FirstEnergy Solutions is suing Ohioans Against Corporate bailouts over its effort to end $1 billion worth of subsidies to the company via a referendum, alleging that the effort violates the Ohio Constitution.
The lawsuit argues that it would be unconstitutional for a referendum to overturn House Bill 6, which approved the subsidies and increased rates for residents to pay for it. Under the Ohio Constitution, a referendum cannot be used on legislation that levies taxes, and FirstEnergy is arguing that the rate increase constitutes a tax increase.
“The charges levied by House Bill 6 are a tax, and laws providing for the levy of a tax are exempt from a referendum under the Ohio Constitution,” the company said in a statement. “If it is not stopped, the referendum would increase Ohioans’ monthly electric bills, eliminate ninety percent of Ohio’s carbon-free, zero-emissions electricity and cost Ohio 4,300 jobs. The referendum is inherently misleading and confusing to Ohio voters. Ohioans and the State of Ohio should be spared the costs associated with the this [sic] futile attempt to place this unconstitutional referendum on the ballot.”
To justify their classification of these increased rates as a tax, the lawsuit cites language from the bill that orders the collection of funds and then allocates those funds. It then cites other sources, including news outlets, that refer to the increased rates as a tax. However, the legislation itself does not use the word “tax” to refer to the fees.
The lawsuit also cites precedent in the Supreme Court case over the Affordable Care Act, which classified certain fees as a tax to justify the legality of the policy.
Gene Pierce, a spokesperson for Ohioans Against Corporate Bailouts, said in a news release that this lawsuit was a frivolous and desperate attempt to halt their referendum effort.
"This frivolous lawsuit is another desperate attempt by FirstEnergy Solutions to protect their ill-gotten billion dollar bailout," Pierce said. "In addition to having no legal basis, their own proponents in the legislature repeatedly stated that H.B. 6 was not a tax increase in their efforts to secure enough votes for passage of the bill."
Pierce told The Center Square via email that a key test for whether something is a tax is whether the legislation calls itself a tax and that defining this charge as a tax would be an expansive concept of taxation. He said that the Affordable Care Act’s logic is flawed and that it should be avoided, not copied.
“The proponents took great pains to use the word ‘charge’ instead of ‘tax,’ in the bill language and multiple times in floor debate and committee hearings,” Pierce said.
Pierce said that these subsidies are distorting the marketplace and preventing true competition. He said that Ohioans Against Corporate Bailouts would be “plowing ahead full speed” with the petition process regardless of the lawsuit.