Regulators postpone Duke hearing amid scandal

October 6, 2010

The Indiana Utility Regulatory Commission canceled a hearing set for Thursday on Duke Energy Corp’s controversial Edwardsport generating plant amid a conflict-of-interest scandal that cost the agency’s chief his job.

Gov. Mitch Daniels on Tuesday fired IURC chairman David Lott Hardy, saying that Hardy knew the agency’s chief counsel, Scott Storms, talked to Duke about a job while presiding over Duke cases, including Edwardsport. Storms later left his IURC post for a job at Duke.

Daniels ordered that administrative opinions over which Storms presided should be reopened and reviewed to ensure they weren’t tainted.

“The commission takes the Governor’s directive seriously and will fully cooperate with all matters related to the review of the IURC cases, including the pending Duke Energy case involving [Edwardport],” said commission spokeswoman Danielle McGrath in a prepared statement issued Wednesday morning. “Therefore, the commission will refrain from holding the hearing on Thursday related to this case. We find that it is in the best interest of the commission and all parties involved. Before continuing with this case, we will evaluate our processes and ensure that our actions are transparent and in line with the Governor’s expectations.”

The hearing was part of a periodic review of the status of the $2.9 billion plant, which is under construction at nearly double its 2007 estimated price tag due to cost overruns.

Rates were projected to rise by an average of 19 percent for Duke’s Indiana customers to pay for Edwardsport, although a settlement with industrial customers could reduce the increase to 16 percent.

Early Wednesday, the Citizens Action Coalition, an Indianapolis group that intervenes on behalf of consumers in utility cases, questioned why the commission still had the Edwardsport hearing on its schedule.

Duke said Storms was not involved “in any substantial way” with the case that was to be heard on Thursday.

“Certainly, if the commission feels differently, we’ll cooperate. It’s premature to speculate about the impact of any delay,” said Angeline Protogere, a spokeswoman for Duke’s Indiana operations.

Storms, as an administrative law judge, presided over about 25 Duke cases in the last several years. He appears to have last worked on the Edwardsport case on July 23.

Storms, along with Duke Energy’s Indiana CEO, Michael Reed, were placed on administrative leave by the North Carolina-based utility on Tuesday shortly after the state announced the firing of Hardy.

Duke and Storms earlier had obtained an opinion from the Indiana Ethics Commission regarding whether Storms would be subject to a one-year employment prohibition with Duke. On Sept. 20, the ethics commission opined that he was not subject to the prohibition, saying he ultimately did not negotiate or administer a contract with Duke.

Commissioners make the ultimate decision in cases pending before the IURC. But consumer groups, such as CAC, were floored, saying Storms still made critical decisions such as deciding whether to admit key evidence in utility cases.

Daniels administration officials this week said Hardy was aware of those communications yet failed to remove Storms from Duke cases. The matter has been turned over to the State Inspector General’s office.

Julia Vaughn, policy director at Common Cause of Indiana, suggested an outside party should be called to investigate, such as the U.S. Attorney.

The Edwardsport plant issue is already volatile as it is. In August, the state’s Utility Cousumer Counselor, David Stippler, said he was “deeply concerned” about the escalating cost of the Edwardsport coal-gasification plant and said the IURC should be mindful of the effect the overruns could have on consumers.

Stippler proposed the commission help consumers in part by axing an incentive that allowed Duke to boost earnings by deferring income taxes.

Last month, Stippler’s office, Duke and Duke industrial customers proposed a settlement that would cap Edwardport’s cost at $3 billion and revise a depreciation rate that would save customers about $35 million a year, among other relief.

The CAC has argued that proposed changes to depreciation and capital are short-lived because they could go away with Duke’s next rate case in 2012, when the plant is set to open. CAC and environmental groups argue the cheapest alternative is to halt construction of the 618-megawatt plant.


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