Electricity prices can have a momentous effect on people throughout all walks of urban life.  The price of electricity impacts the affordability of homes and modes of transportation, levels of energy consumption, economic activity, quality of life, and eco-systemic health.

It is vitally important for public policymakers to consider the whole range of effects of their electricity pricing decisions and to work in the public interest towards ensuring affordable and reliable electricity for all residents.  It is also important for citizens and consumers to actively monitor and be aware of the electric regulatory choices made and actions taken by their policymakers. 

Energy regulation is associated with the largest bribery scandal in the history of the State of Ohio, resulting in the indictment, expulsion, and conviction of Ohio’s Speaker of the House of Representatives.

Eight months after initial charges were filed with the U.S. Department of Justice, FirstEnergy Corp, a large, investor-owned electric utility company, entered into a deferred prosecution agreement. The company admitted to making $61 million in payments to a dark money political action committee secretly operated by the former Speaker. FirstEnergy also characterized a $4.3 million payment to the chair of the Public Utility Commission of Ohio, the lead electric regulatory decision-maker in the state, as a “bribe.”

Based upon my recent research with a team of colleagues, it is evident that while electricity regulation is hugely important for the health and well-being of people throughout urban areas, it is also something about which little is known or understood by the public at large.  And some utility companies and regulators take huge advantage and make massive profits off of this fact.^[1]

The electric regulatory decisions that led to the fiasco in Ohio became effective in October 2019, followed by turmoil after the FBI arrested the Speaker of the Ohio House in late July 2020. FirstEnergy admitted to bribing the Speaker of Ohio’s House of Representatives and Chair of the PUCO in July 2021.  The Speaker was convicted of federal crimes in 2023. ^[2]

This sort of debacle is consistent with the phenomenon known as ‘regulatory capture.’ Regulatory capture occurs when public policy makers and regulators who ostensibly make decisions in the public interest become highly politicized and veer away from the assumed public interest objective of protecting citizens and customers from the monopoly power of the utilities. 

When regulatory capture occurs, electric regulatory commissions begin to clandestinely pursue their own private interests, making their decisions in the interest of the utilities. even at public expense.

Published by Utilities Policy, a peer-reviewed academic publication, my team’s research examined electricity prices in three states with restructured generation markets (Illinois, Ohio, and Pennsylvania), comparing them to three other states that did not restructure (Indiana, Michigan, and Wisconsin).  Our research concluded that restructuring could have greatly benefitted consumers.  However, regulatory-approved charges were added to electricity bills, effectively shifting the benefits that consumers could have received and redirecting them into the coffers of the utility companies. 

This sort of behavior is hugely damaging, and unless citizens and consumers monitor and stay on top of electric regulatory decisions and the actions of their policy makers, it is apt to happen again in Ohio and elsewhere.

Electricity is a basic necessity for living in today’s urban America.  Affordable and reliable electricity is essential for maintaining a good quality of life in contemporary American society.  When electricity prices rise above the levels necessary to cover the costs of generation, transmission and distribution, unnecessarily high utility bills can strain household budgets.  They can even force poor and working-class households to make difficult choices between paying for electricity, housing, healthcare, education, and other essential expenses.

When as a result of regulatory capture electricity prices become artificially high, electric utility company shareholders and executives make inordinately large profits.  But at the same time, many residents need to adjust their household budgets to accommodate the increased expenses. Especially for middle-or-working class urban Americans, this can mean cutting back on discretionary spending, reducing savings, or even sacrificing other necessities.

Electricity prices also influence the cost of doing business. Higher electricity prices can increase the operational costs for commercial establishments, which may result in higher prices for goods and services.  It can also affect industrial activities and manufacturing, potentially leading to regional job losses or relocation of businesses to regions with lower electricity costs.

When the decisions made by state electric commissions are made in the interests of utilities rather than consumers and citizens, one of the predictable effects is to concentrate social authority and resources in the hands of a few people while costs are diffused throughout society.  This can exacerbate the wealth gap between the rich and the rest of society, leading to a small minority having significantly more economic power and influence.  It can also reduce social mobility, exacerbate political imbalance, and lead to feelings of frustration, resentment, and social unrest among those who bear the costs.

Urban working-and-middle class households have a substantial stake in state-level electricity regulation. The electric regulatory choices made and actions taken by their policymakers directly impact their daily lives, financial stability, and the well-being of their families and communities. Ensuring that these regulations address the interests and needs of all citizens, regardless of their socioeconomic status, not only the utility shareholders and executives, is essential for building a fair and inclusive energy system.

Bill Bowen

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^[1]  The article is open-access and can be downloaded from:

    https://www.sciencedirect.com/science/article/pii/S0957178723001273

^[2] Selling out in the State House. USA Today Network Ohio Bureau, updated January 10, 2023, https://www.cincinnati.com/in-depth/news/politics/2021/06/03/ohio-corruption-house-bill-6-bribery-timeline-larry-householder/5248218001/; Kathiann M. Kowalski, Former Ohio regulator linked to $4 million payoff directed agency to limit response to FirstEnergy corruption, Eye on Ohio, Ohio Center for Journalism, February 15, 2022, https://eyeonohio.com/former-ohio-regulator-linked-to-4-million-payoff-directed-agency-to-limit-response-to-firstenergy-corruption/; Laura Bischoff and Jessie Balmert, Ex-Ohio House Speaker Larry Householder, former Ohio GOP leader Matt Borges found guilty, Columbus Dispatch, March 9, 2023, https://www.dispatch.com/story/news/politics/2023/03/09/jury-verdict-lar...