American Electric Power looks to resolve investigation over HB6 - The Columbus Dispatch
American Electric Power looks to resolve investigation over HB6
AEP hopes to resolve federal investigation into House Bill 6 role as it seeks new CEO
Mark Williams
Federal regulators may be on the verge of wrapping up their investigation of American Electric Power and its role in the scandal-ridden Ohio House Bill 6 legislation adopted nearly five years ago.
The company said in a regulatory filing Monday that it continues to believe it has done nothing wrong while acknowledging that the investigation by the Securities and Exchange Commission may result in civil penalties or other action against the power company.
"AEP and the SEC are engaged in discussions about a possible resolution of the SEC’s investigation and potential claims under the securities laws," the company said in a regulatory filing Monday. "Any resolution or filed claims, the outcome of which cannot be predicted, may subject AEP to civil penalties and other remedial measures.
"Discussions are continuing and management is unable to determine a range of potential losses that is reasonably possible of occurring, but management does not believe the results of this investigation or a possible resolution thereof will have a material impact on results of operations, cash flows or financial condition."
The SEC issued subpoenas to AEP In May 2021 and again in August 2022 for information related to the bill along with information on AEP’s policies and financial processes and controls, the company has said.
House Bill 6 is best known for providing subsidies to the state's two nuclear power plants.
It also provides subsidies for two aging coal-fired power plants, one in Ohio and one in Indiana, owned by a group of power companies, including AEP.
While the subsidies for the nuclear plants were revoked, Ohio consumers continue to pay for the two coal plants.
A Dispatch investigation found that AEP contributed $350,000 to a group called Empowering Ohio’s Economy Inc. that became part of a criminal case against former Ohio House Speaker Larry Householder.
Householder was convicted and sentenced to 20 years in prison in June for orchestrating a nearly $60 million illegal bribery scheme that fueled his return to political power.
Householder, former Ohio Republican Party chairman Matt Borges and three other men were charged with participating in a pay-to-play scheme that helped Householder win control of the Ohio House of Representatives in 2018, pass the bailout and defend that law against a ballot initiative to block it.
Empowering Ohio’s Economy gave $150,000 to a group called Generation Now, which also received $60 million from interests related to Akron-based FirstEnergy, a former owner of the nuclear plants, to ensure passage of House Bill 6.
In mid-February, the state announced two indictments against former FirstEnergy executives, including former CEO Chuck Jones, and the former leader of the Public Utilities Commission of Ohio, Sam Randazzo. All have denied wrongdoing.
Cramer cites Icahn investment as leading to Sloat's ouster
The updated filing on the SEC investigation comes amid changes on AEP's board and with its top executive.
The company announced Monday that the board removed Julie Sloat, the company's CEO, president and board chair.
That move came two weeks after the company struck a deal with billionaire activist investor Carl Icahn to give him two seats on the company's board. In addition, a third member of the Icahn team will serve as a non-voting observer at board meetings.
Acting CEO and President Ben Fowke, the former top executive of Minneapolis-based Xcel Energy electric and gas company, told analysts on a conference call Tuesday to discuss the company's financial results for the final three months of 2023, that Icahn holds about 5.3 million shares of AEP stock, or about 1% of all the company's shares.
"Like us, the Icahn team believes AEP shares are undervalued and there's meaningful upside potential for our investors," he said. "The addition to AEP’s board will bring fresh perspective as we continue to execute on strategic priorities and enhance value for our stakeholders."
Fowke and other AEP executives received several questions from analysts on the call about Sloat's departure.
"It was a full board decision after discussions with Julie, and we decided that the best path forward is to transition to a new CEO," he said.
On the call Fowke eluded to 2023 being a challenging year when it came to dealing with regulatory issues in several states where it operates that have affected AEP's financial results.
"There's certainly been some twists and turns and a few bumps in the road," he said. "But I would encourage all of you to focus on the key opportunities that lie ahead. I have tremendous confidence in our team's ability to achieve our objectives as we work every day to deliver safe, reliable and affordable energies to our customer."
Sloat was removed just a year after taking the job. She had moved up through the executive ranks and then took over for Nick Akins.
Wall Street commenter Jim Cramer, who has for years interviewed AEP executives on his show on CNBC, said in a research note Tuesday that he was caught off guard by the move.
"I thought she was doing a pretty good job. She's been there for 23 years," he said. "Activist investor Carl Icahn got two board seats and that was it for Sloat. ... This is just plain shocking. This is outrageous. She was the CFO and a good one."
Fowke told analysts that AEP's top job is an attractive one for prospective candidates.
"Ideally, you get somebody that is a seasoned executive in the utility industry, is well known in the investor community," he said. "I think that's extremely important, has great leadership qualities. We've got a lot of talent at AEP, and we want to develop that talent. And ultimately, it would be ideal if they have multi-jurisdictional experience and the ability to achieve regulatory success."
@BizMarkWilliams
Related Knowledge Center: Climate economics
Climate change is now a driver of the world’s economy. The impact is profound:
- Catastrophic weather events — hurricanes, floods, droughts, high temperatures — are more frequent and more extreme. The cost can be measured in both the initial damage caused and the longer-term impact on the economy.
- Vulnerable communities are increasing climate-related investments, hardening infrastructure and taking other protective measures.
- Investment in carbon capture and storage technologies is increasingly rapidly.
- Governments are making investments and crafting regulations to reduce emissions of carbon dioxide and other greenhouse gases.
On top of all of this is the cost of uncertainty. As the Fourth National Climate Assessment, released in 2018 by the U.S. Global Change Research Program, says, “The assumption that current and future climate conditions will resemble the recent past is no longer valid.”