On Sept. 24, Scott Storms, a lawyer for the Indiana utility commission, quit and went to work for Duke after receiving an ethics waiver. That decision outraged consumer advocates. On Oct. 5, Indiana Gov. Mitch Daniels fired the commission's head and ordered a reopening of Mr. Storm's recent decisions involving Duke. Duke later fired Mr. Storms and also its top local executive who had hired him.
End of story? Not by a long shot. Then came a release of emails pried loose by the Indianapolis Star, which led to the resignation last week of James Turner, Duke's executive in charge of its regulated utility businesses. The emails exposed an allegedly excessive coziness between Indiana regulators and Duke executives, who joked about cars, wine and wives. In one email, Duke's Mr. Turner wondered if the state's "ethics police would have a cow" if a top regulator visited him at his weekend home.
Then again, you might wonder how the people involved could have helped being buddy-buddy with each other. Virtually all the players working for Duke had once worked for the Indiana government, while the main player on Indiana's side, the head of its utility commission, had once been a lawyer for a local utility now owned by Duke.
The company in the future might be smart to hire out-of-staters to run its Indiana business. The state might be smart to subject its utility regulators to legislative confirmation or direct election by voters, as other states do to ward off cronyism. Hovering over all is Duke's Edwardsport coal-gasification plant, whose high-tech white elephanthood is a direct product of Mr. Rogers's attempt to position his company to prosper in the age of climate politics.
The plant, which is nearly $1 billion over budget, was always destined to mean higher prices for consumers compared to the low-tech coal plants it would replace. But it was sold to the locals as supplying not just electricity but a "clean coal" future for Indiana's "dirty" coal-mining industry. More to the point, the plant's economics were supposed to be rescued when Congress passed cap and trade, dramatically hiking costs for traditional coal power plants.
Mr. Rogers here was betting on Mr. Rogers, the closest thing to a celebrity CEO in the utility business, profiled in the New York Times magazine two years ago as a "green coal baron." No executive has lobbied as noisily or consistently for a national price on carbon output. His wish seemed certain to come true after both major parties nominated climate worrywarts in the 2008 presidential contest.
But something about a 9.8% national unemployment rate has now made politicians less keen on imposing higher utility bills. Nor did Mr. Rogers count on what we'll boldly call the public's growing sophistication about climate science. Where the public was once prepared to believe in a pending climate meltdown because "scientists" said so, now it entertains the possibility that "scientists" are human, capable of mistaking theory for fact, of confusing belief with knowledge.
From the start, the Edwardsport plant was unpopular with certain consumer and green groups for whom clean coal is an oxymoron, but they were outvoiced by other groups that take a more realistic view of America's dependence on coal. Now the opponents are limbering up again, joined by industrial customers such as Nucor Steel, who fret about getting socked with high-priced electricity.
Though it isn't reflected in the emails, let's just assume then a certain neuralgia on Duke's part about whether Indiana regulators will continue to let the plant's costs be passed along to consumers. Until the scandal, the state had been reasonably obliging. But 'tis the season to be charitable. The critics should also acknowledge that Duke and the rest of the industry have been in a tough position, trying to invest billions to meet future demand despite nagging uncertainty about the future of climate policy. The Edwardsport plant may be proving a wrong bet in this regard, but that does not mean that Indiana's regulatory process has been corrupted.
Just the opposite: 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 it 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.
Editor's note: In case you missed these Indianapolis Star front page stories about Duke Energy and the IURC, please find below links to these stories.
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Duke Energy exec Turner resigns over ethics flap
11:32 AM, Dec 6, 2010
http://www.indystar.com/article/20101206/BUSINESS/12060350
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IURC chief and Duke exec were pals, e-mails show