencing politics and essentially buying off politicians in ways to help them make even more money — it’s a temptation that has proven to be pretty irresistible for many utilities,” said David Pomerantz, executive director of the Energy and Policy Institute, a utility watchdog group that advocates renewable energy.
Below are four ways electric utilities have tried to influence decision-making within state and local governments.
Secret Political Spending
FirstEnergy is one of the nation’s largest electric companies and owns three regulated utilities in Ohio, where the FBI and federal prosecutors are seeking to unravel bribery allegations.
Authorities allege that FirstEnergy contributed $60 million to a group overseen by Ohio House Speaker Larry Householder in exchange for his help passing legislation that provided a billion-dollar bailout of two failing nuclear energy plants. That bill also reduced standards for renewable energy and the energy efficiency programs that save customers money.
Prosecutors have charged Householder with racketeering. He has pleaded not guilty in federal court, and his attorney did not return a request for comment. FirstEnergy has not been charged. A corporate spokeswoman said the company is cooperating fully with the investigation, and its CEO said in a recent earnings call that he firmly believes FirstEnergy acted properly.
According to the criminal complaint against Householder, the company helped the politician win the speaker’s office and put the payments into a nonprofit organization called Generation Now, which was supposed to be a social welfare organization. Householder, a Republican, and his allies are accused of instead using the payments from FirstEnergy to expand the speaker’s political power and enrich themselves. Three lobbyists — including the former state GOP chairman — and a longtime aide to Householder also were charged. All parties have denied the allegations. The state House stripped Householder of the speakership, but he remains in office.
Ohio’s attorney general in September filed a lawsuit against FirstEnergy, Householder, Generation Now and others, seeking to block payment of the nuclear bailout. FirstEnergy said the lawsuit was without merit. “The Attorney General’s lawsuit unjustly targets the company for lawfully engaging in the political process and supporting policy initiatives that matter to our customers, employees, communities and shareholders,” spokeswoman Jennifer Young said in an email.
In Arizona, the FBI and U.S. Attorney’s Office opened an investigation into political spending by the state’s largest utility, Arizona Public Service. The companygave millions to “dark money” organizations — political nonprofits that spend money from undisclosed donors — in 2014 to help elect two state regulators. The money flowed to groups with names like Save Our Future Now. The candidates won and in 2017 voted for a utility-backed rate increase.
One of the candidates who received “dark money” funding denied knowledge of the utility’s involvement and the second said the idea they could be bought was insulting, the public radio station KJZZ reported.
Arizona Public Service refused for years to admit it was the source of the contributions, but it did so in 2019 at the request of state regulators, according to The Arizona Republic.
A spokesperson for the U.S. Attorney’s Office in Phoenix declined to comment on the federal probe. Pinnacle West, the parent company of Arizona Public Service, said in a February filing that the company “understands the matter is closed.” Arizona Public Service’s CEO said in January that the company would no longer spend, directly or indirectly, on elections for the state regulators who oversee utilities. Company spokeswoman Jenna Rowell said that since 2016 the company has voluntarily published an annual list of its political donations, which are paid by shareholders.
Offering Jobs to Allies
The largest electric utility in Illinois agreed in July to pay a $200 million fine to resolve a federal investigation into bribery.
Commonwealth Edison admitted it arranged jobs, subcontracts and payments for associates of Illinois House Speaker Michael Madigan, a Democrat, as a reward for legislative efforts to help the utility, according to a deferred prosecution agreement with the company in federal court.
Indirect payments through third parties and a consulting company to associates of the speaker from 2011 to 2019 totaled more than $1.3 million. The recipients “performed little or no work for ComEd,” according to the documents.
During that time, the utility sought Madigan’s support for legislation that kept favorable utility rates for the company. It became law, and the estimated benefit to Commonwealth Edison was more than $150 million.
Madigan has not been charged and denies wrongdoing. If Commonwealth Edison or its parent company “even harbored the thought that they could bribe or influence me, they would have failed miserably,” Madigan wrote in a letter last month to a state legislative committee.
A former Commonwealth Edison executive was charged with bribery conspiracy in September and pleaded guilty on Sept. 29 in what was the first conviction in the investigation.
In the wake of the scandal, the company has “taken robust action to aggressively identify and address deficiencies, including enhancing our compliance governance and our lobbying policies to prevent this type of misconduct from ever happening again,” spokesman Paul Elsberg said. “We apologize for the past conduct that didn’t live up to our own values and are committed to earning back the trust of our communities and partners.”
Creating the Appearance of Public Support
Entergy, a utility regulated by the New Orleans City Council, wanted to build a natural gas plant. Critics and community advocates argued that the plant was unnecessary and posed an environmental threat to the area.
To create the appearance of support, a subcontractor for the utility in 2017 paid people to appear and speak at a City Council meeting posing as citizens favoring the plant, an independent investigation concluded. The council approved the gas plant but later fined Entergy $5 million after the investigation, done by a law firm hired by the council, found the company knew or should have known its subcontractors paid actors.
Entergy denied knowledge of the paid actors but said in 2018, “We should have been more diligent and ‘we should have known.’” It paid the $5 million fine.
The council allowed the plant to go forward. It began operating in May, a company spokesman said.
Undertaking Mega Projects That Don’t Pan Out
Mississippi Power, a unit of Atlanta-based Southern Company, announced plans for a “clean coal” plant in 2006. But the so-called Kemper project shot up in cost from $2.9 billion to $7.5 billion amid missed deadlines and allegations of mismanagement. The facility ended up using only natural gas to generate electricity.
A 2016 investigation by The New York Times found that plant owners understated costs and tried to conceal problems from state regulators.
In response, Southern Company issued a statement saying its project had “garnered enormous support from energy leaders across the U.S. and around the world” and saying the concerns of a former employee were “unsubstantiated.”
After media reports about the plant’s problems, the company’s stock dropped, and shareholders in January 2017 filed a class-action lawsuit alleging Southern Company made false statements and didn’t disclose adverse information about the plant’s progress. While denying wrongdoing, Southern Company agreed to an $87.5 million settlement last month.
For their part, Mississippi regulators required shareholders to cover $6.4 billion of the plant’s cost under terms of a 2018 regulatory settlement. Customers were on the hook for hundreds of millions, though.
“We’ve endeavored from the very beginning to find a way to take failures at the company and problems that they didn’t see coming down the line to make sure we find a way to protect ratepayers,” the chairman of the state’s public utility commission said at the time.
In South Carolina, federal authorities charged a utility executive with fraud over a failed nuclear proposal. Construction flaws plus cheap natural gas prices and lower-than-expected electricity demand threatened the project — and its ability to receive a federal tax credit. So, prosecutors alleged, the executive misled the public and state regulators about the delays, allowing SCANA Corp. to obtain rate increases.
The executive pleaded guilty in federal court in July to defrauding customers and making false statements to regulators and the public. He agreed to cooperate in the ongoing investigation.
The plant was canceled in 2017, but electricity customers have paid $2 billion for the failed proposal, the newspaper The Post and Courier reported.
SCANA Corp. was later purchased by Dominion Energy.
The deal turned SCANA into Dominion Energy South Carolina and cut rates, but customers still owe $2.3 billion more for the project in the next two decades, The Post and Courier reported.
