FirstEnergy Corp. complied last year with a 2008 Ohio law that requires greater investment by utilities in renewable energy, after the Public Utilities Commission of Ohio grew weary of handing out waivers from the law. Two new state audits suggest that FirstEnergy grossly overpaid for renewable-energy credits to meet its obligations.
The credits are offered for sale to companies that don't want to develop their own renewable-energy projects. FirstEnergy passed the inflated costs of the credits along to consumers, plus 7 percent interest, the audits conclude.
In some cases, the utility paid more than 15 times what the credits were worth -- a strategy auditors called "seriously flawed." The pass-through costs are expected to drive up electric bills for most FirstEnergy residential customers by about $5 a month over three years.
FirstEnergy says it was forced into a corner because of a shortage of available credits at the time. It could have paid a fine, but that -- unlike costs for credits -- cannot be passed on to ratepayers.
Ohio law requires utilities to produce or get at least 12.5 percent of the electricity they distribute from renewable sources by 2025, with annual benchmarks along the way. The law has spurred investment in renewable-energy projects, which has led to new jobs.
FirstEnergy didn't do anything illegal, the auditors noted. But the state law should be changed so that utilities must bear such excessive costs or, at least, adhere to a more-reasonable business model on consumers' behalf.
FirstEnergy vows to fight such an effort. But when it forces its customers to bear above-market costs for credits so it can avoid fines, it wastes money that "could have been used to drive real investments in Ohio," Sierra Club analyst Daniel Sawmiller says.
The Office of the Ohio Consumers' Counsel says it will try to get the credit practice stopped and money returned to FirstEnergy ratepayers. That's an important effort.