HB 6 corruption tax? Policy expert says that’s what Ohio utility consumers paying

By Marty Schladen
Ohio Capital Journal     
https://ohiocapitaljournal.com/

Many politicians — especially conservatives — are loath to approve anything that could be construed as a tax increase. 

But since 2009, Ohio’s leadership has gone along with a number of questionable rate hikes demanded by regulated utilities. They’ve functioned in the same manner as tax increases — regressive ones with unsavory origins.

There were new state charges earlier this month in Ohio’s massive FirstEnergy bribery scandal. They brought new attention to the issue, but that scandal is hardly the only time Ohio utilities have been able to impose questionable rate increases on their unsuspecting customers.

In the scandal, Akron-based FirstEnergy paid more than $61 million in bribes in exchange for the 2019 passage and protection of a $1.3 billion ratepayer bailout. As a consequence, former House Speaker Larry Householder, R-Glenford, is serving a 20-year federal prison sentence. 

The state charges filed this month against two top FirstEnergy executives and the state’s top regulator pertain to those crimes. But they also describe more than a decade’s worth of additional shady increases in which payoffs played a central role. 

They accuse Sam Randazzo — whom Ohio Gov. Mike DeWine later appointed to be top regulator — of secretly helping FirstEnergy make huge, secret payments to powerful energy users. In exchange, the charges say, the industrial users dropped their opposition to rate increases FirstEnergy wanted to impose on all its customers. 

The payments might not have been illegal, but they functioned as kickbacks all the same.

The Columbus Dispatch on Sunday reported that in 2008 then-Gov. Ted Strickland, a Democrat, tried to negotiate an end to the shady practice, but then-House Speaker Jon Husted killed the attempt, a former aide to Strickland told the paper. Husted is now DeWine’s lieutenant governor and is said to be planning a run in the 2026 Ohio Republican primary to be governor in his own right.

Those increases are in addition to a whole slew of other rate hikes that Ohio’s erstwhile regulator has granted, but the state Supreme Court later ruled to be illegal. They total more than $1.5 billion worth altogether. Even though the gains have been ruled unlawful, utilities have gotten to keep them because the Public Utilities Commission of Ohio keeps granting such increases without building in a refund mechanism in the event they’re struck down.

Jenifer French, DeWine’s appointment to replace the disgraced Randazzo, has repeated PUCO staff claims that such refund mechanisms are illegal. But the legal case seems dubious and watchdogs and lawmakers from both parties dispute it.

So Ohio ratepayers have shelled out billions in illegal electric payments and untold millions more as the consequence of shady kickbacks to powerful companies. Those who allowed such payments are responsible for what is the functional equivalent of a tax increase, said Rob Moore, principal of Scioto Analysis, a Columbus firm that applies economics to questions of public policy.

One reason they work the same as a tax is because one has little choice in 2024 about paying for electrical service, he said.

“You can’t get away from it,” Moore said. “You’re going to have to pay something for electricity.” He later added, “That’s functionally no different from a tax.”

And it’s one that falls extra-hard on the poor.

Disconnected electricity and gas can destroy perishable food while also taking away the ability to cook it. For those who are struggling, finding money and getting to the store for one batch of food can already be a challenge. Having to do it again after arranging a reconnection can be even more difficult.

Disconnection also can be used as a rationale for children’s services to break up a family, the Energy News Network reported in 2022. 

The news outlet reported that as part of a story about nearly 200,000 disconnections by Ohio electric utilities at the height of the coronavirus pandemic. Advocates asked the PUCO for relief, but the regulatory agency said it was powerless to act.

Moore said that if you view utilities as the practical equivalent of a tax, it’s a regressive one.

“In general, lower-income people pay more of their income on utilities than upper-income people,” he said.

Moore cited a 2013 report by the U.S. Energy Information Agency saying that households in the bottom 20% of incomes made 6% of their total expenditures on home energy, while those in the top 20% paid half that.

Energy-insecure households are likely to be poorer still. The agency last year reported that they paid 27% more in real terms than everybody else — $1.24 per square foot vs. 98 cents.

As with the state and local tax burden, the extra costs Householder, the PUCO and others have imposed on Ohio seem to be falling most heavily on those least able to pay it.

“Basically, he just levied a tax and lined his pockets with it,” Moore said of the former speaker.

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