Dive Brief:

• The Ohio Supreme Court rejected a grid modernization charge FirstEnergy has been collecting from customers since 2017, concluding conditions on recovery of the distribution modernization rider (DMR) were insufficient to ensure the money was spent correctly and thereby protect customers.
• The DMR allowed FirstEnergy to collect $168 million to $204 million in extra revenue per year. Funds already collected are not subject to refund.
• Opponents of the charge called it a "blank check" approved by the Public Utilities Commission of Ohio (PUCO) that was ultimately used to help faltering coal and nuclear generation. Utility officials say the rider has been successful in boosting investment in advanced technologies.

Dive Insight:

While the DMR funds are marked for grid modernization investments, critics said there was no mechanism to enforce that — and the court agreed.

"There are no discernable consequences or repercussions if FirstEnergy fails to comply with the conditions imposed for receiving DMR funds," the court wrote. "Ostensibly, FirstEnergy would forfeit the DMR if it failed to comply with any of the conditions. But FirstEnergy has been recovering DMR revenue since January 1, 2017, and the commission did not make the DMR subject to refund if FirstEnergy does not meet the required conditions."

FirstEnergy must immediately stop charging the DMR, but without the possibility of refunds, customer advocates say it is not much of a win.

"Without a refund, this decision is another victory for utilities who have thwarted consumer attempts at the PUCO, the legislature and the court to enable refunds of utility charges that the court finds to be improper," the Ohio Consumers Counsel told The Plain Dealer.

The Environmental Defense Fund has been working to change the state's refund law, which currently precludes returning funds to customers. "Today's ruling should give added impetus to this effort," the group said.

"State regulators cannot write blank checks to the utilities they are supposed to regulate," Environmental Defense Fund Senior Attorney John Finnigan said in a statement.

Finnigan said the charge was "an illegal bailout of FirstEnergy’s uneconomic coal and nuclear plants."

FirstEnergy Corp's competitive generation subsidiary filed for bankruptcy protection in 2018, as its coal and nuclear plants struggled to compete. 

FirstEnergy is "still reviewing the Court’s decision and evaluating our options," the company said in a statement.

"We continue to believe that Rider DMR provides benefits to our customers by enhancing our ability to modernize our system and invest in advanced technologies," the utility said."