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Watchdog ignored concerns, probe finds

10/29/03

Julie Carr Smyth
Plain Dealer Bureau

Columbus - A top aide says he repeatedly questioned utility watchdog Rob Tongren on the wisdom of destroying potentially explosive consultants' findings before the documents were scrapped.

But the Ohio consumers' counsel disregarded staff concerns brought to him by deputy Eric Stephens and changed a records policy, which he knew would cause the documents on FirstEnergy electric rates to be trashed, a newly disclosed internal probe shows.

"I remember saying to Rob . . . Are you sure you want to destroy the LaCapra documents? There has been a lot of controversy around them,' " Stephens, the deputy consumers' counsel, said in a transcript of the probe.

"He asked me if it would be illegal or unethical to proceed. I said, Illegal, no. Unethical, I don't believe so. Advisable, no.' This conversation occurred several times," Stephens said.

Consultant La Capra Associates of Boston had been prepared to testify in 2000 that FirstEnergy's deregulation proposal was "a $3.5 billion windfall for FirstEnergy at the Ohio consumers' expense." After denying news media requests for the consultant's documents, Tongren's office destroyed them last July after it shortened the period that it retains such records to one year from two.

Until this week, Tongren had denied knowing that the records-rentention policy had been changed. Yesterday's disclosure that he not only knew about the change but also had specifically discussed destruction of the LaCapra documents came amid an inquiry by the Ohio Consumers' Counsel Governing Board.

Although Tongren never made the estimates public, he shared them with other parties in the case, including FirstEnergy, the Industrial Energy Users-Ohio, and the staff of the Public Utilities Commission of Ohio.

OCC Technical Director Joe Bowser said that LaCapra calculated one part of the number and that he calculated another - coming up with a grand total of $2.6 billion for so-called stranded costs that First Energy was entitled to recover. He acknowledged that the figure was an "aggressive" estimate that was prepared to bolster the case of residential consumers, whom Tongren's office represents.

With Tongren's agreement, the company ultimately got $6.9 billion, which it is currently collecting through electricity bills. The total jumps to $8.7 billion with the addition of pass-through taxes. Tongren was one of 16 parties who agreed to that deal rather than fight FirstEnergy.

State Sen. Teresa Fedor, the Senate Public Utilities Committee's ranking Democrat, dubbed Tongren's actions a "cover-up" yesterday. She said she plans to call for his resignation today during the committee's own inquiry into his actions.

Three other groups - Ohio Citizen Action, the Ohio Taxpayers Association and the Northeast Ohio Public Energy Council - have also said Tongren should go.

"I will be asking for his immediate resignation, so that, No. 1, the cover-up that has happened up to this point will not continue and, No. 2, so that residential consumers' interests are protected," Fedor said. "I believe this issue has led to the public having no confidence in his leadership."

But OCC Governing Board Chairman Jerome Solove appeared unprepared yesterday to do the only thing that he believes the governing board has the power to do: fire Tongren. He said that nothing at yesterday's four-hour meeting alarmed him - and that he wanted to wait for an inspector general's investigation to finish before taking any action. The board plans to meet again Nov. 5 to continue its discussion.

"There was no information presented today that would lead anyone to the conclusion there was impropriety," Solove said.

But board member Helen Mac Murray felt differently - peppering Tongren and top members of his staff with question after question about their handling of LaCapra's findings in 2000 and a records-policy change that allowed them to be discarded. She asked staff members to quantify what benefits they won for consumers by agreeing to sign off on a settlement with FirstEnergy without making a public stink.

After hearing Bowser's $2.6 billion estimate, she asked, "Did you produce $4.3 billion in benefits to consumers?" Staff members said that the tradeoffs the office won were difficult to measure and that part of the thinking was that a lengthy court battle would delay consumer benefits.

Stephens said that the Ohio Supreme Court has been historically deferential to decisions of the PUCO and that PUCO staff members had made it clear that they would support an out-of-court settlement.

PUCO Chairman Alan Schriber, in an interview yesterday, called the notion "ridiculous."

"We would never have done that without the OCC," he said. "You just don't do a deal like that without the representative of the residential ratepayers."

Schriber noted that the PUCO staff was just one party to the case, as was Tongren's office.

"They all signed at the same time. No one signed before anyone else; no one coerced anyone else," he said.

Schriber also took issue with suggestions during yesterday's meeting that the OCC modeled the change in its record-retention policy after the PUCO's, which OCC staff members said keeps case files for only 60 days. The OCC changed its schedule this February for retaining working case files from two years to one.

Schriber said the OCC misinterpreted commission rules, saying PUCO documents are often kept for decades. He said the commission's own deregulation consulting study, conducted by Research Data International, is still on file.

"Certainly, when we have a study like RDI, why would we destroy it? There's no reason to," he said.

To reach this Plain Dealer reporter:

jsmyth@plaind.com, 1-800-228-8272


2003 The Plain Dealer. Used with permission.
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