Dive Brief:

• The Public Utilities Commission of Ohio on Tuesday opened a review of FirstEnergy's political and charitable contributions, following a request last week to the agency by the Ohio Consumers' Counsel for a broader management audit of the company.
• FirstEnergy finds itself at the center of a nearly two year federal racketeering investigation by the U.S. Attorney for the Southern District of Ohio that led to the indictment of the Ohio Speaker of the House and four associates in July in connection with the legislature's approval last year of a bill subsidizing two nuclear and two coal plants.
• The PUCO review follows revelations made in an unrelated federal lawsuit against a former FirstEnergy employee who allegedly stole internal documents and gave them to the Securities and Exchange Commission. The SEC does not confirm or deny its investigations. FirstEnergy had no comment.

Dive Insight:

The continuing expansion of investigations involving FirstEnergy and its formerly affiliated power plant company FirstEnergy Solutions, which emerged from bankruptcy protection in February as Energy Harbor, has devalued the shares of both companies while sparking a political maelstrom among state lawmakers.

The share price of FirstEnergy, at about $42 before the federal indictments in July, has hovered under $30 while Energy Harbor, which is thinly traded as an over-the-counter pink sheet stock, has fallen from $35 before the indictments, with daily closings now between $20 and about $23.

FirstEnergy has admitted it was served with a federal subpoena while Energy Harbor has only acknowledged it is aware of the investigation. FirstEnergy announced that independent members of its board of directors had ordered an internal audit of the company's spending for political purposes. A FirstEnergy spokesperson this week had no information about the internal audit or whether an independent outside auditor or law firm had been retained to conduct it.

Meanwhile, Ohio lawmakers are grappling with how to repeal the bailout legislation, House Bill 6, and whether to replace it. New customer charges related to the legislation are set to begin the first of the year. Legislative hearings have already begun on competing bills with the hope that new legislation might be approved before the Nov. 3 elections.

The outlook for the bailout to survive remains sketchy as lawmakers, already nervous over public reaction to the revelations made by federal prosecutors, have learned that a proposal by regional grid operator PJM would, in effect, nullify the impact of any state subsidies to a power plant by taking them into account when setting the minimum price acceptable from them in future capacity market auctions.

Veteran utility lawyer, Samuel Randazzo, now the chairman of the PUCO, deflected questions during a legislative hearing this week from Democratic lawmakers wanting to know why the PUCO had to be prodded by the state's consumer advocate to launch its own investigation.

They also demanded to know whether as a lawyer and lobbyist Randazzo or his previous management companies had a business relationship with FirstEnergy. Randazzo provided lawmakers with a broad but detailed overview of the state's utility laws but deflected questions about his former clients during his nearly 50-year law practice in the state.

The PUCO's decision to open a review of FirstEnergy's spending on political campaigns also left the Consumers' Counsel unhappy and critical.

"The PUCO implemented only a part of our several requests to protect Ohioans by investigating FirstEnergy," the agency said in a prepared statement. "As we pointed out, the Ohio legislature has granted the PUCO considerable powers to investigate utilities for the protection of the public. We hope the PUCO will more fully use those powers to broaden its announced 'review' of FirstEnergy's alleged conduct in influencing the passage of House Bill 6."