The revolving door between the Indiana Utility Regulatory has been well established for a very long time but may have a more difficult time in the future.
In what may be the clearest signal yet of a run for the presidency by Indiana Governor Mitch Daniels, he decided yesterday to try to mitigate a scandal of huge proportions by firing the Chairman of the Indiana Utility Regulatory Commission David Lott Hardy.
Although the media and even Daniels' opposition had given Hardy a pass for being the chair of a commission that was intended to regulate his former employer, when the revolving door between the Commission and Duke Energy recently became too crowded to maneuver, Daniels had his General Counsel, David Pippen, step in with a stern warning that even the appearance of wrong doing was not allowed.
In a strongly worded memorandum to all State Agency heads, Pippen wrote:
"Recently, a former general counsel and administrative law judge (ALJ) for the Indiana Utility Regulatory Commission left state government to work for Duke Energy of Indiana, a regulated entity. I wrote a letter to the IURC explaining the Governor's interpretation of the spirit and intention of the ethics reform he spearheaded when he came to office. In short, he will not tolerate even the appearance of impropriety.
"Upon the Governor's direction, an internal review of the matter revealed the lawyer was communicating with Duke regarding a position with the company at a time he was presiding over administrative hearings concerning Duke. Additionally, the agency head was aware of the communications and did not remove the lawyer from matters for which the lawyer was now conflicted.
"So you understand the seriousness of this matter, I want you to know our response:
1. The Governor has terminated the employment of the chairman of the IURC;
2. The administrative opinions over which the ALJ presided regarding Duke will be reopened and reviewed to ensure no undue influence was exerted in the decisions;
3. The one-year cooling off period for decision makers are to be considered to include ALJs who preside over information gathering and order drafting; and
4. The matter has been referred to the Inspector General to determine if any laws were broken or misinformation given to the Ethics Commission when requesting a formal opinion;
"To reiterate the ethics rules as they relate to regulated entities:
1. No ALJ should engage in communications with regulated entities regarding possible employment without recusing oneself from matters appearing before that regulator;
2. Administrative opinions over which an ALJ presided while pursuing employment opportunities with the regulated entity will be reopened and reviewed to ensure no undue influence was exerted in the decision;
3. The one-year cooling off period for decision makers includes ALJs who preside over information gathering and order drafting; and
4. Violations of these points will be referred to the Inspector General.
"Please advise your staff to avoid this circumstance in the future.
"Atterholt's appointment is effective immediately. The governor will request that the IURC Nominating Committee begin the process of accepting applications to fill the open position on the commission."
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The former Judge Pippen referred to was Scott Storms, who served the Commission as both its Chief Counsel and Chief Administrative Law Judge. It was in his capacity as ALJ that created a clear conflict of interest since Storms had "presided" over nearly all the "dockets" decided by the IURC in what may become Duke Energy Indiana's largest boondoggle ever, the nearly $3 billion Edwardsport new coal plant currently under construction in SW Indiana.
That plant, and its IURC approval has been challenged by Valley Watch, Save the Valley, the Citizens Action Coalition and the Hoosier Chapter of the Sierra Club since it was first proposed as being too expensive for ratepayers and not even needed for supplying the electrical needs of customers in Duke's sixty-nine Indiana county "service territory."
Valley Watch's and the other's arguments have essentially been ignored by the Commission for more than three years as costs for the plant have grown precipitously from a mere $1 billion when Duke first started gathering political support for the plant in 2004 to just under $3 billion today.
Sadly the early figure also was claimed to include Carbon Capture and Sequestration or CCS while the $3 billion amount does not include that at all.
In fact, Duke's assurances to the public and the IURC that they would incorporate CCS "on site" in the project were totally unfounded after a ratepayer funded $15 million study in to the matter showed the site was completely unsuitable for sequestration of the 9 million tons of CO2 the plant would release each year.
Repeated attempts by opponents of the plant to point out these things were brushed aside by Storms, Hardy and the IURC who basically just rubber stamped whatever Duke desired, leaving Duke's customers to assume the massive risk the project entailed.
Even Duke projects overall rate increases for their Indiana customers of nearly 20% while it is certain that residential customers will pay significantly higher increases than Duke's commercial and industrial class customers. In fact, Valley Watch has estimated that it is likely that residential rate increases could exceed 30% to build a plant that is not even needed.
Had Duke and the friendly IURC decided that CCS should be done at the plant, those increases would be even larger. The United States Department of Energy has projected that incorporating CCS into a new plant will increase the capital costs need to build by around 50% which would bring the total for this plant to a whopping $4.5 billion on the backs of ratepayers.
But the problem does not end there.
The University of Kentucky's Center for Applied Energy Research (CAER) estimates that the energy required to capture and sequester carbon from such a plant will consume anywhere from 25-40% of the energy the plant produces. That significant hit has made most state regulators scoff at the idea of new coal in thier states due to the hugh costs that now exceed cleaner alternatives like wind and even solar power.
But not in Indiana, where the Governor, whose ambitions for the presidency has recently made blogs and even a major Newsweek story, has given anything "coal" a green light.
(The Governor's thought about another Indiana coal project in Rockport, IN can be found here.
For that facility, Daniels completely dropped his conservative facade and supported legislation that Valley Watch described as the "Communist Chinese Model of Business" requiring the State of Indiana to purchase the plant's syngas output and then force Indiana gas customers to buy it at prices as much as 400% of the cost of natural gas bought on the open and free market.
Yesterday's actions by the Governor do make him look good in the eyes of both constituents and anyone wanting to weed out scandal and conflicts of interest in a democracy.
However, had Daniels not been contemplating a run for President, it seems doubtful that he would have taken such a strong stand and may have even turned his back.
After all, Hardy, the man he fired, was recently reappointed to the chair of the Commission by Daniels and everyone knew that Hardy was close to Duke since he was Duke's predecessor, Public Service Indiana's Assistant General Counsel.
It was also well understood that the former Executive Director of the Commission, Michael Reed, took over as Duke Indiana's new President in June of this year.
That appointment came without even an obtuse glance from the Daniels Administration.
Sadly, this all comes after more than $1.5 billion has already been spent for a plant that is not needed and will drive some Duke ratepayers into bankruptcy due to the tremendous rate increases that will be required to pay off the nefarious plant, the first of its kind in the nation.
It was easy to predict this economic travesty. In August of 2007, Valley Watch president, John Blair did just that before the IURC in a Bloomington, IN hearing about whether IURC should allow the plant.
Blair's testimony has come true almost in its entirety. It can be downloaded by clicking the link below.
Download Blair's testimony here.
John Blair can be reached at ecoserve1@AOL.com.