The Federal Energy Regulatory Commission ordered FirstEnergy Corp. to refund customers, with interest, for improper accounting of lobbying expenses in support of legislation to bail out two nuclear plants in Ohio.
FirstEnergy, headquartered in Akron, Ohio, has 60 days to respond to a FERC audit, which was released Feb. 4. The company must submit an analysis that details its "calculation of refunds" tied to correcting the improper accounting of lobbying costs, donations and unsupported utility operations and plant costs as well as an outline of its refund method and the periods during which refunds will be made.
The audit said FirstEnergy made payments of about $70.9 million to various 501(c)(4) groups and a group identified as Hardworking Ohioans Inc. for "lobbying or other nonoperating purposes." In addition, the audit pointed out that FirstEnergy did not disclose the payments until an investigation by the U.S. Justice Department was made public.
The audit covered the period of Jan. 1, 2015, to Sept. 30, 2021.
FirstEnergy submitted a letter to FERC in response to the audit and said it "largely accepts" the findings and recommendations.
"In many instances, the accounting recommendations have been implemented or are already underway," FirstEnergy spokesman Mark Durbin said in a Feb. 6 email. "For the recommendations that have not yet been implemented, we look forward to working cooperatively with FERC staff during the compliance phase of the audit."
Durbin said that as part of FirstEnergy's internal investigation, launched in late 2020, the company "identified certain transactions that were either improperly classified, misallocated or lacked supporting documentation."
Those transactions accounted for $1.5 million of the $70.9 million in lobbying expenses identified in the FERC audit, Durbin said.
"None of the rest of the $70.9 million was collected from customers," Durbin said.
FERC's Division of Investigations sent a letter to FirstEnergy in late January 2021, directing the company to "preserve and maintain all documents and information related to an ongoing audit" being conducted by the Division of Audits and Accounting within the Office of Enforcement concerning activities related to Ohio's House Bill 6.
In a three-year deferred prosecution agreement with federal prosecutors in July 2021, FirstEnergy admitted that the company and its past and present affiliates funneled nearly $60 million through political nonprofit groups to secure the legislative bailout of two merchant nuclear plants through H.B. 6.
The audit report outlined seven areas of noncompliance and presented 38 recommendations largely associated with improper accounting and recordkeeping, including lobbying expenses, allowance for funds used during construction, amortization of regulatory assets, vegetation management costs and allocation of overhead costs tied to construction work in progress.
FirstEnergy must submit a plan for implementing the audit's recommendations within 30 days and provide quarterly reports describing its progress in completing each corrective action. In addition to refunds, the recommendations include revisions of accounting policies and procedures, additional staff training and an independent, third-party labor time study.
