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Friday, September 24, 2010

Ind. Gov't. - Fallout from "Consumer group criticizes Indiana regulator's move to Duke Energy" [Updated]

Wednesday the Indianapolis Star had this story in its business section -- it begins:

A consumer group is raising ethical questions over a state regulator's decision to take a job next week at Duke Energy, a utility he has overseen in numerous state hearings, including those regarding construction of the Edwardsport power plant in southwestern Indiana.

Citizens Action Coalition said the company's decision to hire Scott Storms as assistant general counsel, "raises serious concerns about the relationship between those who regulate utilities and the utilities themselves."

Storms currently serves as general counsel to the Indiana Utility Regulatory Commission. In that role, said Citizens Action said, he has "played a critical role and signed many of the (state's) decisions related to Edwardsport." Storms will start his new job at Duke Energy on Monday.

The group pointed to the state's ethics code, which states, in an example of post-employment restrictions for regulators who have made decision on individual public utility companies: "You may not work for this utility company for a year."

"It's disturbing that a required, one-year cooling off period so easily became less than 60 days," said Grant Smith, executive director of the Citizens Action Coalition, in a press release.

The story continues by reporting that Duke Energy said:
[I]n early August, Scott removed himself from Duke Energy-related cases he was working on at the commission to avoid a conflict of interest.

The company also pointed to a ruling from the Indiana state ethics commission issued this month, which said that Storms' employment with Duke Energy would not violate state law.

Now the fallout: Here is a copy of a letter that the ILB has obtained, dated Sept. 23, 2010, from the General Counsel to the Governor to David Lott Hardy, chairman of the IURC. It concludes:
Further, in keeping with the spirit as well as the letter of the Governor's Executive Order on ethics and the ethics statutes, we question whether any issue Duke Energy of Indiana may bring before the IURC in the next three hundred and sixty-five days could be divorced from the particular matter restrictions outlined by the Ethics Commission. Indiana Code 4-2-6-11 specifically considers the "circumstances surrounding the employment" and only issues unrelated to the "particular matters" raised in the next year would be conflict free for Mr. Storms to represent Duke's interests before the IURC. The Governor has asked me to inform you that we don't see any issues unrelated to the "particular matters" which may come up in the next year and as such would expect Mr. Storms not to appear before or assist on matters before the IURC for the three hundred and sixty-five days following his departure.

We are certain the IURC intends to abide by the letter and spirit of the ethics laws and that it shares our view that the formal ethics opinion for Mr. Storms contains significant restrictions on his duties as counsel for Duke Energy of Indiana. Had Duke seen fit to assign him out of state, this would have been clear to all. To be certain that the spirit of the laws are fully honored, the Governor asks that the IURC not entertain communications or have contact with Mr. Storms for the next twelve months.

[Updated Sept. 25th] Today's Star has a long story by Jeff Swiatek headed "Duke vows to play fair with former state lawyer: Firm says it will restrict his work more than ethics rules require." Some quotes:
Responding to conflict-of-interests concerns about its hiring of the general counsel of the state's utility regulatory agency, Duke Energy said Friday it will impose even stricter limits on his work for Duke than Indiana's ethics law requires. * * *

Storms, who was the IURC's general counsel and chief administrative law judge, starts working for Duke on Monday as one of its four regulatory attorneys in Indiana. He left his IURC job Friday. * * *

Duke's surprise announcement that it had hired Storms away from his 10-year state job, where he oversaw regulatory matters pertaining to Duke's controversial $2.9 billion coal gasification power plant in Southern Indiana, also prompted a response from Gov. Mitch Daniels.

In a letter to IURC Chairman David Hardy, the governor's general counsel, David Pippen, said the governor wants it known that the ethics guidelines affecting Storms' future contacts with the IURC are to be interpreted broadly. [ILB - the letter is quoted earlier in this entry]

"The governor intended the ethics laws to reassure the public that state employees would not trade influence for personal gains," says the one-page letter, released Friday by the governor's office.

ILB: The entire story bears reading. For instance:
"Storms was presiding administrative law judge over Duke's biggest capital project ever in Indiana -- and one that will return enormous profits to their shareholders," Olson said. The fact that Storms is now going to work at Duke raises a "red flag," Olson said.

Duke is awaiting word from the IURC on whether it will approve a rate settlement for the coal gasification plant that Duke hammered out with its industrial and other customers.

The hiring of government regulators by utilities isn't uncommon.

Two other attorneys in Duke's Indiana legal department were once on the IURC's staff, Protegere said, and the Indiana president for Duke Energy, Michael Reed, is a former executive director of the IURC.

The story reports that TWO IURC ALJs applied for the Duke job:
It turns out that a second IURC administrative law judge, Aaron Schmoll, also applied for the Duke legal job, which Duke posted in the spring. Schmoll came to the State Ethics Commission in July for legal advice and was told he should stop working on any Duke-related matters once he heard back from Duke about his application.
ILB: Who is to say that the dream of a job at some point in your career with the big utility you are regulating, or the gaming industry you are legislating about, does not have an impact on how you conduct yourself during the entire course of your work?

Posted by Marcia Oddi on September 24, 2010 05:20 PM
Posted to Indiana Government