The Ohio Utility Scandal, Explained

Amy Westervelt interviews University of California political scientist Leah Stokes on the corruption behind Ohio's coal and nuclear bailout.

by | Aug 5, 2020


Leah Stokes, author of Short Circuiting Policy and a political science professor at University of California at Santa Barbara, has been following utilities corruption for years. Back in 2013 Stokes started looking into what utility FirstEnergy was doing in Ohio, so when Ohio Speaker of the House Larry Householder was arrested last month in connection with a utility bribery scandal she knew exactly what had happened. Householder was the architect of a piece of legislation in Ohio called HB 6, which passed in July 2019. That bill essentially gutted Ohio’s renewable and energy efficiency laws and incentives and bailed out several coal and nuclear companies. It turns out it was a bill that was bought and paid for by FirstEnergy.

In this Q&A with the Drilled podcast, Stokes explains the whole sordid tale.

Amy Westervelt: Leah Stokes, we are so glad you’re here. What the heck is happening in Ohio right now?

Leah Stokes: Well, it goes back way farther in time. I first started working on this in 2013 and at that time, a different legislator—who, I wonder when his day of reckoning is coming—named Bill Seitz, he was working to try to get rid of the renewable energy and energy efficiency laws that had been passed in a bipartisan way in Ohio. And he was actually working with somebody named Sam Randazzo, who at the time was a lobbyist for the industrial energy users of Ohio. Well, fast forward a few years. Sam Randazzo is now the head regulator at the Ohio Public Utilities Commission, which you’re just like, really? Anyway, they were trying to gut the renewables and energy efficiency laws to some degree. John Kasich was opposed to that, although certainly not enough. And so they only managed to freeze the rollback of the energy efficiency and renewable energy laws. But it was still hugely damaging to the industry. And at the same time, Keith Faber, who was another part of the legislative leadership at the time, he put in a budget bill, a rider, a sort of line item that changed the setback rules for wind turbines, which basically means how far from a property line or a building does a wind project need to be? And that completely gutted the wind energy industry in Ohio. And John Kasich, as governor, could have line item vetoed that change, but he didn’t. And so there was all these shady things going on to try to mess up renewables and energy efficiency in Ohio. And who’s interests did that serve? It served FirstEnergy and AEP and other utilities’ interests because they had all these existing plants, coal plants, nuclear plants that they needed to keep operating. And if they were being forced to build new clean energy renewables, then how are they going to keep that stuff working? And at the same time, Ohio was also going through this electricity restructuring. And suddenly a lot of the plants that FirstEnergy and AEP had invested in were struggling financially. I mean, they literally were losing money in the market every time they operated.

So with all of that going on, FirstEnergy started to lobby the Trump administration actually to get a bailout for their coal plants. And they tried that for several years around sort of 2017. In fact, the Energy Policy Institute, a wonderful watchdog of utilities, has shown that the FirstEnergy corporate jet, has flown to D.C. over 30 times since the Trump administration began and that Rick Perry, the former secretary of energy, has probably met with the CEO of First Energy. So they are lobbying very heavily the Trump administration—it’s possible that this is where the FERC minimum offer price rule came from. This is basically a coal plant subsidy that was put into the rules a couple of years ago now. Anyway, so they’re doing all these corrupt things and it wasn’t quite paying their bills. And so they decided to get a bailout on the agenda at the beginning of 2019, when Larry Householder became the speaker of the House of Representatives in Ohio. And that’s when things really started to pick up.

Amy Westervelt: Okay, so what exactly was HB6? What was this bailout legislation?

Leah Stokes: Yeah. So in 2019, when Larry Householder became speaker, it was actually a really big fight for him to get that role. People may not know this, but Larry Householder was speaker before and he ended up leaving that role because of an FBI investigation and sort of these allegations of corruption, this cloud of corruption surrounding him back in the early 2000s. So he wasn’t a popular pick. But what happened was all of the candidates running for the House of Representatives who supported Larry householder’s suddenly had a lot of campaign money. They were doing very well in their elections. And people noticed that it was all of the candidates who had that money, the shadowy support, who ended up voting for Larry Householder, so he won the role of speaker. And with that power, he began to do the bidding of FirstEnergy. FirstEnergy at that time had spun off its generation assets, its nuclear and coal plants—these were projects that weren’t really doing very well. They were losing money financially and they’d put it in this new company called FirstEnergy Solutions. That company has now rebranded into Energy Harbor. It’s a way that these utility companies try to avoid scrutiny. They change their names all the time. But it was called FirstEnergy Solutions at that time. And it was owned by a bunch of hedge funds. And these investors really want to get their money back. And so it started to seem like they were putting money, a few million dollars, let’s say, into lobbying and potentially even into campaign ads. So an organization called Generation Now popped up on the scene and nobody really knew where this organization came from. And they were spending money on mailers to people saying that HB 6, this law, which was a bailout for nuclear and coal plants, that this had to be passed and that, you know, it was so in the interests of Ohioans. And if you weren’t for it, it was because you you know, the Chinese government was corrupt and somehow involved in Ohio’s energy system. They were just completely bonkers. The Chinese government has absolutely nothing to do with anything. And it passed. And I mean, I’m telling you, the legislative session was done. Everybody had gone home. And FirstEnergy just kept saying, we need that money. You know, we got to get that money. And they also kept changing how much money they needed. And the law ended up getting written in a way that FirstEnergy solutions would never need to open up their books or explain what they were going to do with this money. So they ended up calling a last minute vote, which actually Governor DeWine, a staffer from his office initially was going to get a state taxpayer funded plane to go pick up the legislators, to bring them back to the state house so that they could vote on this last minute corporate bailout. That’s how crazy it was. And by narrow margins, Householder delivered the votes and the the bailout went into effect.

Now, even though it passed into law, a bunch of advocates who thought this was a terrible corporate bailout for polluting dirty coal plants, they tried to do a ballot initiative. In Ohio, if you pass a law, you’ve got I believe it’s 60 or 90 days where you can collect a bunch of signatures from the people of Ohio and that allows you to get it on the ballot so that the people can vote to overturn that law that was passed. And so a bunch of groups, including, in fact, some fossil fuel interests, because they didn’t like the bill for other reasons, they started to try to collect signatures. And these signature collectors suddenly were being literally physically assaulted on the street by people that nobody knew who they were. There were these mailers going out saying that if you signed the petition, the Chinese government would have your personal information, again, completely bonkers. You know, in fact, these petition signers were being bribed to get rid of the signatures or to go home early. I mean, literally, they were like, hey, are you collecting signatures? We’ll give you some money to stop doing it. Or, hey, how many signatures do you have? If you tell us how many signatures you have, we’ll give you money because we need to know how close you are to having enough signatures. And people were like, where’s all this money coming from? You know, who has all this money to do anti-democratic organizing? And shockingly, in the face of all that opposition, the advocates did not get enough signatures for their ballot initiative. And HB 6, a terrible corporate bailout, remains in law. And it was kind of an open secret that Larry Householder was involved in all of this. We all knew because somebody was funding his speakership by getting all these people elected, you know, somebody was funding all this political activity to stop the ballot initiative effort.

And, well, we discovered this week when the FBI arrested Larry Householder, I believe at his farm in Ohio, that it was Larry Householder and FirstEnergy this whole time and that they had been funneling over $60 million into this organization called Generation Now, and a bunch of shady sort of front groups to do all of this corrupt activity.

Amy Westervelt: Wow. So now that Householder has been arrested along with a few of his cohorts, what happens to this HB6 legislation? Does it automatically get put back on the ballot for a vote or get repealed? What happens there?

Leah Stokes: Well, a lot of people, for example, Lisa Friedman in The New York Times, a lot of people are asking, how is this a legitimate law? If it was passed based on corruption, I mean, let’s be clear, Larry Householder got $500,000, half a million dollars of personal benefits as part of this $60 million scheme. We’re talking about $300,000 to pay down a legal conflict that he was having and his legal fees. $100,000 towards his vacation home in Florida, which he wasn’t keeping up with the taxes on. And $97,000 specifically for his own reelection effort. So he was personally benefiting, personally enriching himself based on this money. And so how is it legitimate that he passed this law? And he really did. I mean, he got the votes. He worked very diligently for six months to do this. And then how is it legitimate that the public didn’t have any say because there was $38 million put into literally physically assaulting, bribing petition signature collectors? I mean, so a lot of people are saying HB 6 is not a legitimate law. It was never a legitimate law, quite frankly, because it was a corporate bailout and it was paid for by the same corporation that it was benefiting from the money. So Governor DeWine had called for Larry Householder to resign as speaker, but he had not called for the bill to be overturned or for the legislature to meet and try to overturn and change HB 6. So I called him out on that. Other advocates have, too. And today he did an about face and said, oh, I do think we should revisit this law. And you know what I’m asking is there’s another guy named Larry. His name is Larry Obhof. And he’s the Senate president. And Larry Obhof has called for Larry Householder’s resignation. But again, as not called for HB 6 to be overturned. And let’s be clear, Larry Obhof also took money from first energy. Governor DeWine took money from first energy. Most legislators in the state of Ohio have taken money from first energy. And I think that we have to ask ourselves, why is any politician taking utility money? It is so corrupting it should not be OK.

Amy Westervelt: And we’re talking about FirstEnergy, a private utility that was essentially paying off politicians to try to get this legislation passed. What exactly do they get out of it? I know there’s been some talk of nuclear plants being kept open, maybe longer than they should have been. What all did they get for this investment?

Leah Stokes: Yeah, it’s a return on investment issue. If you are a hedge fund that has bought FirstEnergy Solutions, you think, look, let’s put a few million dollars into this. We’ll get a couple billion in return. If you look at the FBI affidavit, the people working in this conspiracy literally described the money as UN limited. They said, look, we have as much money as we need because they understood what the benefit would be. The return on investment is $60 million for a few billion dollars. I mean, there’s so much focus on the nuclear bailout, which is about $1.3 billion. But there’s a whole other bail out for several coal plants that were in this bill. That’s probably about two times as large as the nuclear bailout. So I estimate that it’s something like $3 billion that we’re talking about here. And keep in mind that a few days after HB 6 was put into law, a spokesperson for FirstEnergy said, “Oh, that Sammis coal plant that we were planning to shut down? We don’t need to shut it down anymore.” And the CEO of FirstEnergy Solutions, John Judge, had said that if we get that bailout money, we will have $40 to $50 million to put into the Sammis coal plant. So this is a coal plant bailout that’s keeping the Sammis plant open and several other plants open as well. So, you know, a lot of focus has been on the nuclear plants, but it’s it’s really a coal bailout, in my view.

Amy Westervelt: I know you wrote a whole book about corrupt utilities and how they have shaped policy for years. Where does this fit into the larger issue of utilities being influenced by various companies to shape energy policy in their favor?

Leah Stokes: It’s called Short Circuiting Policy, and it’s about how corrupt the utilities are and there’s a fascinating history of the electric utility sector. Way back in the early 20th century, there was a person named Samuel Insull. And he’s actually the guy who came up with the way our utility system works. He invented the idea of a monopoly utility that had a public utility commission that would oversee it at the state level. And, you know, there are quotes from that time that say for, you know, a decade he was the most powerful business operator in the United States. And that really is how it is state by state. These companies are often the most powerful company in a given state. If you take Arizona Public Service, for example, you know, they are extremely corrupt. They have spent over $50 million on elections for their own regulator, fighting against a clean energy ballot initiative. And, you know, it’s hard to get clear on how terrible they are because they are funding the campaigns of a lot of politicians in that state. And a lot of community groups, you know, soccer clubs, probably United Way campaigns, you know, social welfare organizations. These groups take money from utilities. And so they end up being a kind of octopus that has its tentacles in all different parts of the state. And so I think it’s hard for people in a given state to get clear on how corrupt and problematic these monopoly utilities are. And then across the whole country, because there’s so many different utilities in different states, it’s hard for people to get the same sort of big picture as they would for a company like Exxon that operates across the whole country and the world or Chevron. You know, these companies like Southern Company are in a couple states or FirstEnergy. And they’re also changing their names all the time. Or they have subsidiaries. So you’ve got Southern Company as the parent corporation, but then they’ve got Georgia Power, for example, or Alabama Power. And so it’s a really complicated area that makes it hard for people to pay attention. But I’m hopeful that we’re in a moment right now where the corruption is just so blatant that maybe we’ll start to get more attention and really proper oversight and limits on spending from utilities, on political activity.

Check out an excerpt of Short Circuiting Policy here, or order the book here.

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Amy Westervelt is the editor-in-chief of Drilled News, creator and host of the Drilled podcast, and founder of the Critical Frequency podcast network, named AdWeek's Podcast Network of the Year in 2019. An award-winning print and audio journalist, Amy has contributed to The Guardian, The Wall Street Journal, and The Washington Post, as well as KQED, The California Report, Capital Public Radio, and many other outlets. She is the 2015 winner of the Rachel Carson award for "women greening journalism," and a 2016 winner of an Edward R. Murrow award for her series on the impacts of the Tesla Gigafactory in Nevada. In 2019, the Drilled podcast won the Online News Association's "Excellence in Audio Storytelling" award.