Nice work if you can get it

Political patronage rules in state utility commissions

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When Martin Cohen was appointed head of the Illinois Commerce Commission, the regulatory body that oversees utilities in the state, he joined a very small fraternity.

Cohen took the post in September 2005 pending confirmation by state lawmakers, becoming only the nation's eighth utility commissioner since 2004 to have a background as a consumer advocate. In his former role as executive director of the Citizens Utility Board, he had been a harsh critic of the state's big power companies.

But his confirmation was not to be.

The Illinois Senate, which has several members who receive generous campaign contributions from those same companies, fell two votes shy of the majority needed to confirm him. He lost his job in October.

One senator told a reporter that Cohen "has a certain bias against utility companies."

Cohen's CUB job was to represent citizens in rate cases. That led a handful of key senators to accuse him of harboring a conflict of interest, though not an economic one.

"They claim that my conflict is some inherent bias I have against utility companies," he told the Center. "It's almost like they accuse me of having some sort of genetic defect – it's preposterous."

Cohen said that during the confirmation process one senator asked whether he would accept the president of Commonwealth Edison, the dominant local utility, as a member of the commission. Cohen said if he were to "sell all his stock, leave his retirement program and take a 95 percent pay cut, we would welcome him."

The intrusion of politics into deciding who will sit on a board created to look out for the public interest is not uncommon. Commissioners are much more likely to have a background in politics or the utility industry than experience as consumer advocates.

Members of these boards — commonly known as "public utility commissions" or "public service commissions" — are charged with regulating companies that provide basic public necessities such as local telephone, electricity, water and natural gas services.

In an exhaustive state-by-state survey, Center for Public Integrity researchers examined financial disclosure filings, biographical information, state documents and thousands of other records pertaining to these low-profile public servants. According to the Center's research:

  • 42 percent of current utility commissioners have served as state legislators, legislative staffers or gubernatorial appointees
  • 13 percent of commissioners held jobs in regulated industries before taking office
  • 22 percent of commissioners or their spouses who filed disclosure reports received income from energy or communications companies.

Researchers also found that 25 commissioners accepted a combined $69,000-worth of travel, meals and gifts paid for by outside sources that include the very utility companies they regulate.

The state commissions range in size from three to seven members and are all tasked with regulating utility services, but no two are exactly alike in terms of their regulatory responsibilities. While almost all of them oversee electric, gas, water and telecommunications services, in some states they also regulate railroads, public transportation services, trucking and even modular home construction.

The Center survey looked at commissioners who were in office in 2004. During the course of the research, some commissioners were replaced. The boards of two states (Delaware and New York) each had a vacancy during the survey period, making the total population of the analysis 199 commissioners.

As part of this project, Center researchers also constructed an online "In Your State" resource page to provide information on utility boards in each state, including links to officials' financial disclosure statements.

Well connected politically

In most states, utility commissioners are nominated or appointed by the governor and approved by the Senate, similar to the federal process in which Federal Communications Commission members are appointed by the president and confirmed by the U.S. Senate.

However, commissioners are elected by popular vote in 11 states: Alabama, Arizona, Georgia, Louisiana, Mississippi, Montana, North Dakota, Nebraska, New Mexico, Oklahoma and South Dakota. In Virginia, nominees are selected by a party caucus and elected by the legislature. In South Carolina, commissioners are elected in a joint session of the House and Senate.

The appointment process in some states has been subject to charges of cronyism. Governors are often accused of valuing political loyalty over qualifications for the job.

Of the 199 state commissioners identified in this survey, the most common previous work experience by far was as a state legislator: 45 former state senators or representatives had become utility commissioners. Fourteen commissioners were former legislative staff members and at least 35 had been gubernatorial appointees in other positions. All told, a minimum of 82 commissioners had held at least one of these positions. Center researchers relied on biographical information provided on state Web sites, news stories, financial disclosure forms and interviews for this review.

According to Diane Munns, president of the National Association of Regulatory Utility Commissioners, it only makes sense that governors pick people known to them when making appointments.

"These are important issues in the states," said Munns, who sits on the Iowa Utilities Board. "I don't think it's surprising that governors look at people they trust to take these jobs."

That view isn't shared by Mark Cooper of the Consumer Federation of America.

"It's political patronage," said Cooper, the pro-consumer policy advocacy group's research director. "It's a reward for politically active people."

Some states stand out more than others:

  • In Missouri, the five members who comprise the commission are three former state legislators (Connie Murray, Steve Gaw and Robert Clayton), one former legislative staffer (Jeffrey Davis), and one gubernatorial staffer (Lin Appling).

  • Utah's three-member commission includes two former gubernatorial appointees and a former state senator.

  • Virginia's powerful three-member State Corporation Commission is made up of two former state legislators and a former legislative staffer.

Direct election by the voters does not necessarily lead to more diverse representation for consumers, either. In Arizona, four of the five commissioners are former state legislators and the fifth had been a former gubernatorial appointee.

In contrast, the number of commissioners in the survey who accurately could be described as having experience as consumer advocates is extremely small. Aside from Cohen, we identified seven others:

  • J. Terry Deason of the Florida Public Service Commission was formerly chief regulatory analyst in the commission's Office of Public Counsel.
  • Marsha H. Smith of the Idaho Public Utilities Commission served as deputy attorney general in the business regulation/consumer affairs division of the Office of the Idaho Attorney General and as deputy attorney general for the Idaho Public Utilities Commission.
  • Robert B. Nelson, former commissioner of the Michigan Public Service Commission served as president of the Michigan Electric and Gas Association from December 1987 until his appointment to the utility board in 1999. From 1979 to 1987, he was director of the commission's Office of Regulatory and Consumer Affairs, overseeing the board's legislative, legal, public affairs and consumer services functions.
  • J. Peter Lark argued rate cases on behalf of the public for the Michigan Attorney General's Office before being named to that state's commission.
  • Lorinzo Joyner of the North Carolina Utilities Commission was a staff lawyer for the board's Public Staff in 1983, and continued her work in public utilities law after joining the utilities section of the North Carolina Attorney General's Office.
  • Thomas Getz, before coming to the New Hampshire Public Utilities Commission, was an attorney with the New York Consumer Protection Board.
  • James Volz was appointed chairman of the Vermont Public Service Board by Gov. James Douglas on March 1, 2005. He has 16 years experience as director for Public Advocacy for the state, representing the public in regulated utility matters.

Better paid than many

Public utility board members are paid well by most standards. The nationwide average salary is $92,561, according to the Center's state-by-state survey.

The highest pay for the job is in Virginia, where commissioners earn $135,297 a year; in comparison, newly elected Virginia Gov. Tim Kaine will earn $175,000.

While the job pays well, it also comes with responsibilities that extend far beyond utilities. The State Corporation Commission also regulates insurance (in most states an entirely separate bureaucracy), tracks state banking and securities, and is in charge of all corporate filings. Commissioners have extensive authority and are referred to as "judges."

Virginia's commissioners include Theodore V. Morrison Jr., a member of the Virginia House of Delegates from 1968 to 1988; Clinton Miller, also a former House member, from 1972 to 1995; and Mark C. Christie, counsel to the speaker of the House from 2000 to 2004, and a former gubernatorial staffer.

In second place on the top salary list is Florida's Public Service Commission, whose five members each earn an annual $124,348—nearly equal to Gov. Jeb Bush's $124,575 salary.

Members are appointed by the governor, who selects candidates from a list of names provided by a nominating council. Appointees must be confirmed by the state Senate.

Third on the salary list is Connecticut, where commissioners earn between $107,617 and $138,043 (the midpoint, $122,830, was used for ranking purposes). All five members are former legislators, legislative staffers or gubernatorial appointees.

Ranking at the bottom on the annual salary list is Delaware, where the job is part-time and board members earn $30,000. One rung up is Louisiana, where commissioners are elected to a $45,000-a-year job. Third from the bottom is Nebraska, where commissioners make $50,000.

Industry ties matter

While government experience is by far the most common background among public service commissioners nationwide, utility industry experience is also high on the list.

The Kansas Corporation Commission, which regulates natural gas production and other utilities, has lawyer and former state legislator Robert Krehbiel as a member. Before joining the board, he was the executive vice president of the Kansas Independent Oil and Gas Association; according to its Web site, the group's mission includes "meeting with local, state and national leaders on industry problems" and "maintaining legislative contact at the local, state and national level."

Krehbiel lists Phillips Petroleum Co., Energy Resources Group Inc. and the Imperial Oil Co. as previous employers. His financial disclosure form indicates that he owned 10 percent of an oil and gas production company, which he sold in 2004.

Another Kansas commission example is Michael Moffet, who was a public affairs consultant for Public Strategies Inc., a Texas-based lobbying firm that did work for SBC Communications Inc.

Three of Alaska's five commissioners come from the industry: Mark Johnson was a lawyer for United Utilities Inc., a major telephone service provider; Dave Harbour was former director of government relations for the Atlantic Richfield Co., an oil company; and James Strandberg is an engineer and designer of power plant systems.

Three of Maryland's five commissioners during the survey period had industry ties before joining its Public Service Commission as well: Allen Freifeld was chief regulatory attorney for MCI in the Mid-Atlantic region from 1996 through 2002; Ronald Guns was a longtime employee of telephone giant Verizon Communications Inc.; and Harold Williams lists a number of different jobs with Baltimore Gas and Electric in his online biography on the commission Web site.

Sandra Hochstetter of the Arkansas Public Service Commission served as assistant general counsel for Reliant Energy for 12 years. And Michael Peevey of California's Public Utilities Commission, a former unpaid adviser to Gov. Gray Davis and Power Association of Northern California "Man of the Year" honoree, also was president of Southern California Edison — a division of Edison International, one of the largest energy companies in the world.

Other commissioners' industry connections worth noting include:

  • Sharon Reishus of the Maine Public Utilities Commission was director of North America Power at Cambridge Energy Research Associates, a large energy consulting firm.

  • Michael Harrington was a manager and engineer at the Seabrook Nuclear Power Plant in New Hampshire before he took a spot on the state's Public Utilities Commission. New Hampshire's board also includes Graham Morrison, a former telecommunications analyst with the Gartner Group, BCBS and General Electric.

  • Gregory Sopkin of Colorado represented energy and telecom utilities before joining the state Public Utility Commission in 2003.

  • Denise Bode was president of the Independent Petroleum Association of America, a trade and lobbying organization for the oil industry, before being elected to Oklahoma's Corporation Commission. She also had served as legal counsel for former U.S. Sen. David Boren when he was in office and on President George W. Bush's energy transition team.

Investments raise questions

Of the 199 commissioners examined in the Center's study, 167 of them in 41 states were required to file some form of financial disclosure information. All 50 states have some legislation that bans commissioners from having a financial interest in a company in an industry they regulate, and the analysis of financial holdings largely bore that out.

The analysis did find, however, that 22 percent of those in the study had a financial interest in a communications or energy company.

Of the businesses connected to the regulated industries, communications technology companies were the most common ones in which commissioners had a financial interest. Intel Corp. was No. 1 on the list (eight commissioners owned between $52,500 and $117,499 in stock); Microsoft ($42,500 to $77,499) and Cisco Systems Inc. ($43,500 to $68,500) were second and third, respectively.

Cellular telephone companies are regulated largely at the federal level, but states still are responsible for tracking service and other issues. Six commissioners own between $42,501 and $137,499 in stock in Nokia, Vodaphone (part owner of Verizon Wireless) and Motorola.

The cable television industry is largely regulated at the local level, although states have become more involved as cable operators enter the telephone business and telephone companies enter the pay-television business. Five commissioners owned a combined $13,000 in stock in Comcast and Time Warner Inc., according to their disclosure forms.

Some investments, though, appear to be more directly related to regulated industry.

Carol Murphy, formerly a commissioner with the New Jersey Board of Public Utilities, is married to a man whose bond investment in Jersey Central Power & Light is valued at between $25,000 and $50,000.

Meanwhile, the Virginia commission's Morrison owned between $10,000 and $50,000 of stock in SBC Communications, according to his disclosure statement filed in 2004.

However, Ken Schrad, a State Corporate Commission spokesman, said that Morrison no longer owns the SBC stock. Schrad said the stock was held in a retirement account and when Morrison did own it, SBC was not active in Virginia. However, that changed this year when the commission needed to consider the implications for the state of SBC's merger with AT&T Corp.

Who pays for commissioner's travel?

This week in Palm Springs, the National Association of Regulatory Utility Commissioners hosted its annual meeting. The trade association's Web site states that its mission is to "serve the public interest by improving the quality and effectiveness of public utility regulation."

NARUC was the top outside sponsor of travel for utility commissioners, according to disclosure forms collected by the Center. Filings show that the group sponsored at least 14 trips, valued at a combined $11,548 but the real total is likely much higher because not all states require commissioners to report such information.

The association's annual meetings act as magnets for lobbyists.

"If you go to the NARUC convention, every large entity will have their hospitality suite going full bore," said Byron Harris, an economist who represents West Virginia residents in utility rate cases.

Harris said that the convention's educational panels are usually dominated by industry representatives. "Some committees hear from the people they regulate and really don't want to hear from dissenting voices."

Organizers of the annual meeting try to keep industry influence at bay to some extent. A company that is "subject to regulatory jurisdiction of a NARUC member" cannot act as a sponsor. But the ban does not extend to utility service companies or utility associations that lobby the government.

This year's sponsors, for example, include Utility Service Partners Inc. and the Electric Power Supply Association. Another major sponsor, the Edison Electric Institute, spent nearly $83 million lobbying the federal government between 1998 and 2004, according to the Center's LobbyWatch database. While it does not own any regulated utilities directly, it is easily the largest lobbying group for electric companies in the nation.

NARUC head Munns said that the meetings are an "opportunity to educate the membership." This can be especially valuable given the relatively short tenure of some of the commissioners, she said.

She admitted that industry lobbying takes place at the event, but said that meetings are open to everyone. "I'd be more than happy to invite you," she said. "We start meeting at 7 o'clock in the morning."

Overall, the Center identified 25 commissioners who accepted a combined $69,000-worth of services in 2003, mostly related to travel.

South Carolina's disclosure law requires utility board members to report free meals and travel paid for by industry. Three commissioners accepted 46 meals from various sponsors, according to their 2004 disclosure forms, the most of any state that is required to report such activity.

At the NARUC Winter Committee Meeting in Washington, D.C., South Carolina's commissioners listed details of meetings with representatives from BellSouth Inc., Duke Energy, Progress Energy, Sprint, Williams Gas and Alltel — all of which do business in the state. Another outing for the Palmetto State's commissioners, this one at Morton's Steak House in Atlanta, was sponsored by AT&T, BellSouth, Duke and others.

A number of other trips were paid for by regulated utilities or nonprofits that are funded by regulated utilities.

The Electric Power Research Institute — which has representatives of some of the largest power companies and lobbying firms in the country on its board — paid at least $6,500 for trips for the nation's public utility board members in 2004. Among the organizations that paid for trips and food were the American Gas Association, the Gas Technology Institute and Verizon Communications Inc.

The most heavily traveled commissioner in the Center's survey was Marilyn Showalter, formerly of the Washington state Utilities and Transportation Commission, who took 21 trips valued at $15,054. All but four of the trips were related to speaking engagements, according to records.

While NARUC conventions might sound a little dry, offering seminars such as "The constitutional framework of economic regulation: A workshop," not all trips are strictly business. Miller of Virginia's commission lists a NASCAR stock car racing event in Bristol, Tenn., valued at $500 among his. It was paid for by Tom Sokol, president of Sprint's Virginia and Tennessee operations. Sokol also footed the bill for Miller's trip to an Atlantic Coast Conference basketball tournament game, also worth $500.

Other freebies Miller has reported in the past include a golf trip to the Fiddlers Convention in Galax, Va., paid for by "personal friend" Jim Spradlin, the director of external affairs at Sprint; another NASCAR race outing paid for by Sokol; and a golf trip sponsored by Cox Communications.

Sokol is also a "personal friend" of Miller's fellow board member Morrison, for whom he sponsored a trip to the NASCAR race in Bristol valued at $300 for two years in a row.

When asked about the activities, State Corporation Commission spokesman Schrad told the Center:

"SCC Commissioners Morrison and Miller have complied with the lawful requirement to disclose any entertainment event paid for by an individual. They also honored the lawful requirement to refrain from discussing any fact or issue arising out of any proceeding pending before the commission."

What makes a good commissioner?

Trips and conventions aside, the daily responsibilities of utility regulators are hardly glamorous.

Most commissions act as quasi-judicial organizations that deal largely with laws or administrative rules, so having a legal background is useful for members — and in some states it's required. The job can require expertise in accounting, engineering, administration and investing. About 10 percent of the commissioners — at least 20 of the 199 surveyed — had previously worked in staff or appointed positions in state regulatory commissions.

Since utility regulation is a specialized field, previous experience is not a realistic requirement for board membership. And in 11 states, it's the voters who decide who has the best qualifications. This begs the question, what combination of experience is desirable for a public utility commissioner?

"I don't know what the punch line is," said the Consumer Federation of America's Cooper. "Because they're politicos, they're probably not very expert. Then again, they may have been on the committees that oversaw these industries."

People who come from the utility industries argue that such experience is valuable. While this might be true, it depends on what type of industry experience they are talking about.

Strandberg of Alaska's commission is a professional engineer who designs power plant systems; such insight would certainly come in handy as a utility regulator. It is more difficult to make the same argument for people whose primary jobs were to promote a corporate agenda.

While there is some logic to appointing commissioners with industry or regulatory experience, an argument could be made that there should be more commissioners who have experience representing consumers, not utility companies.

In Illinois, the rejection of Cohen's appointment has gotten the former consumer advocate a considerable amount of attention, but he said he has no interest in leveraging that publicity into a run for office — at least not right now.

And despite his Senate confirmation experience, he said he does not support making Illinois' utility commission job an elective office.

"I've personally never favored electing the commission. It comes back to the money," he said. "You are either beholden to industry or the political party structure."

For now, he's not sure what he will do. He would like to work for a nonprofit group or for government. Regardless, he will have to do something soon.

"I can't afford to take a break for a very long while," he said. "I'm, as they say, exploring my options."

Director of State Projects Leah Rush and researchers Katie Mills, Robert Morlino and Mike Baxter contributed to this report.