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As Ohio bribery probe proceeds, AEP 'on the outside looking in,' CEO says


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Essential Energy Insights - January 2021

As Ohio bribery probe proceeds, AEP 'on the outside looking in,' CEO says

Hours after reports emerged that FBI agents were searching the home of a top Ohio utility regulator, American Electric Power Co. Inc. Chairman, President and CEO Nicholas Akins reiterated that his company has not been contacted as part of the investigation into the passage of the state's nuclear subsidy law.

"We're on the outside looking in," Akins told S&P Global Market Intelligence in a Nov. 16 phone interview.

The CEO said that if AEP is contacted as part of the federal bribery investigation, the company will be "transparent and cooperative."

"If we do hear something from [investigators], which we might [based on] conversations we've had, we obviously feel pretty confident in our position, and we'll be responsive if and when that actually occurs," Akins said. "Regarding the chairman this morning, I just don't know what's happening there and what the connection is."

On the morning of Nov. 16, FBI agents searched the home of Public Utilities Commission of Ohio Chairman Sam Randazzo in Columbus, Ohio, The (Cincinnati) Enquirer reported. FBI spokesperson Todd Lindgren confirmed to the newspaper that FBI agents were in the area "in relation to a sealed federal search warrant."

Ohio Gov. Mike DeWine appointed Randazzo chairman of the PUCO in early 2019. Randazzo previously served as a staff member with the PUCO and as an assistant attorney general. Randazzo was also a lobbyist for energy companies and general counsel for the Industrial Energy Users-Ohio.

Sustainability Funding Alliance of Ohio Inc., a company reportedly owned by Randazzo, is listed in a December 2018 court document as providing professional services for former bankrupt FirstEnergy Corp. subsidiary FirstEnergy Solutions Corp., now Energy Harbor Corp.

An affidavit an FBI special agent filed in late July implies that FirstEnergy and affiliated entities, though not mentioned by name, wired funds through a 501(c)(4) nonprofit group called Generation Now to support House Bill 6 and the efforts of former Ohio House Speaker Larry Householder while defeating a ballot initiative to overturn the law.

On Oct. 29, FirstEnergy's board of directors announced it had terminated former CEO Charles Jones Jr. and two senior vice presidents based on violations of the company's policies and code of conduct following an internal review. The announcement came the same day two men pleaded guilty to participating in a racketeering conspiracy designed to pass and uphold H.B. 6.

The search of the PUCO chairman's home comes less than two weeks after regulators ordered commission staff to hire a third-party auditor to review FirstEnergy's compliance with Ohio's corporate separation regulations.

In mid-September, the PUCO opened a separate proceeding to "review the political and charitable spending" by FirstEnergy's utilities in support of H.B. 6 and against the referendum effort.

Media reports also linked AEP to a "dark money" group, identified as Empowering Ohio's Economy Inc., alleged to have provided $150,000 to Generation Now and $200,000 to the Coalition for Opportunity & Growth in support of H.B. 6.

"The change that we're making is our oversight of 501(c)(4)s and the transparency associated reporting," Akins said. "In our corporate accountability report, we've always said that we do give to 501(c)(3)s and 501(c)(4)s. But now, we've changed the process to where we actually say who we're giving to upfront to add that degree of transparency. That's what we've learned from this process."

Policy implications.

AEP has not yet seen any widespread policy implications from the ongoing corruption probe, Akins said.

"We haven't seen any change in terms of our legislative or our regulatory interfaces. It's been a very positive environment for us," Akins said. "Now if the chairman were to leave or whatever, there are three other commissioners. We have a [rate] case that is undergoing. We don't suspect there will be any change relative to that case."

"I really don't believe there will be a lot of change related to our emphasis placed on energy policy in Ohio," the CEO added.

Lawmakers in Ohio are still debating whether to repeal and replace H.B. 6. A bipartisan group of lawmakers, appointed by Ohio House Speaker Bob Cupp, is leading the law's review.

H.B. 6, which establishes a $9/MWh credit for clean air resources, provides $150 million in annual financial support for the 908-MW Davis-Besse and 1,268-MW Perry nuclear units beginning Jan. 1, 2021, through Dec. 31, 2027. The legislation also provides ratepayer-backed funding for two Ohio Valley Electric Corp.-operated coal plants, one of which is in Indiana, and renewable resources.

It is unclear what shape potential replacement legislation could take.

"We would like to see a broader approach taken relative to clean energy," Akins said. "I really do believe there will continue to be support for the nuclear [assets], but there's also the support for the rest of the movement to the clean energy economy around renewables, around energy efficiency, around all those things that we continue to move ahead on.

"One of the things that we were concerned with early on with H.B. 6 was it truncated the existing renewables contracts that we had, and we wanted to make sure that those contracts were grandfathered. ... So, I think we want to make absolutely sure any policy that emerges, whether [H.B. 6 is] repealed, whether it's amended, we would like to see more of the clean energy components brought into it."