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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. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

  2. "Meanwhile small- and mid-size firms are getting squeezed and likely will not survive unless they become a boutique firm." I've been a business attorney in small, and now mid-size firm for over 30 years, and for over 30 years legal consultants have been preaching this exact same mantra of impending doom for small and mid-sized firms -- verbatim. This claim apparently helps them gin up merger opportunities from smaller firms who become convinced that they need to become larger overnight. The claim that large corporations are interested in cost-saving and efficiency has likewise been preached for decades, and is likewise bunk. If large corporations had any real interest in saving money they wouldn't use large law firms whose rates are substantially higher than those of high-quality mid-sized firms.

  3. The family is the foundation of all human government. That is the Grand Design. Modern governments throw off this Design and make bureaucratic war against the family, as does Hollywood and cultural elitists such as third wave feminists. Since WWII we have been on a ship of fools that way, with both the elite and government and their social engineering hacks relentlessly attacking the very foundation of social order. And their success? See it in the streets of Fergusson, on the food stamp doles (mostly broken families)and in the above article. Reject the Grand Design for true social function, enter the Glorious State to manage social dysfunction. Our Brave New World will be a prison camp, and we will welcome it as the only way to manage given the anarchy without it.

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  5. Some in the Hoosier legal elite consider this prayer recommended by the AG seditious, not to mention the Saint who pledged loyalty to God over King and went to the axe for so doing: "Thomas More, counselor of law and statesman of integrity, merry martyr and most human of saints: Pray that, for the glory of God and in the pursuit of His justice, I may be trustworthy with confidences, keen in study, accurate in analysis, correct in conclusion, able in argument, loyal to clients, honest with all, courteous to adversaries, ever attentive to conscience. Sit with me at my desk and listen with me to my clients' tales. Read with me in my library and stand always beside me so that today I shall not, to win a point, lose my soul. Pray that my family may find in me what yours found in you: friendship and courage, cheerfulness and charity, diligence in duties, counsel in adversity, patience in pain—their good servant, and God's first. Amen."

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