High court: State's FirstEnergy refund order was improper

The Ohio Supreme Court ruled Wednesday that the Public Utilities Commission of Ohio lacked the authority in 2013 to order FirstEnergy Corp. to refund to Ohio customers approximately $43.3 million that the utility had spent on renewable energy credits between 2009 and 2011.

A FirstEnergy employee walks by the Emergency Feedwater Facility at Davis-Besse Nuclear Power Station in October of 2016.

In a 6-1 ruling, the state’s high court said PUCO engaged in “unlawful retroactive rate-making” when it tried to make the Akron-based company give back some of the money it spend on energy credits while trying to comply with Ohio law requiring utilities to draw a percentage of their power from renewable sources.

The court noted that under state law, utilities are not required to make refunds.

Had the utilities commission included a refund provision in FirstEnergy’s 2009 rate plan, the commission might have been able to require a refund, the justices found. But since it didn’t, the 2013 refund order was illegal.

“FirstEnergy agrees with reversal,” the utility’s spokesman Doug Colafella said following the ruling. “At the time we followed the law.”

The situation began with the utility’s 2009 rate plan.

Under state law, utilities were required to have a small portion of the electricity they sell — 0.5 percent in 2009 and rising to 12.5 percent by 2025 — come from renewable technologies, such as wind and solar.

Utilities that owned no renewable-energy sources could buy Renewable Energy Credits and pass those credits’ cost on to customers.

FirstEnergy at first lobbied legislators against the renewable requirement, then after it later complied, PUCO said it paid too much for the credits.

The overpayments amounted to $43.4 million, or 15 times more than any other company in the country, according to an outside auditor hired by the commission. Some of the credits were purchased from FirstEnergy’s subsidiary, FirstEnergy Solutions.

FirstEnergy Corp. argued it had no other options at the time to paying the renewable-energy credits’ high price in order to comply with state law.

After PUCO ordered FirstEnergy to begin refunding the $43 million by slightly reducing its rates by an average of $5 per household, the utility filed an appeal in 2014 with the Ohio Supreme Court.

The Office of the Ohio Consumers’ Counsel was quick to criticize the high-court ruling.

"Today's disappointing court decision again highlights one of the worst ways that Ohio's rate-setting process is unfair ‎to utility consumers — the law allows FirstEnergy and other utilities to keep unlawful charges instead of giving millions of dollars in refunds to consumers,” spokesman Dan Doron said. “Ohioans need their legislature to take swift action to change the law so that utility consumers are protected in the future.”

The Supreme Court ruling didn’t go entirely FirstEnergy’s way.

Under the designation of “trade secrets” the utility in 2013 sought and received PUCO approval to keep sealed all records relating to its methods and pricing for buying renewable-energy credits.

As part of its decision Wednesday, the Supreme Court said the commission failed to provide any evidence trade secrets were at risk and the utility would be harmed if the information was disclosed. Therefore, the granting of trade-secret status was reversed and PUCO must make public details of the renewable-credit purchases or provide evidence of why they should remain sealed.

Contact Blade Business Writer Jon Chavez at jchavez@theblade.com or 419-724-6128.