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Scandals cloud trust in Ohio's utility regulation commission

Sam Hendren
89.7 NPR News

This is part two of three-part series exploring Columbia Gas of Ohio's record-high rate increase requestwithin the state's regulatory environment.

When a utility company in Ohio wants to charge customers more, they aren’t allowed to just do it. Even though these companies are for-profit, state law limits how they increase rates and by how much.

These special rules are the result of special classifications utility companies
have in Ohio. With special regulations mandating approvals for rate charges and other terms, the companies can operate like monopolies in their designated territories.

But recent events involving utility providers and state officials are causing some to doubt the often-subjective process used to determine a fair rate.

Doubts were seeded when Sam Randazzo, the former chair of the Public Utilities Commission of Ohio, resigned in 2020 during the nuclear bailout scandal amid accusations he accepted bribes in exchange for doing the bidding of a utility company. Randazzo, who came from the utility industry when he was appointed by Ohio Gov. Mike DeWine in 2019, denies the allegations and an investigation is ongoing.

And, then there’s the state law giving local communities the control to kill renewable energy projects, preceded by a law thatbans local controlwhen it comes to limiting or even discouraging natural gas.

Dan Sawmiller, director of energy policy in Ohio for the Natural Resources Defense Council, finds the timeline concerning, and suspicious. While the state moved to allow local governments to kick out renewable energy projects, it also moved to ban the ability of local governments to do anything to encourage moves away from natural gas. That includes the creation of incentives to replace appliances or implementing building codes requiring an electric power source.

Sawmiller said the bills were created by lobbyists for the industry and distributed and passed in multiple states.

“They knew that they were pushing legislation that would keep people from getting off the fossil gas train," Sawmiller said.

All of this is happening under the direction of state lawmakers, like former Ohio House Speaker Larry Householder, who is scheduled to go on trial in January in the federal bribery case connected to the bailout of two nuclear power plants in northeast Ohio.

That makes some feel skeptical about the timing of a rate increase request from Columbia Gas. Ohio’s largest natural gas distributor is asking the PUCO to increase their rates to historical levels. They want to increase fees that are independent from the amount of gas a household or business uses. The increase would bring in over $200 million a year.

Sawmiller said the ask comes quickly on the heels of the bill protecting natural gas usage.

"It's like, what are you going to do? 'We're going to add an $80-a-month charge.' You can't avoid it because its fixed charges. The only way to avoid it, then, is to look at an electric heat pump instead of a gas furnace, an electric stove instead of a gas stove. But they're saying that your local government is not allowed to pass any kind of anything to help you make that transition," Sawmiller said.

If granted, the increase would raise bills by about a third for most and could lead to charges for residential customers of $50 to $80 a month over the course of several years.

“The boldness of the request is crazy," Sawmiller said.

Besides concerns with the actions of state lawmakers, the people making decisions on the utility commission are also concerning to advocates like Sawmiller and Mike Haugh, director of analytical services for the Ohio Consumer’s Counsel which advocates for utility customers.

Most of the members have worked in the utility world in some capacity. Many have a background in law.

Sawmiller calls PUCI a revolving door with the utility industry and a cog in Ohio’s utility environment which encourages short-term victories for fossil fuel companies over policies that encourage long-term growth in sustainable energy sectors.

Haugh said he expects some bleed over between utilities and regulators, but there is some bias.

“Unfortunately, there's so many people that come from the utility industry. And although it's nice to have that expertise, that bias, implicit or not, it's going to be there if you've been working with that mindset as a representative of a utility,” he said.

Columbia Gas’ parent company NiSource declined requests for an interview, but spokesman Eric Hardgrove said in an email that the company follows all legal and ethical guidelines.

"Columbia Gas of Ohio is guided by core values rooted in ethics and transparency. We follow all legal and ethical guidelines regarding all dealings with regulators and public officials. There are protections at the PUCO and Columbia Gas to guard against conflicts. None of the current commissioners were Columbia Gas of Ohio employees," the email states.

There are protections, like a "cooling-off period" that requires several years to pass before a regulator can return to the private sector in the field, said Doug Jones, a professor emeritus of public policy and management at Ohio State University. But he said that doesn't happen in reverse and the waiting period should be longer.

The issue of utility employees becoming players on the regulatory side is common, Jone said. It is common enough that there is a term for it - industry capture.

“It's always a problem that's always lurking there in one way, in many ways,” he said.

It’s problematic, Jones said, because organizations like the PUCO are quasi-judicial, meaning they should be "impartial and independent."

"What that allows is policy to be made. It's less stringent than an actual judicial activity with respect to the evidence to be included and what you can do as an outcome," he said.

That means the process can be subjective and if there is too much influence in support of utilities, or consumers, the imbalance can disrupt the entire system.

"You don't want any side of the parties to capture a commission that includes the consumer side, but the main danger is industry capture," Jones said.

Jones said even the best protections against regulatory capture sometimes let undue influence sneak by when utilities lobby or make deals with state lawmakers, which is what allegedly happened in the nuclear bailout scandal.

“Ohio is one of those examples, where companies probably have much too much clout in the state legislature, most of us I think, would say, say that. So that's a very hurtful and difficult thing and very hard to hard to handle," Jones said.

Critics want more accountability in the way PUCO makes decisions. Some critics want to see new processes for making appointments to the commission.

Jones said banning private talks between commissioners and utilities, staggering appointments and open record laws, like Ohio has, does help.

PUCO spokesman Matt Schilling declined an interview, but said commissioners carefully weigh evidence and testimony when deciding a rate case. He also said the members are prevented from having a financial interest in the utilities they regulate.

"Ohio law prohibits anyone at the PUCO from having a financial interest in entities regulated by the PUCO. Commissioners file annual ethics disclosures with the state of Ohio. PUCO commissioners swear an oath to dutifully execute their duties in carrying out the PUCO's mission to 'to assure all residential and business consumers access to adequate, safe and reliable utility services at fair prices, while facilitating an environment that provides competitive choices.' When issuing any decision, PUCO commissioners must carefully weigh all evidence and testimony in the case record. All PUCO rulings are appealable directly to the Supreme Court of Ohio."

The statement continues, "The PUCO's jurisdiction is specifically outlined in Ohio Revised Code 4909 when it comes to rate cases. In a rate case proceeding, utilities bear the burden of proof to demonstrate that their proposed rates are 'just and reasonable' as stated in Ohio law. Utilities may only recover their costs that are related to their obligation to provide reliable, adequate and safe utility services."

This is part two of three-part series exploring Columbia Gas of Ohio's record-high rate increase requestwithin the state's regulatory environment.

Renee Fox is a reporter for 89.7 NPR News.