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Powers collide in utility rate case charged by ethics scandal

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What a difference an ethics scandal makes.

Duke Energy received everything it asked for from the Indiana Utility Regulatory Commission in a request for deferred accounting of $11.6 million after a 2009 ice storm. But after discovery that administrative law judge Scott Storms had been cozying up to Duke while presiding over its cases, ultimately getting a high-paying job with the utility, heads rolled, and the IURC later reversed itself.

As the scandal unfolded in late 2010, Duke fired Storms, and Gov. Mitch Daniels fired IURC Chairman David Lott Hardy, who had learned about the communication between Storms and Duke as Storms administered cases. A state ethics panel fined Storms $10,000 and banned him from holding state office; Hardy faces three Class D felony counts of official misconduct.
 

duke04-2col.jpg Duke Energy contests reversal of a 2010 IURC ruling initially in its favor. (IL Photo/ Perry Reichanadter)

When Duke Energy v. Indiana Utility Regulatory Commission, 93A02-1111-EX-1042, was argued before the Indiana Court of Appeals on Dec. 10, the ethics scandal was never too far away, although judges seemed to wrestle with how it may affect their opinion.

IURC commissioners “have never said why they changed their minds,” said attorney Jon Laramore of Faegre Baker Daniels LLP, who represented Duke. He argued that the cases on which the commission at first found for Duke in 2010, and later against in 2011, were largely the same. “The right remedy here,” Laramore said, “is to vacate that arbitrary and capricious (second) decision.”

Presiding Judge Nancy Vaidik asked Laramore whether revisiting a decision was in the commission’s discretionary powers, and he responded that its conflicting results wouldn’t build public confidence.

“The flip side is, how does the public view a case where the (administrative law judge) is seeking employment with the very company that he’s ruling on?” Vaidik said.

“If that’s the reason for (IURC commissioners) changing their mind, they should say so and they should base it on the facts,” Laramore said. “And there is no fact in this record that indicates any influence at all on that (reversal) because of that situation.”

Judge Paul Mathias noted that an IURC investigation found there was no undue influence regarding Storms, despite the ethics ruling against him, and Judge Michael Barnes said the IURC finding was in the record before the court.

IURC attorney David Steiner and Office of Utility Consumer Counselor attorney A. David Stippler defended the agency’s reversal and said there was ample cause for it.

“This was a completely new look at the evidence,” Steiner said of the second hearing in which Duke’s request was denied. “They decided because of the concerns that had been raised about potential impropriety ... that they were going to look at this thing anew.”

Steiner and Stippler noted that the hearing officer, IURC chair and at least one commissioner had changed when Duke’s case was revisited. Stippler said Duke was asking for more money the second time around and that a Duke official in a deposition “made some admissions we believe in the second proceeding that were relevant to the entire question about whether there should be deferred accounting.”

Vaidik pressed attorneys on Laramore’s argument that the same commission came to different conclusions based on essentially the same set of facts. “Doesn’t it smell?” Vaidik asked Steiner.

“This is more like a new judge after the first judge has been recused making a decision about the case,” Steiner said. “I don’t think any rule of law prevents a judge from changing his or her mind about a case, particularly if there is new evidence.”

Anthony Swinger, spokesman for the Office of Utility Consumer Counselor, said the agency had opposed Duke’s request in both cases. “Really, the bottom line here is the statutory prohibition on single-issue ratemaking,” Swinger said.

Duke could request and receive special accounting treatment for extraordinary storms, he said. “We simply believe Duke did not make that case and that the commission got it right in its (second) order.”

But Ed Simcox, interim president of the Indiana Energy Association, said the commission’s reversal of a previous order could have significant consequences if the Court of Appeals allows it to stand.

“It was the view of the Indiana Energy Association companies that the commission’s action in this case might erode that policy of finality and certainty,” Simcox said. “The reason that’s important to the companies is the risk that would present to the state of Indiana’s reputation in the credit markets. The credit markets look very closely at state regulation.”

Meanwhile, Citizens Action Coalition executive director Kerwin Olson said the ethics scandal should bring new scrutiny to other cases where Storms was involved, particularly the controversial $3 billion Edwardsport Integrated Gasification Combined Cycle project. The CAC opposes ratepayer subsidies for construction of that coal-fired power plant in Knox County.


hardy-david-lott-mug Hardy

“In the Duke-Edwardsport case, (IURC is) not even allowing (Duke’s) hiring of Scott Storms … and the firing of David Lott Hardy into the evidence to be considered,” Olson said. “How in the world can the commission acknowledge an ethics scandal in two cases and ignore it in the third? It’s inconsistent and wrong from our perspective.”

In addition to the charge that Hardy looked the other way when Storms was trying to get a job with Duke, Hardy also was charged in a grand jury indictment last December with two counts of improper ex parte communications with Duke employees on separate occasions regarding cost increases on the Edwardsport project.

The Court of Appeals in October declined to postpone a trial for Hardy, who claimed he was too ill to stand trial. At IL deadline, his trial date had not been set.•

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  1. A traditional parade of attorneys? Really Evansville? Y'all need to get out more. When is the traditional parade of notaries? Nurses? Sanitation workers? Pole dancers? I gotta wonder, do throngs of admiring citizens gather to laud these marching servants of the constitution? "Show us your billing records!!!" Hoping some video gets posted. Ours is not a narcissistic profession by any chance, is it? Nah .....

  2. My previous comment not an aside at court. I agree with smith. Good call. Just thought posting here a bit on the if it bleeds it leads side. Most attorneys need to think of last lines of story above.

  3. Hello everyone I'm Gina and I'm here for the exact same thing you are. I have the wonderful joy of waking up every morning to my heart being pulled out and sheer terror of what DCS is going to Throw at me and my family today.Let me start from the !bebeginning.My daughter lost all rights to her 3beautiful children due to Severe mental issues she no longer lives in our state and has cut all ties.DCS led her to belive that once she done signed over her right the babies would be with their family. We have faught screamed begged and anything else we could possibly due I hired a lawyer five grand down the drain.You know all I want is my babies home.I've done everything they have even asked me to do.Now their saying I can't see my grandchildren cause I'M on a prescription for paipain.I have a very rare blood disease it causes cellulitis a form of blood poisoning to stay dormant in my tissues and nervous system it also causes a ,blood clotting disorder.even with the two blood thinners I'm on I still Continue to develop them them also.DCS knows about my illness and still they refuse to let me see my grandchildren. I Love and miss them so much Please can anyone help Us my grandchildren and I they should be worrying about what toy there going to play with but instead there worrying about if there ever coming home again.THANK YOU DCS FOR ALL YOU'VE DONE. ( And if anyone at all has any ideals or knows who can help. Please contact (765)960~5096.only serious callers

  4. He must be a Rethuglican, for if from the other side of the aisle such acts would be merely personal and thus not something that attaches to his professional life. AND ... gotta love this ... oh, and on top of talking dirty on the phone, he also, as an aside, guess we should mention, might be important, not sure, but .... "In addition to these allegations, Keaton was accused of failing to file an appeal after he collected advance payment from a client seeking to challenge a ruling that the client repay benefits because of unreported income." rimshot

  5. I am not a fan of some of the 8.4 discipline we have seen for private conduct-- but this was so egregious and abusive and had so many points of bad conduct relates to the law and the lawyer's status as a lawyer that it is clearly a proper and just disbarment. A truly despicable account of bad acts showing unfit character to practice law. I applaud the outcome.

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