Indiana Scandal Means More Heat for Duke Energy CEO Jim Rogers

Jim Rogers photoLast month NLPC reported that Duke Energy CEO James Rogers faced increasing questions about his leadership, in part because of conflicts of interest with top company officials and the Indiana Utility Regulatory Commission. Now the state’s Ethics Commission has fined a former top lawyer at IURC because he discussed a potential job with Duke while he participated in cases that would determine cost recovery for the utility’s controversial Edwardsport coal gasification plant.

The Indianapolis Star reported that the lawyer, Scott Storms, committed three violations of state law in the scandal, and the Ethics panel fined him $12,120 and barred him from future state employment. From the report:

In a six-page ruling, the ethics commission said Storms, while general counsel and chief administrative law judge at the IURC, was negotiating for a job or “had an arrangement” concerning prospective employment with Duke as he took part in cases involving the company’s Edwardsport plant and its proposed digital electrical network.

In both cases, Duke was seeking state approval to pass along costs to customers. Storms did not have a vote on those matters but advised the commissioners and made procedural rulings.

The panel also concluded that Storms violated state law by failing to notify his supervisors of a potential conflict of interest or seeking an advisory ethics opinion.

According to The Star, Storms took a job with Duke in September that raised his annual salary from $93,000 to $135,000. Duke fired him in November after the newspaper revealed emails in which he discussed his potential job with top company officials. Two of those officials lost their jobs as well, as did Storms’s former boss at the IURC, David Hardy, because he knew about the conflict but failed to do anything about it. Gov. Mitch Daniels dismissed Hardy.

What did Jim Rogers know about the negotiations, and was there favorable rate consideration by IURC for Edwardsport? Cost estimates for the plant have swelled from nearly $2 billion when first proposed in 2007 to almost $3 billion last year, according to the Charlotte Business Journal. Opponents of the plant had cited the immaturity of coal gasification technology, but Duke in part promoted it as a carbon sequestration experiment (with $1 million in federal funds) to reduce the amount of greenhouse gases produced in power generation. The higher costs would have increased customers bills by an average of 16 percent under a $2.987 billion settlement between the utility and IURC reached during the scandal, but that agreement was voided. Duke now seeks an agreement for cost recovery a bit less than that, but its industry customers want the company and its shareholders to absorb about $500 million more than what Duke wants, according to news reports.

Rogers late last year denied knowledge of the problematic correspondence between Duke and IURC officials. But in March he amended his testimony about the Edwardsport rate negotiations, stating that a review of 9,000 emails showed that discussions between Duke’s top Indiana executive, Mike Reed, and Hardy, the dismissed IURC official, might indicate that a cost settlement was discussed between the two. Reed, who was fired in November, knew of plans to bring Storms from IURC to Duke, and he also kept Rogers in the loop about where the rate case was going with IURC. Is it a stretch to believe Rogers knew of Duke-Indiana’s efforts to bring a top IURC lawyer on board at such a critical time for the company’s troubled Edwardsport project?

Rogers has led the creation of an atmosphere of coziness between Duke and government, whether its questionable interaction with state regulators; backing Obama administration-favored energy policies such as cap-and-trade that would have added a hidden tax to electric bills; or outright support of a political party by guaranteeing a $10 million line of credit for organizers of the 2012 Democratic National Convention in Charlotte, where Duke is headquartered. There’s a fuzzy line between executives, regulators and policymakers, which is part of the business plan.

Now Rogers is in the crosshairs because of a project that is supposed to replace two older oil and coal-fired plants built in the 1940s, conceived in part to promote the “clean coal” theory and to appeal to politicos concerned about the reduction of greenhouse gas emissions. As the Wall Street Journal’s Holman Jenkins wrote in December:

The plant was hugely popular with the political firmament, and continues to benefit from a gusher of federal, state and local tax subsidies worth $460 million. One could even say the regulatory process made the Edwardsport blunder possible. Without regulators around to guarantee a return on such a risky and pioneering investment, Duke likely would have sat on its hands and let rising electricity prices take care of any gap between demand and supply while waiting for the country to make up its mind about global warming.

Rogers denied that climate change legislation drove Duke’s decisions on the Edwardsport project, but he admitted it is “the first plant in the nation to scale up coal gasification technology.” That step would likely not have been taken had Duke not had assurances on government handouts and rates to pay for the new plant. When cost coverage was in jeopardy, it appeared some of its top people took unethical measures to make sure they stayed intact.

That’s something for which Rogers should be held responsible.

Paul Chesser is associate fellow for the National Legal and Policy Center and is executive director of American Tradition Institute.


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