WASHINGTON, D.C. — Back when people still went to the movies, there was a strange tendency for similar films to come out in pairs. “Deep Impact” and “Armageddon,” both released in 1998, were about saving the Earth from a giant asteroid. Two 2013 films, “White House Down” and “Olympus Has Fallen,” were both about terrorist attacks on the White House. And in 2009, theaters featured “Observe and Report” and “Paul Blart: Mall Cop,” two movies about overweight security guards at the mall.
Now, life appears to be imitating art, as two very similar political scandals involving the nuclear industry are playing out in Ohio and Illinois. In both cases, the operators of nuclear power plants are alleged to have bribed the state’s speaker of the house in exchange for enactment of favorable treatment and government bailouts.
These twin scandals raise serious issues about the role of government in the electricity sector.
Take Illinois first. On July 17, electric utility Commonwealth Edison (ComEd) admitted in court documents that it had directed jobs and contracts to associates of Illinois speaker Michael Madigan in exchange for favorable treatment by the legislature, such as approval of rate increases. ComEd is paying a $200 million fine to avoid prosecution. Madigan has denied the charges.
The situation in Ohio is even wilder. The 82-page criminal complaint for federal racketeering, money laundering and bribery alleges that the speaker of the Ohio House essentially set up a “dark money” account into which eventually was poured over $61 million by a power company and others that stood to benefit from legislation. The money was used partly to finance primary candidates over an election cycle to secure the vote for the top leadership position in the Ohio House of Representatives. Perhaps even more disgusting, the bulk of it, $38 million, was allegedly used for ads to defeat a referendum attempt and to harass and buy off signature gathers who were trying to keep the legislation from going into effect via a vote of the people.
The major alleged funder of this effort was FirstEnergy Corp., identified as Company A Corp. in the complaint, then-owner through a subsidiary of the only two nuclear plants in Ohio. In return, the speaker allegedly delivered a $1 billion bailout of FirstEnergy’s failing nuclear plants in House Bill 6 and set up his own little fiefdom of representatives.
Corruption is as old as human history. But it’s worth considering whether there is something about the way that power plants are operated and regulated that makes scandals like those in Ohio and Illinois more likely. In Ohio, a person identified as Company A Corp.‘s CEO provided an answer in comments detailed in the complaint about a provision added to HB 6 in the Ohio Senate to “decouple” the company’s revenue from the amount of energy sales. Under this provision, if the utility made less money in a year than it had in 2018, it could add a surcharge to customers’ bills to make up the difference. As the CEO bragged to investors, the provision would help make them “somewhat recession-proof.”
Revenue guarantees may be a great deal for electric providers, but they aren’t necessarily for consumers. Nevertheless, they are actually the norm throughout much of the United States.
This is because electric providers were once all government-sanctioned monopolies, the rates of which were set to cover their costs plus a set percentage of profit. In recent decades, some states have moved away from this model, introducing more competition into the system, but there are still too many avenues open for government intervention. One of the main arguments used in favor of HB 6 was that the state had already intervened to support alternative energy, and so it was only fair to bail out nuclear plants, too.
Ultimately, there are two ways for a business to make money. One is through the market. The other is through politics. The more space we give to the latter, the more likely we are to see corruption. And the one who will definitely pay for this corruption is the customer.
Josiah Neeley is a resident senior fellow in energy with the R Street Institute. Michael Haugh is a senior fellow with the R Street Institute. The libertarian-leaning institute favors free-market solutions.
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