INDIANAPOLIS (AP) — Gov. Mitch Daniels reacted strongly Tuesday to an ethics flap roiling the Indiana Utility Regulatory Commission, firing the panel's chairman, ordering opinions involving a Duke Energy plant reopened and sending the matter to his inspector general.
Daniels' general counsel wrote in a memo to all executive branch agency heads that an internal review showed Scott Storms, an IURC attorney and administrative law judge, discussed a position with Duke while presiding over hearings concerning the utility.
IURC Chairman David Lott Hardy was aware of the discussions between Storms and Duke but did not remove him from handling matters related to the utility, according to the memo.
Daniels' office said in a statement that Hardy's dismissal Tuesday was effective immediately. Daniels named IURC Commissioner Jim Atterholt as the panel's new chairman.
Storms left the IURC last month for a new position in Duke's regulatory division. That prompted criticism from watchdog groups since Storms had handled matters related to a $2.9 billion coal-gasification plant the utility is building in southwestern Indiana. Its construction costs are nearly double the original 2007 estimate.
"An internal review of the matter revealed the lawyer was communicating with Duke regarding a position with the company at a time he was presiding over administrative hearings concerning Duke," Daniels aide David Pippen wrote in his memo.
Administrative opinions that Storms presided over "regarding Duke will be reopened and reviewed to ensure no undue influence was exerted in the decisions," Pippen wrote.
Daniels' office also sent the matter to Inspector General David Thomas to determine if any laws were broken or if any misinformation was given to the Indiana Ethics Commission, a state agency that rules on ethics questions involving state employees.
Duke issued a statement saying it had placed Storms on administrative leave with pay pending a review by outside counsel. Also placed on leave pending the review was Mike Reed, who became president of Duke Energy-Indiana in June, about 16 months after leaving the IURC as its executive director.
Duke placed Reed on leave because he had worked for the state before joining the utility, spokeswoman Angeline Protogere said. Reed left the IURC to become commissioner of the Indiana Department of Transportation in February 2009.
Duke hired Storms after receiving an Indiana Ethics Commission opinion clearing him to work there under certain limitations, the utility's statement said.
It also said the utility will cooperate with the IURC's review of Duke decisions and the inspector general's investigation.
The 630-megawatt coal-gasification plant Duke is building near Edwardsport has seen its original construction costs spike. Those costs will result in higher electrical rates for Duke's Indiana customers.
Duke last month struck an agreement with the state's utility consumer counselor that would cap at $2.98 billion the construction costs that the utility could pass along to rate payers. Protogere said the utility expected the agreement to withstand the IURC review because the deal was struck after Storms left the commission.
Activists who criticized Duke's hiring of Storms welcomed Tuesday's developments but said the controversy wasn't over.
"We believe the commission has ignored evidence submitted by Duke's own witnesses that canceling the plant is the least-cost option for rate payers at this point," said Kerwin Olson, program director for the environmental and utility watchdog group Citizens Action Coalition.
"They have essentially given Duke Energy a blank check. We question all of those orders and the motivation behind them," Olson said.
Julia Vaughn, policy director for the government watchdog group Common Cause/Indiana, praised Daniels' moves but said the Storms' pursuit of a job with Duke while at the IURC was troubling.
"More investigation is needed to ensure that the public interest is upheld," Vaughn said.
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