On December 30, 2022, FERC issued an order approving a stipulation between the Office of Enforcement and FirstEnergy Corp., which required FirstEnergy to pay a civil penalty and submit to compliance monitoring because FirstEnergy violated the Commission’s Duty of Candor rule, the audit provisions of the Public Utilities Holding Company Act of 2005 (PUHCA 2005), and Section 301 of the FPA when it did not report potential bribes paid in response to data requests from Enforcement’s Division of Audits and Accounting (DAA).
DAA commenced an audit of FirstEnergy and its affiliates and subsidiaries, including its ten public utilities in February 2019. As part of the audit, DAA requested information related to FirstEnergy’s lobbying and governmental affairs expenses and accounting through data requests. FirstEnergy claimed to comply with these requests. However, by late July 2020, FirstEnergy became embroiled in a racketeering conspiracy that uncovered more than $81 million in payments to the then-Speaker of the Ohio House of Representatives and an individual who became Chairman of the Public Utilities Commission of Ohio. FirstEnergy had never disclosed these payments as part of the DAA’s initial audit requests even though it has since cooperated with Enforcement’s investigation and subsequently reported all payments to the DAA.
Enforcement determined that FirstEnergy violated FERC’s Duty of Candor rule1 because “FirstEnergy and its affiliates and subsidiaries omitted material information that was responsive to a series of the DAA’s data requests and failed to exercise due diligence to ensure the accuracy and completeness of its responses.”2 Enforcement also concluded that FirstEnergy violated Section 1264 of PUHCA 20053 and Section 301 of the FPA4 “by not providing the Commission with open access to their accounts and records.”5
FirstEnergy and Enforcement have now entered into a stipulation and consent agreement that the Commission approved on December 30, 2022. In the agreement, FirstEnergy agreed to pay a civil penalty of $3.86 million and will submit two annual compliance monitoring reports.6 The Commission noted that, since FirstEnergy had responded to DAA’s initial audit requests, FirstEnergy had fully cooperated with Enforcement’s investigation. The Commission approved the agreement as a fair and equitable resolution, considering “the nature and seriousness of the conduct.”7
Other utilities engaged in substantial lobbying efforts should take note of the extent of the penalties imposed on FirstEnergy in this order. Although FirstEnergy did engage in racketeering in this instance, other, less serious violations in which a public utility neglects to report lobbying and governmental affairs expenses may result in substantial civil penalties and compliance reports for violators.
2 FirstEnergy Corp., 181 FERC ¶ 61,277, at P 12 (2022).
5 181 FERC ¶ 61,277, at P 13.