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AEP CEO promises increased transparency amid federal bribery probe in Ohio

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Essential Energy Insights - January 2021


AEP CEO promises increased transparency amid federal bribery probe in Ohio

American Electric Power Co. Inc.'s CEO has promised increased transparency around the company's contributions to 501(c)(4) organizations while maintaining the company had no known involvement in a corruption scheme behind the passage of House Bill 6 in Ohio.

"We were surprised and disappointed to learn of what federal investigators allege was a scheme by the speaker of the Ohio House and others to enrich themselves and we, along with you, have been trying to educate ourselves about the criminal complaint and the underlying conduct in it," AEP Chairman, President and CEO Nicholas Akins said Aug. 6 on the company's second-quarter 2020 earnings call. "There has been a lot of speculation and media reports about various unnamed companies described in the affidavit in support of the complaint. Based on the facts that we know, we do not believe AEP is any of the companies specifically described in the affidavit."

Media reports linked AEP to a "dark money" group, identified as Empowering Ohio's Economy Inc., alleged to have provided funding to entities at the center of the federal racketeering case in Ohio. Empowering Ohio's Economy is believed to have provided $150,000 to Generation Now and $200,000 to the Coalition for Opportunity & Growth in support of H.B. 6, legislation signed into law in July 2019 that provides $150 million in annual subsidies for Ohio's nuclear plants.

The law also provides ratepayer-backed funding for the Ohio Valley Electric Corp.-operated Kyger Creek and Clifty Creek coal plants, one of which is in Indiana, and funnels $20 million each year to a renewable generation fund. Three AEP utilities own interests in the Ohio Valley Electric plants.

Generation Now, a 501(c)(4) nonprofit group, is charged in the federal indictment that also has implicated Akron, Ohio-headquartered FirstEnergy Corp. and its FirstEnergy Service Co. subsidiary in a "pay to play" corruption scheme involving more than $60 million in bribes allegedly paid to advocate for the passage of H.B. 6.

"AEP has contributed to a variety of 501(c)(4) social welfare organizations to promote economic development and educational programs across our service territories. One such organization is Empowering Ohio's Economy, which was organized to promote economic and business development in Ohio," Akins said. "Starting in 2015, AEP contributed a total of $8.7 million to Empowering Ohio's Economy."

The CEO noted that "a review of publicly available tax forms" shows that Empowering Ohio's Economy "made a number of grants over time to a wide variety of charitable organizations under 501(c)(3) and social welfare organizations under 501(c)(4)."

"Our contributions to Empowering Ohio's Economy to support its mission were appropriate and lawful," Akins said.

"We also understand the concerns that some have expressed regarding the lack of transparency surrounding 501(c)(4) organizations, which are not required to disclose their donors and amounts donated to them," Akins added. "With that in mind, we will commit to include additional disclosures in our corporate accountability report with respect to contributions that we made to 501(c)(4) organizations in 2020 and going forward."

As a result of the controversy surrounding the passage of H.B. 6, there is an ongoing bipartisan effort to repeal the law.

AEP said it expects "minimal" financial impact from a potential repeal of the law, which also includes decoupling provisions.

"We think we'll be absolutely fine if it's repealed and not replaced," AEP Executive Vice President and CFO Brian Tierney said.