If FirstEnergy pays $3 million for failing Lakewood, why shouldn't Lakewood get the cash?

A $3 million fine imposed because Lakewood residents endured repeated electrical failures ought to do something for Lakewood residents. Sending the money to the state’s general fund while the people who lost food, work time and even access to refrigerated medicine get nothing makes little sense.

That argument on the Today in Ohio podcast has now picked up some unlikely allies, hosts Chris Quinn and Leila Atassi noted Thursday: FirstEnergy itself, the Ohio Consumers’ Counsel and state Rep. Tristan Rader.

All three want the potential $3.05 million penalty against FirstEnergy used in some way to benefit the community where the problems occurred.
 
“I think our reporting and discussion here might have really helped turn this from a story about the state collecting a fine into a really much more important question,” Atassi said. “How does taking $3 million from FirstEnergy actually help the residents that FirstEnergy failed?”
 
The Public Utilities Commission of Ohio staff proposed the penalty after concluding the utility likely violated state standards for reliability and customer communication, Atassi said. Nearly 300 people responded to a Lakewood survey about the outages. They described spoiled food, missed work, interrupted medical care and other losses.

Under the normal fine process, however, Ohio gets the money and the customers get nothing.
 
FirstEnergy has proposed putting the $3 million toward electrical-system improvements in Lakewood, including work on aging equipment and underground cables. The Consumers’ Counsel has suggested customer benefits such as assistance paying electric bills.

Rader plans to go further legislatively, Atassi said, proposing automatic bill credits after prolonged outages along with a simpler way for consumers to recover losses such as spoiled food and refrigerated medication.
 
Quinn likes the idea of spending $3 million on Lakewood’s infrastructure. He just doesn’t want FirstEnergy administering the money.
 
“I just wouldn’t trust FirstEnergy,” he said.
 
His concern is that allowing the utility to count $3 million in Lakewood upgrades as its punishment could simply produce accounting games. FirstEnergy could put the fine toward work it otherwise would have had to perform, while moving $3 million it already intended to spend somewhere else.

“They would just use sleight of hand in the budget to move $3 million from maintenance into Lakewood,” Quinn said.
 
For a fine to actually be a fine, he argued, FirstEnergy has to lose control of the money.
 
“I do think the money needs to leave their hands some way so that they actually feel a little bit of the pain,” Quinn said. “So maybe the best thing to do is to give them (Lakewood ratepayers) discounts on their bills.”

Atassi agreed that FirstEnergy’s newfound enthusiasm for keeping the money in Lakewood deserves some skepticism.
 
“Let’s not mistake FirstEnergy’s position for pure corporate generosity here,” she said. “Its proposal could help Lakewood, and that’s preferable to letting Columbus pocket the money, but it also allows FirstEnergy to turn its punishment into a credit against obligations it should arguably have to meet anyway.”
 
That leaves the PUCO with a straightforward principle but a trickier question of execution.
 
The principle: Lakewood should benefit. How do regulators accomplish that without letting FirstEnergy escape the actual financial consequences of the failures that produced the penalty?
 
Direct credits on customer bills are one possibility. Consumer assistance is another. Infrastructure work could have a lasting benefit, provided the money is separated from FirstEnergy’s ordinary maintenance obligations and the utility does not get to merely shift numbers around.
 
What the hosts rejected was the default outcome in which state government simply absorbs the money.
 
And Quinn had one way for the state to ensure FirstEnergy could not turn its fine into ordinary capital spending.
 
“Give us the $3 million,” he said, “and we’ll pay AEP to come in and put in new transformers.”