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Updated: PUCO Attorney Examiner Suspends Automatic Approval Process Of Broker Application Of FirstEnergy Advisors For Further Review

NOPEC, OCC Allege Commonality Of Management And Control Among New FirstEnergy Broker And Ohio Utilities Is A "Per Se" Violation Of Rules

Seek Hearing On FirstEnergy Broker License Application

February 12, 2020

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Copyright 2010-20
Reporting by Paul Ring •

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Update: Feb. 12 8:40 a.m.

A Public Utilities Commission of Ohio Attorney Examiner has suspended the automatic approval process of the electric broker/aggregator application of Suvon, LLC d/b/a FirstEnergy Advisors to allow for further review of the matter

In accordance with R.C. 4928.08, as well as Ohio Adm.Code 4901:1-24-10, FirstEnergy Advisors’ application for certification is subject to a 30-day automatic approval process. Ohio Adm.Code 4901:1-24-10 provides that, upon good cause shown, the Commission or an attorney examiner may suspend consideration of an application for certification.

"The attorney examiner finds that good cause exists to suspend the 30-day automatic approval process for FirstEnergy Advisors’ application for certification, in order for the Commission and Staff to further review this matter," the Attorney Examiner said in an entry in the proceeding

Additionally, Vistra Energy Corp. and its subsidiaries (Vistra) filed a motion to intervene in the case on February 11, 2020. Vistra also filed a motion to deny or suspend the application of FirstEnergy Advisors, citing many of the same reasons argued by OCC and NOPEC.

See more details in our original story from Feb. 11 below

Original Story (Feb. 11):

The Northeast Ohio Public Energy Council and Office of the Ohio Consumers' Counsel alleged in a joint motion at the Public Utilities Commission of Ohio that the commonality of management and control among Suvon, LLC, doing business as FirstEnergy Advisors, which is seeking an Ohio electric broker license, and the FirstEnergy Ohio distribution utilities, "is a per se violation of R.C. 4928.17(A), which requires that a competitive retail electric supplier be 'fully separated' from its regulated utilities."

Readers of were the first to learn of the application of FirstEnergy Advisors (also d/b/a FirstEnergy Home) for an Ohio electric broker-aggregator license to serve all customer classes in all service areas in our exclusive January 20 story here

OCC and NOPEC requested that PUCO suspend the broker application of FirstEnergy Advisors before the application is automatically approved within 30 days of filing by operation of Ohio Admin. Code 4901:1-27-10, and set the matter for hearing

OCC and NOPEC argued that Ohio Rev. Code 4928.17(A)(1) requires that a utility's corporate separation plan must, "provide[], at minimum, for the provision of the competitive retail electric service or the nonelectric product or service through a fully separated affiliate of the utility."

OCC and NOPEC alleged, "The three managers of FirstEnergy Advisors are the President of FE Utilities and CEO of FE Corp. (Chuck Jones), the President of the FE Ohio Utilities (Dennis Chack) and the Senior Vice President and CFO of FE Corp. (Steve Strah). Moreover, two of the managers (Mr. Jones and Mr. Strah) are directors of the regulated utilities."

OCC and NOPEC alleged, "The concerns about operational control are further exacerbated by the commonality of the most senior key officials in each affiliate. As reflected in the chart below, the senior officers of FirstEnergy Corp and FirstEnergy Service Company are nearly identical to those of the regulated utilities. And FirstEnergy Advisors shares three of the most senior officers of FirstEnergy Corp. and FirstEnergy Service Company."

OCC and NOPEC alleged that the shared senior officers are as follows:

Citing a previously reported corporate separation audit report (which had found that the prior assignment of the responsibility of FirstEnergy Solutions (FES) retail supply sales to FirstEnergy Service Company was, "highly inappropriate") NOPEC and OCC alleged, "The PUCO Audit Report was correct that it was inappropriate to comingle management from the FES sales division as part of the senior leadership team of FirstEnergy Service Company. That is because the officers would be privy to the regulated utilities' information through FirstEnergy Service Company. That same situation is present here and compounded by the fact that the persons holding the highest level positions with FirstEnergy Corp and FirstEnergy Services Company are nearly identical to those holding the same or similar positions with the FirstEnergy Utilities. All three of FirstEnergy Advisors' members will interact with all of these officials through FirstEnergy Service Company, at a minimum. Under this proposed management and control structure, FirstEnergy Advisors cannot operate as a fully separated affiliate."

"It will be difficult (and, in fact, impossible) for FirstEnergy Advisors to function as a fully separated affiliate of FirstEnergy's utilities if, as its application discloses, it will be managed and controlled by the same people who manage the FirstEnergy utilities' operations. This commonality of management control appears to be so pervasive as to be per se unlawful," OCC and NOPEC alleged

"The Consumer Groups are aware that structurally separate affiliates are permitted to share employees and services in some instances. But that sharing is only allowed if the employees' activities do not violate the code of conduct per Ohio Admin. Code 4901:1-37- 04(D) and are properly accounted for in the cost allocation manual per Ohio Admin. Code 4901:1-37-04(A)(5). Sharing of employees and services would not be allowed in this situation, under the rules," NOPEC and OCC said

In a separately filed motion to intervene, NOPEC further said, "The shared employee exceptions in the applicable code of conduct (O.A.C. 4901;1-37-04(D)) do not apply when management and control are incapable of separation. As stated previously, the knowledge, ideas and thoughts of each common manager cannot be separated between the competitive and non-competitive entities. R.C. 4928.17(A)(1) recognizes as much by requiring that Suvon, d/b/a FirstEnergy Advisors, must be operated as a fully separated affiliate, and the Commission's rules state so. See Ohio Admin. Code 4901:1-37-04(A)(1), which provides that '[e]ach electric utility and its affiliates that provide services to customers within the electric utility's service territory shall function independently of each other.' See, also, Ohio Admin. Code 4901:1-37-04(A)(3), which requires that '[a]n electric utility's operating employees and those of its affiliates shall function independently of each other.' These provisions establish a threshold test that Suvon, with its consolidated management and control, cannot pass. Savon's management cannot function separately from its affiliated EDUs and, therefore, does not have the capability as required by R.C. 4928.08(B) to provide fully separated competitive retail electric service."

NOPEC and OCC also cited a previously reported recommendation, from an auditor reviewing the FirstEnergy EDCs' corporate separation, that the name "FirstEnergy" should be removed from the name of competitive supplier FirstEnergy Solutions

The auditor had concluded that, "Using 'FirstEnergy' in the Ohio Companies' CRES affiliate's name, 'FirstEnergy Solutions,' implies an endorsement by the FirstEnergy Ohio Companies [utilities]."

See more details on the auditor's findings here

NOPEC and OCC alleged that the same concerns apply to the use of the FirstEnergy name by a broker

Case No. 20-103-EL-AGG

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