Dive Brief:

• Samuel Randazzo, the former chairman of the Public Utilities Commission of Ohio, resigned Friday morning, four days after the FBI conducted an early morning search of his Columbus home and less than a day after FirstEnergy revealed in a U.S. Securities and Exchange Commission filing that it paid $4 million in early 2019 to end a six-year contract with a consulting company believed to be linked to Randazzo.
• FirstEnergy revealed in its third quarter 10-Q — filed with the SEC Thursday evening — that its Board of Directors fired former senior managers for violating company ethics policies when they paid $4 million to a company "associated with an individual who subsequently was appointed to a full-time role as an Ohio government official directly involved in regulating FE's Ohio distribution companies."
• Randazzo, a veteran utility lawyer, was appointed to chair the PUCO in February 2019. State ethics commission records show that Randazzo has been a principal in two consulting companies later identified as unsecured creditors in the bankruptcy proceedings of former FirstEnergy subsidiary FirstEnergy Solutions.

Dive Insight:

In a letter to Gov. Mike DeWine, R, Randazzo framed his resignation as a selfless effort to stave off suspicion and controversy about any future PUCO decisions and save DeWine from distraction as he battles COVID-19. 

DeWine released the resignation letter Friday morning and told reporters that Randazzo had done a good job as chairman. Randazzo could not be reached for comment.

Randazzo wrote that "the impression left by an FBI raid on our home, the statement included in FirstEnergy’s filing with the Securities and Exchange Commission yesterday, and the accompanying publicity will, right or wrong, fuel suspicions about and controversy over decisions I may render in my current capacity."

The resignation letter also revealed that Randazzo disclosed his "prior business relationships" to the governor's office before his interview with the PUCO Nominating Council — a screening committee on which Randazzo had himself been a member for more than a decade. In January 2019, the 12-member committee unanimously voted to recommend his appointment to chair the PUCO. And the letter repeats Randazzo's earlier comments to lawmakers that the administration asked him to apply for the chair position on the commission rather than retire as he had been planning to do.

Randazzo's resignation as well as the new revelations in FirstEnergy's 10-Q come four months after the FBI searched the homes of former Ohio Speaker of the House Larry Householder, R, and four associates, and the subsequent indictment of all of them on racketeering and public corruption charges in connection with the passage of legislation authorizing state-wide utility bill increases to bail out two nuclear power plants owned by a former FirstEnergy subsidiary as well as bail out two 65-year-old coal-fired plants owned by all of the state's power companies. Two of the four Householder associates have pled guilty, while Householder and the others await trial. 

FirstEnergy was implicated in the federal investigation as one of the companies that contributed nearly $61 million to bankroll Householder's efforts to pass the bailout legislation, known as House Bill 6. Efforts to repeal H.B. 6 since the indictments have stalled. The company has been served federal subpoenas and is also under investigation by the SEC.

FirstEnergy's revelation in its SEC 10-Q filing on Thursday evening that "certain former members of senior management" violated company ethics policies when they paid nearly $4 million to close out a six-year consulting contract did not name Randazzo or his consulting company, but instead described a person associated with a consulting company who subsequently became a state utility regulator.

The filing also questioned the purpose of the $4 million payment. "At this time, it has not been determined if the payments were for the purposes represented within the consulting agreement," the filing noted.

The 10-Q said that the board of directors on Oct. 29 fired CEO Charles Jones, Senior VP of Marketing Dennis Chack, and Senior VP for External Affairs Michael Dowling for ethics violations.

The company blamed the three executives for failing to make sure that the board of directors was aware of the consulting contract and the decision to terminate it.

The company also noted that its chief legal officer and chief ethics officer "were separated" from the company on Nov. 8 "due to inaction and conduct that the Board determined was influenced by the improper tone at the top."

The company further said it is considering reductions in planned capital expenditures as well as reductions in operating expenses "to allow for flexibility should a fine be imposed as a result of the government investigation."

Ohio Consumers' Counsel Bruce Weston, who had pushed the PUCO to authorize an outside auditor to investigate whether FirstEnergy's expenses in the scheme to pass H.B. 6 had been passed on to customers, issued a statement following Randazzo's resignation stressing that the state must reform the process used to select commissioners.

“Utility consumers may think the regulatory system is rigged against them. That concern is understandable. Until today, a majority of commissioners, three of five, have worked for utilities that the PUCO regulates. Things need to change, and that change should begin with real reform of how PUCO commissioners are appointed and who gets appointed in this state. The public should be watching," Weston said in a statement.