Retail Supplier Suggests $100 Million Forfeiture For Utility For Alleged Affiliate Rules Violations

September 23, 2024

Email This Story
Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The following story is brought free of charge to readers by VertexOne, the exclusive EDI provider of EnergyChoiceMatters.com

Interstate Gas Supply (IGS Energy or IGS) has suggested in testimony that the Public Utilities Commission of Ohio should consider imposing a forfeiture of over $100 million against the FirstEnergy Ohio utilities for alleged violations of law alleged by IGS Energy

The violations alleged by IGS Energy generally address two issues: (1) the FirstEnergy Ohio utilities, themselves, are alleged to have impermissibly sold non-electric products and services, which IGS Energy alleges does not comply with Ohio law; and (2) the FirstEnergy Ohio utilities allegedly funded what IGS Energy alleged were $10 million in lobbying expenses for the utilities' former unregulated affiliate, FirstEnergy Solutions

Non-electric products and services include various non-commodity services including home warranty and protection plans, among others

In addition to the suggested forfeitures, IGS Energy requested that PUCO compel the FirstEnergy electric distribution companies (EDCs) to undertake billing system changes and to allow retail electric suppliers to bill for non-commodity charges on the utilities' consolidated bill.

Under rule changes which were effective in 2021, utilities must offer retail suppliers the ability to bill non-commodity charges under UCB only if the utility offers such billing for its own non-commodity services or those of an affiliate. Utilities may alternatively elect to not offer any party (including itself) billing for non-commodity services as a means of compliance

IGS Energy's testimony was filed in a proceeding addressing an auditor's report concerning the FirstEnergy Ohio utilities' corporate separation plan

IGS Energy said that the report from a third-party auditor regarding FirstEnergy Ohio's corporate separation plan is not "completely clear" whether an entity branded as FirstEnergy Home (a separate affiliate), or as FirstEnergy Products, offered the non-electric products at any specific point in time. Regardless, the FirstEnergy Ohio utilities have said that they, themselves, previously offered non-electric products and services, "with support from FirstEnergy Products".

IGS argued that the FirstEnergy utilities do not have authority to offer non-electric services.

While the FirstEnergy Ohio EDCs obtained authorization under their tariffs to sell non-electric products as part of their Electric Transition Plan associated with restructuring, IGS Energy argued that Ohio law requires the offering of non-electric products to be performed through a fully separated affiliate of the utility

While PUCO may grant an interim exception to this fully separated affiliate requirement for good cause, IGS Energy alleged that, "FirstEnergy has made no effort in a corporate separation application filing to demonstrate why it should be permitted to offer non-electric products."

IGS Energy alleged that FirstEnergy impermissibly profited from (1) using a warm transfer process to funnel captive distribution customers, who were calling the utility call center about regulated utility issues, to a customer service rep at FirstEnergy Products, and (2) billing the non-electric services on the utility consolidated bill

The warm transfers, IGS Energy alleged, gives, through a ratepayer-funded call center, the FirstEnergy Ohio utilities a "first bite" at customers interested in non-electric services

"Through the FirstEnergy [Ohio EDCs] call center, FirstEnergy has a large captive customer base that is often required to call FirstEnergy. For example, when a customer would like to commence retail electric service, they have to contact the utility. FirstEnergy, of course, has utilized that conversation to make a plug for non-electric services ... FirstEnergy's 'warm transfers' have unfairly and unreasonably obtained market share, often times before IGS or a competitive alternative even have an opportunity to speak with them," IGS Energy alleged

IGS noted that retail energy suppliers were not, and are not, afforded an opportunity to bill non-commodity charges on the utility consolidated bill at the FirstEnergy Ohio EDCs

IGS Energy also alleged, "FirstEnergy [Ohio EDCs] has indicated that it is not even aware whether FirstEnergy collects from all customers unpaid receivables associated with its non-electric products."

IGS Energy said that, given that violations may be assessed at $25,000 per day, and the alleged violations occurred from 2016 until the FirstEnergy Ohio utilities ceased offering non-electric products in 2022, a forfeiture for these alleged violations could total $59 million. IGS called such relief "equitable".

Turning to another matter, IGS Energy alleged that the FirstEnergy Ohio utilities were allocated costs of a $10 million lobbying contract that was allegedly entered into for the benefit of the EDCs' affiliate FirstEnergy Solutions (this is the contract which led to the HB 6 scandal).

Among other things, IGS alleged that this contract reflects anti-competitive subsidies from a utility to a competitive affiliate

IGS Energy said that, given that violations may be assessed at $25,000 per day, and the alleged violations occurred from 2013 until 2018, a forfeiture for these alleged violations could total over $45 million, on the conservative approach that the violation is deemed only a single violation persisting each day. IGS said that PUCO should establish this level as the "floor" for any forfeiture

As previously reported, the FirstEnergy Ohio EDCs ceased offering non-electric services in 2022, and recently confirmed details of the formal wind-down of its competitive broker affiliate, Suvon, LLC, which did business as FirstEnergy Advisors and FirstEnergy Home

In recent testimony in the proceeding, the FirstEnergy Ohio utilities described implementation of policies, procedures, trainings and other actions which the utilities said are to satisfy and exceed the auditors’ recommendations, including a comprehensive review and revision of the Cost Allocation Manual

In recent testimony in the proceeding, the FirstEnergy Ohio utilities also noted that, in 2022, FirstEnergy Service Company launched the State Codes of Conduct Compliance (SCOC) Program, "to centralize and enhance compliance with the code of conduct and corporate separation-related regulations of the six states within which it operates, including Ohio."

The FirstEnergy Ohio utilities further said in testimony that, "[t]he SCOC Program developed policies and procedures to support compliance with Ohio-specific code of conduct and corporate separation requirements."

The FirstEnergy Ohio utilities further said in testimony that, "In addition to affiliate activities, product and service offerings, and training programs, the Audits reviewed other areas of corporate separation compliance and made various recommendations. The Companies have taken actions to address the processes identified as opportunities for improvement, and further investigated areas of minor non-compliance and implemented corrective action."

Regarding code of conduct requirements, the FirstEnergy Ohio utilities said that the auditor found the utilities to be "generally compliant with these requirements," but, as stated by the utilities, "identified two areas of minor non-compliance related to the Companies’ non-electric products and services offerings and the relationship between the Companies and Suvon."

As noted above, the FirstEnergy Ohio utilities have discontinued their non-electric products and services offerings and Suvon is said to be winding down.

The FirstEnergy Ohio utilities' testimony at length describes what the utilities term, "significant structural changes to the Companies’ affiliates, offerings, and trainings in recent years, which resolve many of the auditors’ recommendations," and describes, "the Companies’ implementation of policies, procedures, and other actions that satisfy and exceed the auditors’ recommendations to ensure the Companies are fully compliant with Ohio corporate separation law."

Case 17-0974-EL-UNC

ADVERTISEMENT

ADVERTISEMENT
NEW Jobs on RetailEnergyJobs.com:
• NEW! -- Director of Policy and Research, Retail Energy
• NEW! -- Director, Load Forecasting -- Retail Supplier
• NEW! -- Wholesale Markets Analyst -- Retail Supplier
• NEW! -- Origination Analyst -- Retail Supplier
• NEW! -- Settlements Analyst -- Retail Supplier
• NEW! -- Billing Supervisor

HOME

Copyright 2024 EnergyChoiceMatters.com. Unauthorized copying, retransmission, or republication prohibited. You are not permitted to copy any work or text of EnergyChoiceMatters.com without the separate and express written consent of EnergyChoiceMatters.com