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FirstEnergy corporate separation report filed

Today the Public Utilities Commission of Ohio (PUCO) issued an audit report of FirstEnergy’s Ohio electric distribution companies’ compliance with corporate separation laws and related PUCO regulations.

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COLUMBUS, OHIO (Sept. 13, 2021) – Today the Public Utilities Commission of Ohio (PUCO) issued an audit report of FirstEnergy’s Ohio electric distribution companies’ compliance with corporate separation laws and related PUCO regulations.

Specifically, the report assesses Cleveland Electric Illuminating Company, Ohio Edison, Toledo Edison and other FirstEnergy affiliates’ procedures related to 44 corporate separation requirements in Ohio Administrative Code (OAC). The report identifies 23 requirements in which the FirstEnergy companies are compliant, 13 opportunities for improvement, 8 minor violations, and zero major violations. The report describes minor violations as “deviation from compliance requirements not likely to result in a failure of compliance.” The audit examined procedures in place from Nov. 1, 2016 through Oct. 31, 2020.

Overall, the report found that FirstEnergy needs to build a robust and effective compliance plan that is designed to meet the specific corporate separation requirements in the OAC. The report makes recommendations to improve compliance with respect to structural safeguards, managing customer and supplier information, customer protection, marketing and branding, and accounting and its cost allocation manual.

A full copy of the audit report, prepared by the PUCO’s independent auditor, is available online in case docket 17-974-EL-UNC.

The PUCO attorney examiner assigned to this case will issue a procedural schedule in the near future to further consider this audit report.

What is corporate separation?

Ohio law requires electric distribution utilities to have controls in place to ensure fair competition for retail electric service providers. Regulations generally require:

  • Structural safeguards – utilities and affiliates must operate independently
  • Separate accounting – utilities and affiliates must have their own accounting records
  • Restrictions on financial arrangements between utilities and their affiliates
  • Code of conduct – company policy that personnel must follow detailing protections of customer information and supplier interactions
  • Cost allocation manual – document intended to ensure no cross-subsidization occurs between utilities and affiliates

Related and ongoing proceedings

The PUCO has four separate pending investigations related to FirstEnergy and the passage of Amended Substitute House Bill 6 (133 G.A.)

On April 22, 2020, the Commission certified Suvon, LLC, d/b/a FirstEnergy Advisors as a competitive retail electric services company eligible to offer broker and aggregator services.

Background

A separate audit report of FirstEnergy’s compliance with corporate separation regulations was filed in the same proceeding on May 14, 2018. A copy of this report and comments filed by intervening parties is available in the case docket for 17-974-EL-UNC.

On Nov. 4, 2020, the Commission issued an entry directing the PUCO staff to issue a request for proposal for audit services to examine FirstEnergy’s compliance with Ohio’s corporate separation laws. In its entry, the Commission noted a disclosure made by FirstEnergy to the Securities and Exchange Commission that it had terminated corporate officers for violations of company policies warranted further investigation to ensure compliance with Ohio’s corporate separation laws.

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