GUEST BLOG: Duke Energy Ties to NC Governor Increase Concerns over Bill to Fire State Utilities Commission

February 14, 2013

This guess post was written by Sue Sturgis for the Institute for Southern Studies' online magazine,Facing South. This is a critical moment for North Carolina's energy future, as a packed public hearing held in Raleigh this week showed -- and there are growing concerns that the politician who might get to make key decisions about it has significant conflicts of interest. On Monday, Feb. 11, about 180 people attended a N.C. Utilities Commission (NCUC) hearing on Duke Energy's plan for meeting its customers' power needs over the next two decades. Dozens of citizens testified against Duke's proposed Integrated Resource Plan, which calls for generating most of its energy from polluting sources: dirty coal plants (24 percent), natural gas plants (29 percent), and risky nuclear plants (29 percent). Efficiency would account for only 4.5 percent of Duke's generation mix, while wind and solar would make up only 2.25 percent. The plan would cost Duke's customers dearly, as the company -- which supplies electricity to over 95 percent of North Carolina customers since its merger with Progress Energy -- would quadruple rates within a decade. Speaker after speaker called on commissioners to require Duke to increase its generation from renewable sources such as solar and to encourage greater efficiency. Many of those who testified cited the urgency of acting now, pointing to mounting signs that the climate has already been dangerously disrupted by unchecked greenhouse gas pollution. "What are we waiting for, the next tragic super storm to strike?" asked Avram Friedman, executive director of the Canary Coalition, a nonprofit that advocates for clean air in western North Carolina. "What is it going to take for you to act in the public interest?" But there are mounting concerns that the public interest will get even less consideration if North Carolina's legislature gets its way and gives Gov. Pat McCrory (R) sole control over the commission's membership. A controversial bill recently introduced in the General Assembly would sweep out the current members of key state regulatory commissions including the NCUC and replace them with members appointed by the governor and/or the legislature. In the case of the NCUC,Senate Bill 10specifies that the new appointments would be made by the governor and confirmed by the legislature. It would also downsize the commission from seven members to five. The bill has already passed the Senate and is now advancing through the House, both of which are controlled by veto-proof Republican super-majorities. [caption id="attachment_15557" align="alignright" width="600" caption="The Greenpeace thermal airship A.E. Bates flies over Duke Energy's Marshall coal-fired power plant on Lake Norman."][/caption] State Sen. Bill Rabon (R-New Hanover), one of the bill's primary sponsors along with Sens. Tom Apodaca (R-Buncombe) and Neal Hunt (R-Wake), told the Senate Rules Committee that the bill streamlines state government and allows key boards to be run by appointees who "are more like-minded and willing to carry out the philosophy of the new administration," as The News & Observerreported. However, some watchdogs are protesting what they call "an unprecedented conflict of interest" created by the legislation because of McCrory's unusually close ties to Duke Energy. In addition to having received generous campaign contributions from Duke Energy (the company, its political action committee, employees, and their families donated over $240,000 to McCrory's 2008 and 2012 gubernatorial campaigns and to the state Republican Party since he became the party's nominee, according to arecent reportby the liberal advocacy group Progress NC), McCrory worked for the company for 28 years, starting out digging ditches and eventually making his way to a position as senior adviser with Duke's Business and Economic Development Group before retiring in 2007 to run for governor. Because of that employment history, the clean-energy advocacy group NC WARN last month joined with the state AARP toask the governor to recuse himselffrom making appointments to the commission and from appointing a new Public Staff director to represent consumers in utility cases because of his longtime association with Duke. This week NC WARN sent aletterto McCrory raising concerns about the commission overhaul proposal. "If the bill passes, you would be required to appoint all the members of the Utilities Commission," NC WARN Executive Director Jim Warren wrote in the Feb. 11 letter. "The public perception would be inescapable that Duke Energy had captured its regulator, and had done so with the Governor's assistance." But the governor's financial ties to the utility giant are not merely historic: Though he's no longer employed by Duke Energy, McCrory continues to hold a significant financial stake in the company. His lateststatement of economic interestfiled with the N.C. Ethics Commission andposted to the Indyweek.com websitediscloses that he holds stock in Duke valued at a minimum of $10,000. North Carolina ethics rules do not require reporting the exact value of the investment. Notified of the holdings, Warren said they are "just more evidence that the governor has an unprecedented conflict of interest." McCrory's history of conflicts This is not the first time concerns have arisen over potential conflicts of interest related to McCrory's close ties to Duke Energy, as Facing Southreportedback in 2008. In 1994, while working for Duke and serving as an at-large city councilman and mayor pro tem in the company's hometown of Charlotte, McCrory chaired a council meeting and voted on a matter that directly affected Duke's finances.City of Charlotte v. Cookinvolved Charlotte's efforts to condemn private farmland to build an underground water pipe for a project that would enable the city to purchase power from Duke instead of the electric membership corporation that was the authorized provider for that location. The case eventually ended up in state Supreme Court. Though the court majority ultimately ruled there was no wrongdoing by the city, adissenting opinionby Justice Beverly Lake Jr., a Republican, pointed to a conflict of interest on McCrory's part:
The record evidences multiple Duke Power internal e-mail messages and memoranda reflecting that Duke Power and the City collaborated to have the City acquire a fee simple title to the property in order that Duke Power could provide the power to the plant. These e-mail messages indicate that the mayor pro tempore of the City, an employee of Duke Power, as well as the project director had contact with Duke Power officials and discussed condemning a fee simple interest for the project. The mayor pro tempore chaired the 12 September 1994 City Council meeting where the subject of condemning a fee simple was discussed, and he voted in favor of a fee simple condemnation.
McCrory filed an affidavit saying he would not have participated in the meeting if he had known Duke was involved. However, the courtpointedto evidence that McCrory did in fact know Duke was involved -- though itruledthat "an ethical problem involving the Council has to rise to a much higher level than this one for us to upset a decision by the Council." In another action that raised conflict of interest concerns, McCrory went to Washington, D.C. in 1997 to testify as Charlotte mayor against federal clean air regulations for the city that would have cost his employer Duke Energy an estimated $600 million. As a local paperreportedat the time:
When asked about a possible conflict of interest arising from his appearance on Capitol Hill as Charlotte's mayor to testify about a matter that would directly affect his employer, Duke Power (where he serves as manager of business relations), McCrory replied, "No, in fact it's quite beneficial because I'm very knowledgeable on the subject."
In the letter it sent to McCrory this week about the latest conflict of interest concern, NC WARN asked the governor to oppose the NCUC provision in the commission overhaul bill and to call for it to be removed from the House version of the legislation. It also asked McCrory to state that, should the section pass in spite of his opposition, he would appoint an independent panel to recommend candidates for the NCUC and abide by its recommendations. If he fails to do so, NC WARN's Warren wrote, McCrory risks further alienating the people from the government that's supposed to serve them:
The Utilities Commission provisions of the bill would set the precedent that whenever legislative leadership and the governor changes party, the seated commissioners would be thrown out and replaced. It would do away with the Commission's institutional legitimacy as well as its knowledge base and continuity gained by handling its highly complex legal, technical, and policy issues. The public, already skeptical that utility regulation is in the public's interest, would see the Commission as just a rubber stamp wielded by politicians and their utility industry backers. Instead of bolstering faith in the integrity and effectiveness of state government, the bill would take cynicism to a new level.

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