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As reported previously, the FirstEnergy Ohio EDCs ceased offering non-electric services in 2022, and recently confirmed details of the formal wind-down of its competitive broker affiliate, Suvon, LLC, which did business as FirstEnergy Advisors and FirstEnergy Home.

In recent testimony in the proceeding, the FirstEnergy Ohio utilities described implementation of policies, procedures, trainings and other actions which the utilities said are to satisfy and exceed the auditors’ recommendations, including a comprehensive review and revision of the Cost Allocation Manual.

In response to FirstEnergy’s filed testimony and an auditor’s report, IGS Energy’s witness Mike White filed testimony addressing an auditor’s report concerning the FirstEnergy Ohio utilities’ corporate separation plan.

IGS Energy testimony said that the report from a third-party auditor regarding FirstEnergy Ohio’s corporate separation plan is not “completely clear” whether an entity branded as FirstEnergy Home (a separate affiliate), or as FirstEnergy Products, offered the non-electric products at any specific point in time. Regardless, the FirstEnergy Ohio utilities have said that they, themselves, previously offered non-electric products and services, “with support from FirstEnergy Products”.

IGS argued that the FirstEnergy utilities do not have authority to offer non-electric services.

While the FirstEnergy Ohio EDCs obtained authorization under their tariffs to sell non-electric products as part of their Electric Transition Plan associated with restructuring, IGS Energy argued that Ohio law requires the offering of non-electric products to be performed through a fully separated affiliate of the utility

Excerpts from Testimony of Mike White On Behalf of IGS:

{***} “IGS provides competitive retail electric service provider and non-electric products 14 in FirstEnergy’s service territory. During the time period under review in the Audit Report, 15 IGS competed against FirstEnergy and its affiliates with respect to both of these types of 16 services. As such, my testimony addresses FirstEnergy’s conduct that abused its position as a monopoly utility, in violation of Ohio’s corporate separation statutes, to tilt the competitive playing field in favor of its own or affiliated competitive businesses. Specifically, my testimony addresses FirstEnergy’s provision of non-electric services to customers in its services territory and various consulting agreements that FirstEnergy aid for on behalf of its affiliate FirstEnergy Solutions.

Regarding non-electric services, I focus on FirstEnergy’s inappropriate utilization of utility assets—such as the consolidated utility bill and its call center—to unfairly subsidize and market the provision of its non-electric products and services to the detriment of competitive service providers. FirstEnergy’s non-electric service business has reaped unfair profits and market share because of this undue preference.

While the Audit Report addresses this inappropriate relationship to some degree, it does not recommend an appropriate remedy to address the underlying offense. Therefore, I recommend that the Commission fine FirstEnergy for violating corporate separation requirements that prohibit the extension of an undue preference to an internal business unit or affiliate providing a competitive service or non-electric service. I also recommend that the Commission order FirstEnergy to modify its billing system to permit competitive retail electric service providers to include non-electric service charges on the consolidated utility bill. These remedies would at least partially remedy the harm FirstEnergy has caused to the competitive market.

While the Audit Report failed to address the various consultant agreements where FirstEnergy customers paid millions of dollars for the benefit of FirstEnergy Solutions, I explain how these agreements violate Ohio’s Corporate Separation statues. Given the undeniable evidence of wrongdoing, I believe the Commission should levy a considerable ine against FirstEnergy. Failure to do so would send the wrong message to FirstEnergy and other utilities in this state.”

1. How do you recommend that the Commission calculate the fine that FirstEnergy pays? 
2. The law suggests that the Commission consider “the severity of the violation, the source of the violation, any pattern of violations, or any monetary damages caused by the violation . . . ” and that the Commission may issue fines up to $25,000 per day per violation. In this case, it is clear from January 8, 2013 to December 18, 2018, FirstEnergy funded over $10,000,000 in lobbying expenses for its unregulated affiliate. That reflects 836 days. Conservatively classifying this improper relationship as one violation that persisted over 1,836 days, the Commission should set the floor for FirstEnergy’s forfeiture at $45,900,000. I also understand that additional evidence may be presented in this proceeding that could increase the size of the forfeiture that FirstEnergy pays. Of course, his remedy is exclusive and not exhaustive of additional remedies that may be available in the DCR Audit proceedings related to the improper coding and collection of consultant expenses.” {***}

See main Docket case link below for all FirstEnergy filed testimony and other docket materials.

17-0974-El-Unc (04/12/2017)
In The Matter Of The Ohio Edison Company, The Cleveland Electric Illuminating Company, And The Toledo Edison Company’s Compliance With R.C. 4928.17 AN