http://www.indystar.com/apps/pbcs.dll/article?AID=2011102010332

12:15 AM, Feb. 1, 2011  Written by John Russell

Consumer advocates are demanding that the state appoint an outside investigator to look into whether Duke Energy Corp. used undue influence to get state approval to build its massive power plant in Edwardsport.

They say Indiana's regulatory process has been so tainted with inappropriate and secret conversations between Duke employees and state officials that the public has lost confidence.

The Office of Utility Consumer Counselor compared it to jury tampering and said the matter remains suspect, even though several people at Duke and the state have been fired or resigned.

"If you tamper with one juror, you don't have to tamper with all 12" to obstruct justice, said Randall C. Helmer, the deputy consumer counselor. He said he would favor a special prosecutor or other independent agent to examine whether Duke overstepped legal boundaries when several executives contacted state regulators to discuss Edwardsport, company hiring decisions and vacation plans.

Timothy Stewart, an attorney with Lewis & Kappes, who represents large industrial customers of Duke Energy -- including manufacturers and shopping centers -- said that appointing an independent investigator is "the only way the public will ever have confidence in the outcome of this matter."

They made their comments Monday to the Indiana Utility Regulatory Commission, which is sorting out how to move ahead in the case. The IURC did not make an immediate decision on the matter.

The state is coming under increasing pressure from consumer groups and industrial customers to make more information available and allow the public a greater say in the matter.

On Monday, the IURC overturned an earlier decision and agreed to hold two additional field hearings in Kokomo and Columbus to allow more public input on the Edwardsport case. One of the hearings will be held Feb. 28 at Columbus North High School, 1400 25th St., Columbus. The other will be March 1 at the Kokomo Event Center, 1500 N. Reed Road, Kokomo. Both hearings begin at 5:30 p.m.

The IURC has been stung in recent months by findings that one of its own high-level officials, general counsel Scott Storms, had presided over hearings about the Edwardsport plant while talking to Duke about a job. He quit the IURC in September to take a job with the utility. But just a week later, Gov. Mitch Daniels fired the IURC chairman, David Lott Hardy, saying he knew of Storms' conflict of interest but did nothing to stop it.

The IURC has denied separate requests from Citizens Action Coalition, a grass-roots consumer group, and The Indianapolis Star to examine the contents of construction reports on the Edwardsport project prepared by an outside inspector, Black & Veatch. The IURC said it could not produce the reports because they contained trade secrets and opinion or deliberative information, both of which are privileged under state law.

The Indiana Public Access Counselor also ruled that the reports were exempted from public disclosure.

The IURC official who originally signed the order granting confidentiality to the Black & Veatch reports was Storms. He has since been fired from Duke and accused of ethics violations by the Indiana inspector general on charges of having an improper financial interest arising from employment or prospective employment at Duke.

The IURC has delivered other documents to The Star that were requested under open-records laws, including hundreds of compromising e-mails between state regulators and Duke executives.

The Star also requested a wide array of documents in December from Gov. Daniels' office under the open-records laws. The governor's office has yet to deliver those records, even though officials there originally said the records would be provided "as they are gathered."

On Monday, Jane Jankowski, the governor's press secretary, said records were still being compiled and declined to provide a timetable of when they might be available.

"I don't know when," she said. "There's a lot of stuff going on around here. I don't know exactly when this will be provided to you. It will be provided when they're done going through all the documents."

Jerry Polk, an attorney for four consumer and environmental groups, said that he favored the IURC appointing an "independent agent" to look into questions of undue influence.

"There doesn't have to be a quid pro quo or a payoff to taint the whole process," he said later. "Sometimes it's just a matter of inappropriate contact."

Duke took issue with the "jury tampering" comments, saying that every past decision related to the Edwardsport plant has been a unanimous decision by the IURC.

"If a commissioner wants to dissent, they can," said Angeline Protogere, a Duke spokeswoman. "Also, most of the current commissioners were not even part of the IURC when the plant was originally approved."

Some consumer advocates and Duke customers also want to slow the Edwardsport approval process for cost overruns until this fall, so they have more time to dig into the matter to see if Duke hid the true cost of the plant from the beginning.

"We have reason to believe that Duke knew the plant would cost substantially more than what it originally told the IURC," Stewart said.

Duke repeatedly has denied that it has hidden the true costs of Edwardsport. The company said it has managed the project properly and let regulators know about cost and construction problems as they arose.

The plant is more than halfway built. Duke said Monday it wants to have hearings by no later than summer. "We're building this plant right now. We're spending money on this plant every day," said Kelley Karn, a Duke Energy lawyer.

Last week, Citizens Action Coalition filed numerous confidential e-mails and letters in the case, which strongly suggested that Duke and its engineering contractor, Bechtel Corp., had been arguing over why the plant's cost had risen so sharply, who was to blame, and who should pay the bills.

Call Star reporter John Russell at (317) 444-6283.