Utilities are lobbying against the public interest. Here's how to stop it.

In this episode, utility watchdog David Pomerantz discusses all
the ways that utilities use ratepayer money to lobby against the
clean-energy transition — and what regulators and policy makers
can do to stop it.


(PDF transcript)


(Active transcript)


Text transcript:


David Roberts


There are many features of US public life that I believe, perhaps
naively, would be the subject of a great deal more anger were
they better understood. One of those is the role utilities play
in climate policy.


A rapid transition to a low-carbon energy system is necessary to
avoid the worst of climate change. Happily, that transition is
going to be an enormous net benefit to US public health and the
US economy. It's good for quality of life, economic growth,
international competitiveness, national security, and the
long-term inhabitability of the planet.


But it’s not necessarily good for the companies that actually
sell energy to customers — power and gas utilities. In fact,
utilities are using every tool at their disposal to slow the
energy transition, from lobbying to PR campaigns to donations to,
as the last few years have demonstrated, outright bribery.


And here's the even more galling bit: they are fighting against
the clean-energy transition using your money. They use ratepayer
money — from captive customers over whom they are granted a
monopoly — to fund their lobbying. They have effectively
conscripted their customers, who have no choice where to get
their power and gas, into an involuntary small-donor army working
against the public interest.


It’s outrageous. In a new report called “Getting Politics Out of
Utility Bills,” the Energy and Policy Institute — one of the best
utility watchdogs out there — details some of this utility
corruption and offers recommendations for how to prevent it.
These are not futile recommendations to Congress, but actions
that fall within the current powers of state regulators and the
Federal Energy Regulatory Commission.


I have been ranting about utilities for years, and one of my most
reliable sources on the subject has always been the report’s
author, Energy and Policy Institute Executive Director David
Pomerantz, so I was eager to talk to him to air some shared
grievances, hear some enraging tales of utility shenanigans, and
discuss what can be done to rein them in.


All righty, then. David Pomeranz. Welcome to Volts. Thank you so
much for coming.


David Pomeranz


Thank you so much for having me.


David Roberts


I was thinking of you just earlier today as I saw a new story in
the Washington Post about how the gas industry is under fire and
it is now hiring Democratic politicians to shill for it. And I
thought: "Golly, isn't that thematically on point?". So it seems
like a perfect time to be covering this report. Before we get
into specifics of who's done what and how to stop them from doing
it, let's just start with power utilities are out there getting
involved in politics. And let's just sort of discuss what is
their net effect on politics. Like, what are they pushing for and
against out there in the states and at the federal level?


David Pomeranz


That is a great question, and I think it will be important in
context for your listeners who I am count myself as a loyal one,
and I know many are thinking about climate change, and energy
policy, and decarbonization, and the energy transition. And if
they are concerned about those things then they should be
concerned about utilities, political power and their political
machines. So let's talk about what their political agenda is. And
we're talking about both electric and gas utilities. Oftentimes
the same companies, but sometimes, you know, there are utilities
that sell gas only and electricity only. And they're all relevant
to this conversation.


So, since you mentioned, gas utilities pushing back against
building electrification, and that has certainly been in the news
quite a lot this month, so we can start there, because that's
really simple. The gas utilities sector is, with almost no
exceptions, united in its aggressive political effort to stave
off building electrification. They basically see that as an
existential threat to their existence. They have for some time.


David Roberts


And it is.


David Pomeranz


Yeah, we can be honest about that, I think.


David Roberts


Yeah.


David Pomeranz


We'll talk about electric utilities, of course. You know,
electric utilities have not only a role to play in decarbonized
world and a transition from fossil fuels, but really like the
very central role to play in it. And I wish they would, more of
them would get religion on that. But gas utilities don't really.
Their role is, they make money from putting methane gas in pipes
and sending it to buildings and factories.


David Roberts


These companies that are both, you can sort of see a root out of
this for them. But an exclusively gas utility really is, you
know, destined for the trash bin of history, and knows it and is
fighting it tooth and nail. But some of the stuff electric
utilities are fighting, I don't think is as straightforward or
obvious. Why they seem hostile to both distributed renewables,
sort of consumer side stuff, and hostile to interregional
transmission of the big power. So they seem hostile on sort of
both ends of that. Why are they out doing that and how
significant is their opposition to this stuff in the grand scheme
of things?


David Pomeranz


Yeah, it's significant. It depends a bit on the issue. So maybe
let's start on one end of the spectrum, with the things that they
are most opposed to with the lease nuance.


David Roberts


Right.


David Pomeranz


And I would say that that is distributed resources, customer
owned resources, like rooftop solar, and energy efficiency, which
we maybe don't talk about as much as we should. But, for decades
now, electric utilities have opposed those because it presents a
threat to their business model, right? As you have kind of, like,
in the high priest of helping people to understand this, electric
utilities in our current model make money when they build stuff.
If people are putting solar panels on their roof, or adopting
technologies to use less electricity, either one of those kind of
has the same effect on the electric utility. It means they don't
have to build as much stuff. And so they make less money.


David Roberts


Yes, you're using less utility power.


David Pomeranz


Right. So they are opposed to that. And we'll talk about some of
the most scandalous things that utilities, electric utilities,
have used their political machines to do in the last few years,
but a lot of it roots from this almost paranoid obsession with
stopping the growth of rooftop solar in some places. So that's
that. On the other end of the system in terms of, like, the bulk
power system, it's a little bit less monolithic and a little bit
more of a spectrum within the industry. So there are absolutely
electric utilities who have figured out that they can make money
by retiring coal plants and gas plants, and instead building wind
farms and utility scale solar farms. So Xcel Energy kind of
coined the term "steel for fuel" to represent that change. And it
makes sense. Now, they're all kind of in a different place on
that. Some have really embraced that transition. Some of the
dinosaurs in the industry, like Southern Company, or Duke Energy,
or Entergy, they're not there yet for a bunch of reasons that I
think are largely cultural, frankly. They just have a lot of
groupthink in their leadership and their C-suites, and they
haven't figured out yet that that solution sort of helps their
profits and also helps customers. It's really good for everyone.
And so on that, there's some heterogeneity in the whole sector.


But there are companies who, utility companies, who absolutely,
in the very recent past, have used their political power to slow
down that transition too. So probably the canon example of that,
and I think we should talk more about this because it's really
such an important case study, is FirstEnergy in Ohio.


David Roberts


Yeah, we'll definitely get into that.


David Pomeranz


Sure.


David Roberts


And the transmission thing too. I think is maybe not intuitive
for people just to understand that sort of, if your power
generation and transmission is confined to your utility area,
you're sort of stuck with the resources you have within that
area. And insofar as you connect to other areas, and potentially
get cheaper power, right? You lower the price of power generally.
And utilities, especially the owners of those plants that are
getting those sky high prices, don't want that either.


David Pomeranz


Yeah, this is really counterintuitive for people. And I think,
unfortunately, this narrative has kind of taken over that the
main obstacle to building the high voltage regional transmission
lines that we desperately need to transition from fossil fuels to
renewables, is like some farmers and ranchers and NIMBY, "not in
my backyard" protesters.


David Roberts


Yes. Or environmentalists wielding environmental review, et
cetera, and protecting salamanders.


David Pomeranz


Right. And I'm not dismissing those things as real. There are
people, you know, there is a history of landowners not wanting
transmission lines going on or near their property. But in my
opinion, far less of a barrier and gets much more attention than
it should compared to this really big structural barrier, which
is these multibillion dollar companies that don't want to see
transmission built, regional transmission. And that regional part
is kind of the key when it comes to utilities. So, utilities are
very happy to build local transmission. In fact, they're probably
gold plating their local transmission assets because they can get
it approved very quickly.


David Roberts


Yeah, super easy to get it greenlit.


David Pomeranz


Super easy. And it's a money making machine for them. The
regional transmission assets, first of all, as with anything,
they'll fight the opportunity for anybody to own those assets but
them. So they will fight against any kind of merchant development
of transmission, which takes a big piece of the market out that
could make things cheaper for everybody. And, yeah, they'll fight
against transmission lines that weaken their assets. So a good
example of how this stuff all interacts is, there was a proposed
transmission line to bring clean hydropower from Quebec into New
England, and it was fought by local activists.


But also NextEra Energy paid $20 million to bankroll, very
quietly, some of those protests, and to campaign against the
transmission line because they own gas plants and a nuclear plant
in the region, and so that imported hydro would have undercut the
profitability of those assets. There's another case, that we
documented on our website, about how Entergy, utility company
that operates in Louisiana and in the south, they actually hired
sort of an undercover operative, like a consultant that didn't
disclose they were working for Entergy, to go to some of the
meetings of MISO, the Mid Continent Independent System Operator,
and basically kind of try to gunk up the works, and slow down
development of transmission lines that would bring lower cost
wind energy into Entergy's service territory. So they fight that
too. They fight distributed resources, they fight competitive
regional transmission.


David Roberts


And they fight the creation of new competitive electricity
markets too.


David Pomeranz


Yes, for sure. So, we have competitive wholesale electricity
markets in many parts of the country. The ones we have could use
some reforms to make them work better for customers. Utilities
certainly will fight those. But there are also places where we
don't have any, and the biggest one is the southeast. And the
utilities there, companies like Duke Energy, Dominion Energy,
Southern Company, they are very aggressively using their
political power, including paying groups with names like Power
for Tomorrow, that pay former regulators to do some of this
stuff, to argue against bringing an RTO to the southeast, which
many legislators in some of those states have expressed an
interest in, for both parties because they want to see cheaper
electricity.


Large customers want to see it, because many of them want to have
better access to clean energy, and a regional transmission
operator would help with that. And the utilities are fighting
that too. So it's really kind of up and down the system. A lot of
solutions to decarbonization. Building electrification when it
comes to gas utilities, certainly rooftop solar and energy
efficiency, and in some cases shuttering fossil fuel assets,
regional transmission... All of those are things we need, and all
of those are things that in various parts of the country, one of
the biggest reasons we're not getting those things fast enough,
is because utilities are blocking them.


David Roberts


This is one of this genre of podcast I think of as the "you
should be madder pod", and people really should be madder about
this. So it's kind of wild. So, anything that sort of like,
brings cheaper power, and decarbonization, and customer
empowerment, like all these things that are good socially, and
environmentally, and economically, and politically, name it.
Everybody wants all these things, except for the companies that
control electricity which are out fighting them, which is just
really wild. You know, like any widget maker is gonna go
politically lobby against a ban on widgets, you know what I mean?


Companies have, in our collective wisdom, we have decided that
corporations are people, and have the right of free speech, and
have the right to defend their interests, and whatever the
propriety of that, it's a real thing. But, cannot make the point
enough that utilities are not just another company, they're not
just another private enterprise. So, give us that context too as
well. Why? It's like, it's bad enough that the companies that
control electricity are out comprehensively opposing better,
cleaner, cheaper electricity. But these are not just normal
companies, like, these are monopolies.


David Pomeranz


Yeah, they're basically state granted monopolies and that is a
really important distinction. That's kind of everything. So, if
you don't like the political position of some company that you
buy some consumer product from, if you don't like the political
position of a fast food company, you can buy your hamburgers from
some other fast food company.


David Roberts


So you don't like the behavior of a certain Tesla executive.


David Pomeranz


Precisely. You can buy an EV from some other car company. It's
getting easier than ever. But if you don't like the political
positions of your utility, first of all, you have no recourse.
You have to buy electricity. In some cases you have to buy gas,
for the time being at least. First of all, it's interesting you
mentioned how in our collective wisdom, or at least the
collective wisdom of the Supreme Court, we've basically created
kind of, like, an anything goes campaign finance environment. And
that's meant to, if you believe it, if you give credence to the
logic behind those court decisions, like Citizens United, it's
meant to protect the free speech rights of corporations. I
disagree entirely with the construct, but that's the construct.


What about the free speech rights of utility customers? Right?
Like, if my utility is taking my money and spending it to sue the
EPA, so that they can poison my air and water with impunity,
that's political speech, you know? And I'm basically being
conscripted unwillingly into an army of small dollar donors by my
utility to fund that political speech. So there's case law about
this. I'm not an attorney, but my First Amendment rights are
being violated basically by compelling my speech. So that's one
whole set of problems.


David Roberts


Let's just emphasize this real quick, because I don't know that
we ever stated it clearly. But it is important for people to know
that it'snnot just that your utility is out lobbying against your
interests. And it's not just that you are a captive customer of
that company and cannot get away from it, even if you disagree
with its positions. It is also the case that the money you are
being forced to give the company is being used for that lobbying.
So you're not just an irritated bystander, you're literally
paying for the companies to do this through bills that you have
no choice but to pay. Which just seems like as straightforwardly.


I mean, it's a little wild to me that there hasn't been lawsuits
about this. It's a little crazy that we allow utilities to do
this in the first place. I don't know what the positive argument
is for allowing utilities to conscript their customers into being
dirty energy lobbyists. Are there not lawsuits?


David Pomeranz


There have been some challenges and we're starting to see more of
them. I think, like a lot of issues, this one kind of only rears
its head and becomes salient when a lot of people start to talk
about it. Utility political influence and regulatory capture kind
of thrives in the shadows, and that's sort of the default resting
state almost, like, if people don't talk about it, it just kind
of grows and grows like fungus in the dark.


David Roberts


Well, it's kind of true of electricity generally, it's true of
your utilities generally. You don't have to pay attention to that
stuff.


David Pomeranz


Interestingly, and this is a parallel to something you just
talked about with Sage Welch on your show about gas stoves, there
was more attention to some of these issues, like in the early 80s
when there was a lot of skepticism and sort of public outrage
about utilities for a lot of reasons. Electricity was expensive,
it's coming off the back of Three Mile Island, and for a brief
period, electric utilities were sort of treated more skeptically
in terms of their political operations. And so, that's happened
at other times in our history too, actually right after the stock
market crash and the great depression in the late 1920s and early
1930s, which utilities had a big role in.


There, at that time, was a massive degree of concern about the
political power of investor owned utilities. A lot of that
manifested at the time in this very big struggle between a much
larger question of how we would serve electricity in the country,
would it be investor owned utilities or public power, which you
had FDR sort of pushing for public power, so they're... Detour.
But a long way of saying, there have been periods in our history
where people do pay attention to utilities political power, and
there is a lot of outrage over it, and there tends to be legal
action and legislation proposed and sometimes passed and
regulation. But outside of those moments, it all kind of thrives
in a lack of attention.


My hope is that we are entering one of those cycles now, for a
bunch of reasons.


David Roberts


You would think, right? Because decarbon it is, like, existential
threat, blah, blah, blah. Decarbon by 2050, blah, blah, blah.
Like, this is here now. And imperative.


David Pomeranz


Yeah, now is the time for it. And one other thing I would just
say quickly about that is, even if your utility is doing some
good things, even if your electric utility has gotten the memo
that it needs to decarbonize, maybe it's still fighting rooftop
solar on the side, but at least it's switching from, you know,
it's retiring its coal plants rapidly and switching to
renewables, which some are. This corruption and political
spending that they do, particularly what they're doing with
ratepayer money, and what they're doing, that often breaks the
law, that's really bad when it happens by the sort of, quote
unquote, "better utilities" also, right? Because you have a bunch
of opponents that clean energy transition, like fossil fuel
companies and hardcore conservatives, who don't believe in
climate change, et cetera, say they don't, they are all looking
for a reason, in very bad faith, to criticize the whole thing. So
if you have a utility who is investing in a lot of wind, but
they're doing it via political corruption, that also presents a
huge backlash risk. So it's kind of bad in all its forms and, as
you said, the worst part is that we're being made to fund it.


David Roberts


Yeah, I know. I think you could just say, and I think maybe you'd
probably agree with this, it's just, it's ludicrous on its face,
that publicly granted monopolies, who are providing an essential
service that people cannot go without, are allowed to politically
lobby at all. It's so familiar. I think we don't think about it,
but it's just ludicrous that it's allowed at all. It ought to
just be unthinkable. These should be technocratic nerds who
follow instructions.


David Pomeranz


Just as one small example of this, to put a fine point on it, you
have all these, like, sports stadiums and concert venues around
the country that are named like FirstEnergy Stadium or the
Dominion Performing Arts Center. And once you see this stuff, I
mean, once you sort of see the elements of the utilities
political machine, once you know to look for it, you see it
everywhere. It's like they're sponsoring every nonprofit, they're
naming every venue after themselves. And part of what I think is
so funny about that is like, why does a monopoly actually need to
advertise?


David Roberts


Exactly.


David Pomeranz


They're not competing for sales.


David Roberts


Exactly. They are not going to lose costumers, by definition.


David Pomeranz


Right. What does name recognition do for them? You can't leave
them.


David Roberts


Exactly. Why do they need to have PR departments at all? Customer
service departments, yes. PR? Why, it is crazy.


David Pomeranz


It absolutely is. And that's a great juxtaposition because most
of them have pretty poor customer service and massive PR
departments. And that's where it can be hard to quantify and
measure the full breadth of their political machine, but that is
something we try to do at the Energy and Policy Institute. And
when you look at it, they are among the biggest spenders in their
states on everything, right? They're always among the top
campaign contributors. They're among the top lobbying spenders.
Their trade associations are among the best funded and wealthiest
in Washington, DC where they do all their lobbying.


And it comes back to that ratepayer question, right? In a perfect
world, I think everyone would agree intuitively with what you
just said, David. Like, why should they be allowed to practice
almost any kind of politics at all, right? They're given this
incredible privilege of getting a guaranteed profit margin and a
monopoly. They should be essentially beholden to the will of our
democratically elected officials. Not trying to shape it. But at
a minimum, at a bare minimum, what we should do is make sure we
get into some controls, to make sure that they're not allowed to
supercharge and turbocharge that political machine using their
customers money, right?That they're not allowed to hack off a few
dollars out of your monthly bill every month and use it to pay
for their public relations consultants, et cetera. And that is a
relatively simple problem to solve with reforms. So that's what
we're trying to lay out, how that can be done, in this new report
that we wrote.


David Roberts


Before we get to those specific reforms, and kind of the specific
channels of utility influence, and how they might or might not be
blocked with reforms, let's just take a brief detour for some
storytelling. Because I think when people hear the lobbying is
technically legal, as absurd as it is for it to be legal, but
people should not take from that the impression that utilities
are lobbying within legal bounds here. The fact that they are
allowed to do this, allowed to use customer money to do it, is
practically an open invitation to corruption and how they have
answered the invitation.


So let's talk about a few of the kind of higher profile examples
that have come up in recent years. Because I think people, again,
unless you really hear it put out plainly, it really boggles the
mind, it beggars the imagination. Like, what they're doing is
worse than anyone thinks. So, let's start with Ohio. I wrote a
whole long thing about this and it was, what a rabbit hole! Like,
every twist and turn you go, it's just nastier and nastier. But
tell us what went down in Ohio.


David Pomeranz


For sure. This is a great time to talk about it. So, last week a
criminal trial started for the former speaker of the House of
Ohio, guy named Larry Householder. He is being charged with
accepting bribes and being part of a racketeering scheme. Here's
what happened. So, there's a large electric utility company based
in Ohio called FirstEnergy. FirstEnergy for years had been trying
to collect bailouts for some nuclear plants, and also for some of
its coal plants that were struggling to make any money. They had
tried with the Trump administration, they had tried with previous
Ohio state governments, but they kept coming up empty and they
found their guy in Larry Householder.


So, what Larry Householder is accused of, and what I should note,
this is very important since they're technically allegations for
Householder until he's proven guilty, if he is. But for
FirstEnergy, that's not the case. They admitted to everything I'm
about to say in what's called a deferred prosecution agreement
with the federal government, to avoid going on trial. So they
paid $230 million and admitted guilt to all the following. They
routed $60 million through different dark money organizations. So
technically, these are 501c4 nonprofit groups, that do not have
to disclose their donors, and FirstEnergy did not have to
disclose giving them money.


So it's kind of untraceable money that was then passed to Larry
Householder. He used some of that just for his own personal use,
which is what is at the center of some of the bribery charges.
So, he like, used it to pay down a home of his, and he used it to
pay for his defense in a lawsuit. But most of the money went to
his political machine. So in 2018, most of that money went to
elect a slate of republicans in Republican primaries that year in
Ohio, that had sort of pledged their loyalty to Householder. They
were actually in all these text messages that have come out
through the legal process.


They're referred to as the "team Householder" candidates. And
through the political power that Householder gained through the
election of a lot of those folks, he was able to win kind of an
internal Republican struggle to become the speaker of the House.
And in exchange, his payback to FirstEnergy was to pass a law
called House Bill 6, which passed, it was signed by Ohio governor
Mike DeWine. It offered over a billion dollars in subsidies to
FirstEnergy's coal plants and nuclear plants. Did some other
things that don't get as much attention, but are pretty
important. Kind of did this fake decoupling scheme where, some of
your listeners probably know, but decoupling is a policy where if
a utility adopts energy efficiency measures, so its customers use
electricity, they can be made whole from that. This was like one
reporter in Ohio, Kathiann Kowalski, described it as a spoonful
of sugar without the medicine. So basically it was like, if
Ohioans use electricity, absent the energy efficiency
investments, FirstEnergy would still get all that money back. And
that's ended up being what happened through the COVID pandemic.


So it was billions of dollars in handouts and bailouts to
FirstEnergy. That's not even all of it. They also have, and
FirstEnergy has admitted to this, they also paid over the last
ten years, over $20 million to a guy named Sam Randazzo. $4
million of that came a couple of years ago, just before he was
appointed as FirstEnergy's top regulator on the Ohio, the Public
Utilities Commission of Ohio. And they have basically conceded,
FirstEnergy has conceded that that last $4 million payment at
least, was to influence his behavior as their regulator. And he
was a big driving force behind passing HB 6.


David Roberts


That's not a small amount of money for a dude, for an individual
dude. These are not small bribes.


David Pomeranz


No, they're lots of money. And in this case, we don't always
know, as this money sort of works its way through the utility
accounting machine, like, where it originally came from. In this
case, we know, thanks to some audits and some good investigative
reporting by folks in various states and some people on my team,
that this was ratepayer money, at least some of it was, went into
this bribery scheme. And amazingly, not even just from Ohio
ratepayers. So, at this point, it seems certain that FirstEnergy
also took money from ratepayers of its subsidiaries in
Pennsylvania, and New Jersey, and West Virginia, and Maryland.
And all of that money kind of got hoovered into this machine and
ultimately came out the other side, went to these politicians in
exchange for these laws.


David Roberts


Amazing. If there's one thing that could be more irritating than
your ratepayer money being forced to lobby your state
politicians, its having your ratepayer money be used..


David Pomeranz


Some other state politician.


David Roberts


For corruption in some other state. You don't even get the
benefits of the corruption. I think a lot of listeners probably
were aware of this, or followed this, or read my piece about it a
few years ago, or a million other pieces. It was really just to
sort of put a pin in it. This is not one of these things where
lines were pushed or like, it's impropriety. This is very
straightforward bribery and corruption. It's almost like
charmingly old school in a way like this. Like, checks being
handed over.


David Pomeranz


Sometimes there are gray areas and blurry lines, but not on this
one. And another day that, David Anderson is one of my colleagues
who's kind of led our investigative work on FirstEnergy. He said
something the other day that it's wrong for utilities to spend
their ratepayer money on lobbying and politics. They're not
supposed to do that. They're supposed to spend shareholder money
on that, which we can talk more about, but they're not supposed
to spend anyone's money on bribes. Like, that's just straight up
illegal. And that's what happened with FirstEnergy in Ohio.


David Roberts


Yeah, there are a bunch of examples in your report, and we could
go through this all day, but I don't want to waste too much time.
But just one other one, which I thought was also telling, is in
Florida, which also involved a lot of very sort of
straightforward interventions in the political system to get
friendly Republicans elected.


David Pomeranz


So in Florida case, we're talking about a utility called Florida
Power and Light. Also in the news lately because their CEO is a
guy named Eric Silagy, who just unexpectedly announced his early
retirement.


David Roberts


It's probably fine. Probably nothing going on there.


David Pomeranz


Yeah, nothing to do with anything I'm about to say. So, unlike
FirstEnergy, Florida Power & Light disputes a lot of this.
But it's been reported out, and it's pretty airtight, and they've
kind of been dishonest throughout the process, so I take pretty
much anything they say with it the biggest grain of salt you can
find. What FPL is accused of having done is, they were paying
some, again, their political consultants, and these consultants
then routed money. Again, you see a common theme here to these
dark money 501c4 groups that they basically created for these
purposes.


And then, what those groups did was bankroll unaffiliated
independent candidates for state legislative elections, who were
designed to siphon votes away from candidates disfavored by the
utility. In every case happen to be Democrats, not surprisingly.


David Roberts


Spoiler candidates.


David Pomeranz


Spoiler candidates. And in Florida, this has been referred to as
the "ghost candidate" scandal because these people, it's not
like, oh, we're going to fund a green party candidate because we
think that'll take votes away from a Democrat. But it's like, a
real person who really wants to hold the office and for better or
worse, is running. These are people who didn't do any kind of
campaigning.


They were candidates only on paper. In at least one case, the
main attribute of the candidate was that they had the same last
name as the democrat, which is useful if you're trying to knife
and go to them. And it's pretty clear why they were doing this.
That CEO who's resigning that I just mentioned, Eric Silagi, he
said in an email to two other FPL executives, writing about one
of the targets of this "ghost candidate scandal", a guy named
Jose Javier Rodriguez, a democratic senator in Florida. He said,
"I want you to make his life a living hell" to two other FPL
executives. And it worked. That senator went on to lose
reelection by 34 votes. So, in these state races that can have
really close margins, this utility money has an effect, and
that's just kind of the tip of the iceberg. FPL also, the same
network of consultants and dark money groups and shady
characters, they paid to have private investigators follow a
newspaper columnist that had been critical of the utility. They
paid for a network of these kind of fake news sites designed to
spread utility propaganda.


David Roberts


My goodness.


David Pomeranz


They were trying to buy out a municipal utility in Jacksonville.
And allegedly, these consultants paid by FBL created a nonprofit
to advocate for marijuana legalization, and then offered one of
the city councilors who was most opposed to this FPL buyout, they
offered him, like, a very high paid job with the fake nonprofit
they just created. So it's really like a whole massive political
machine.


David Roberts


Pretty f*****g devious though.


David Pomeranz


It's diabolical, man.


David Roberts


I guess if you're just getting millions of dollars to sit around
in a room and think of fuckery.


David Pomeranz


And that's literally what they do. I mean, in that sense, like
other companies, this gets back to the monopoly business model
issue. Like, other companies, their incentives as a business are
to like, keep costs low, make better stuff, keep customers happy,
grow revenues, whatever. All of the utilities profit is
determined by the regulatory system, like by their public utility
commissions, or appointed by governors and nominated by
legislators, et cetera. So, their biggest incentive is to game
all that. So that becomes the focus of the company. I mean,
anything they can do. And, I think some leaders of some of these
companies have maybe better ethical systems than others.


But the incentive structure is for them to do anything possible,
short of getting caught by law enforcement officials, to game the
system in their favor. And so, we don't need to go through all
the examples, it could be hours. But it's not just red states.
It's not just Florida and Ohio. ComEd in Illinois, they got
busted by the department of justice and paid a 200 million dollar
fine for a patronage scheme with the speaker of that House. This
has happened really all over the country, and I think people hear
the first energy story in Ohio and think, "oh my God. Well that's
got to be the bad apple". And I'm not sure that's true. I think
they're the ones who were the most egregious and got caught the
worst, but if it's a difference, it's maybe a difference of
degree, but not of type. Most utilities are engaged in some
version of this behavior.


David Roberts


Just to reiterate again, this behavior is not just lobbying.
There's weird trade groups, there's dark money groups, there's
weird public relations campaigns that are not traceable back to
the utilities, there's advertising. It's really a full spectrum
of fuckery going on. All of which seem sort of inevitable, based
on the structural incentives. I'm sure these are a lot of scummy
people involved, but if you set things up this way and make it
legal for them to do this, of course they're going to do this. So
one other question before we get to solutions is just insofar as
these things get caught, are the punishments or the threat of
punishment enough to deter future examples of this?


Does anyone get strung up as an example or how far behind are
lawmakers on this?


David Pomeranz


Very far behind. Unfortunately. This is actually one of the main
solution sets, is around deterrence and enforcement. But that's
really a missing piece of the puzzle. And I'll give you an
example of how broken this is in Ohio. Let's look at what's
happened to FirstEnergy. Now, the biggest penalty they've
probably actually had to pay is with investor sentiment, right?
Like shareholders in the company are a little bit skittish and
certainly their stock dropped after the scandal, after this CEO
of Florida Power and Light just announced his unexpected
retirement. Next area of the parent company, their stock dropped
by about 8% that day.


They may recover some of that or all of it, but they do have some
price to pay on Wall Street because investors I think the sort of
unspoken secret among utility investors is they see regulatory
capture and utility political power as a good thing right up
until the point they get caught. For them, it's like, yeah, of
course we want you to control the political environment. We want
you to have the Euphemism is like, good relationships with your
regulators. But they don't I think they kind of are happy to hear
encino evil in terms of how that happens, but they certainly
don't like when it leads to, like, FBI raids and Department of
justice investigations.


So there is a price they have to pay there, but the bigger price
ought to come from the political system, and that has not
happened. So just taking a look at FirstEnergy a rational
response to what they did in Ohio, which was essentially a full
scale takeover, a full scale purchase, essentially, of the
legislature that's supposed to be democratically elected. I think
a rational proportional response to that would have been at least
exploring the idea that First Energy should should lose its
charter to operate, like should lose its monopoly, find another
utility that can provide those services to Ohioans. Because I
would argue First Energy has lost the right to be considered for
that.


That would, to me be a rational response.


David Roberts


It's hard to think of what would justify that if not this.


David Pomeranz


I agree.


David Roberts


What would be worse? I mean, totally.


David Pomeranz


And no one with power has proposed that. I mean, people like me
talk about it all the time, but no one in power to do it in Ohio
has proposed that. Instead, what we've seen is really a complete
abdication. First of all, they haven't even fully addressed the
law that was passed via these corrupt means. So the nuclear
subsidies were rolled back from HP 6, but not the coal subsidies.
Those are still rolling. That law I didn't even mention it
before, but that law also stripped the very meager sort of
renewable incentives or renewable performance standards in Ohio.


David Roberts


I remember.


That hasn't been returned. So they didn't even address kind of
the law that was bought with it. But in terms of consequences,
there's been almost nothing. The Public Utility Commission of
Ohio, they say that they have some ongoing audits and
investigations of FirstEnergy, those are on hold until the
criminal investigations are over. We'll see what comes of that,
if anything. Interestingly, they did have to pay this $230
million payment to the Department of Justice to avoid
prosecution. But we should just put that in perspective. The
company made $11 billion in revenue in 2021. $230 million is
significant, but it's less than the ill gotten gains they got
from HP 6. I mean, that was billions in subsidies.


Way less.


David Pomeranz


Just as one indicator of how broken our enforcement machine is on
this stuff. Interestingly, before the HP 6 news exploded, like,
before there were indictments and criminal charges, FERC, Federal
Energy Regulatory Commission, they had just started an audit of
FirstEnergy's Accounting practices. And not surprisingly, in that
audit, FirstEnergy did not disclose to FERC the portions of the
Excel spreadsheet that showed the bribe payments. They sort of
left that out. So just a few weeks ago, actually, FERC announced
that it was finding FirstEnergy for violating its duty of candor
obligation with the commission, because when you're audited,
you're supposed to provide all those documents.


They didn't tell auditors about $90 million in lobbying expenses,
70 million of which were dark money payments involved in that
bribery scheme. For that violation, they fined FirstEnergy $3.9
million.


David Roberts


Oh my God.


David Pomeranz


And they said, well, this is kind of a fair and equitable fine
based on our practices, but that's $4 million.


David Roberts


Householder got more than that. Personally, bribes, never mind
the rest of it.


David Pomeranz


It's a $4 million penalty for lying, about $90 million, much of
it spent on a corruption scheme that netted billions for the
company. So to call it a slap on the wrist is kind of an insult
to slap on the wrist. And the way regulators treat this right
now, it's interesting. Public Utility Commissions and FERC
actually have a lot of statutory power to fine utilities. That is
like a key component of what it means to be a utility regulator
is that, if you want to, you can penalize them. FERC has
authority to find violations that utilities commit in its
jurisdiction up to a million dollars a day for every day that
they're in violation.


But they almost never use this authority. I mean, occasionally
FERC will use it in cases of really, really egregious market
manipulation. But on this stuff, I'm like lying or sort of quote
unquote, "mistakenly charging customers for political expenses",
that's almost never fined very, very rare cases, and the fines
are very small. And when they do catch it, what they say is like,
okay, well, you got to refund the money to Raypayers. But that's
sort of like telling somebody who robbed a bank if a cop caught a
bank robber mid act and said, "Oh, you know what? Just put the
money back in the vault and we'll call it a day". That's
basically the way regulators treat this kind of misbehavior. So
there's almost no deterrent.


David Roberts


Which is to say, even from the perspective of today, what
FirstEnergy did was perfectly rational and business positive. And
if I were a FirstEnergy investor, I'd be like, "Nice work, do it
again". There's no reason not to do it again. They get so much
more out of this than anyone penalizes them for, even if they are
caught. So in terms of maximizing shareholder returns, it just
seems like perfectly rational behavior on their part.


David Pomeranz


And they're the ones who got caught, which is the minority, I
think. Obviously, we don't know what we don't know.


David Roberts


Right.


David Pomeranz


But FirstEnergy, at least had to suffer some consequences. Like
they've gone through two CEO, they fired the CEO who was
responsible for much of this, and the next CEO didn't hold his
job terribly long, they've had some board turnover.


David Roberts


I'm sure those guys are suffering, David. I'm sure they're on the
soup line now, regretting their choices.


David Pomeranz


That's a great point. But to the extent they've had any
consequences at all, it's only because they got caught and other
utilities are not, or they're caught doing things that are deemed
to be just on the right side of legal. So, as an example,
Michigan Utilities, not caught in as much attention because there
haven't been criminal charges, but they've spent tens of millions
of dollars on dark money operations to control the political
environment in their state and even in others. I mean, DTE Energy
is a Detroit based energy company. They own some biomass plants
in California as part of their unregulated part of their company.


And they routed money through a dark money group, which
ultimately ended at a national laboratory, which put out a report
talking about how those biomass plants would be great candidates
for carbon capture and sequestration, which is what DTE is trying
to do. So none of that has been prosecuted. None of it's been
caught. We've tried to expose some of it. Sammy Roth at the L.A.
times wrote a great story about that scheme. And and I should
say, by the way, just quickly, as an aside, there are reporters
around the country who are working tirelessly to expose this kind
of corruption.


Too many for me to name individually, but they're really doing an
incredible service to not just energy customers, but to
democratic institutions that these utilities are undermining. But
your central premise is, right, just a newspaper article or two.
And even when there have been criminal prosecutions, the
consequences are too low to deter utilities from doing this. And
part of the reason we know that's true is because they keep doing
it.


David Roberts


Yeah, proofs in the pudding. So with our time remaining, then
having griped about this, which is deeply gratifying to me, as
you know, griping about this for many years now, let's talk about
what can be done. Obviously, in a sane world, in a country with
an operational federal apparatus, which you'd like to see is
Congress to act, right? I mean, Congress could just write a law
saying utilities can't do this anymore, period, full stop. And
that would be nice. As we know, Congress doesn't work, et cetera,
et cetera. Half of them are bought by utilities filibuster, on
and on, usual.


So we're left basically looking to either federal agencies, that
Biden can control, or state governments. So what can those
entities do that would have some actual bite and then some
effect?


David Pomeranz


Yeah. A lot, thankfully. So that's what our new report is about.
And usually the stuff that we do at EPI is just kind of like, try
to expose and document all these problems. But we've been
spending so long doing that, and it does seem like people care
that we wanted to at least take a stab at saying, here's what we
can do about it. And there's basically three things. One is
having utility regulators. So this is mostly Public Utility
Commissions simply pass rules and clarify the existing rules to
close all these loopholes and just make clear that utilities
cannot spend their ratepayer money on any kind of political
influence activity and then define that activity really clearly.


By the way, if you ask utilities right now, they would say,
"Well, we don't spend any ratepayer money on politics. We
certainly don't spend any ratepayer money on lobbying." But
that's just sort of fun with words, like, the way they define
lobbying as the narrowest possible definition. And even then
they're not actually following those rules, which we can get to
how you prevent that problem. But the first thing is to make
those rules airtight. So define, Public Utility Commissions can
define all of these different kinds of politics lobbying, PR
machines, advertising, political advertising, regulatory
lobbying, where you're going to regulators and asking for stuff,
all of it, and say you cannot use customer money for that.


If you want to do it, you can do it out of your own profits.


David Roberts


Two things. One is, so any PUC can just do this now. PUC has the
regulatory authority to just do this. Now, my only question is
how easy is it to distinguish utility ratepayer funds from
utility, I don't know, like investor...


David Pomeranz


Profits? Yeah.


David Roberts


Profits. I'm sure there are all sorts of ways of muddling those.


David Pomeranz


There are. And that's what happened in the FirstEnergy case. I
won't bore you all with it. But the answer, is it's hard to
distinguish. And so that's what gets into the second leg of this
tool.


David Roberts


I mean, why not just say don't do it at all with anybody's money?


David Pomeranz


That would be the perfect world. So that is something that a
public utility commission couldn't do by itself, but a state
legislature could. And we've seen some efforts at this. I think
it's politically a bigger lift, but that doesn't mean it's not
possible. There's nothing stopping a state legislature from
trying to say "Utilities are different from other kinds of
companies, and we think they shouldn't spend any money on
politics". And clearly define what that means. Usually in the
wake of big scandals, there have been some legislators, state
legislators, who have proposed bills like that, like after
utilities in South Carolina tried to spend billions of dollars on
a nuclear plant and just built the world's most expensive piece
of pipe art.


There were some legislators who proposed bills like that. I would
love to see more of it. I think those kinds of bills will run
into challenges in the courts, given our current campaign finance
rules, but they're worth trying. And I'm not a constitutional law
scholar by any means but there is reason to believe that, I think
there is legal justification to treat utilities different than
other companies when it comes to campaign finance.


David Roberts


I mean it's an interesting legal question because utilities sit
in this really weird ontological space like they're companies.
They're kind of private companies, kind of not, kind of public,
kind of not. Has it been hashed through the courts whether they
have all the same rights of expression as truly private
companies?


David Pomeranz


I don't think it has. I'm going to get out over my skis pretty
quickly talking about legal stuff. But one thing I will say,
interestingly, just as a note, that maybe will pique folks
interests, in the Citizens United case, the liberal justices in
their minority opinion argued that the framers did not think
corporations should have kind of unfettered speech, and they're
different from human beings free speech rights. And of all
people, Justice Scalia's rebuttal to that. He actually said well
when the framers said that kind of stuff they were talking about
state chartered monopoly corporations and that might be true for
them, because, at the time, we had, that was common then,
corporate structures were very different 300 years ago.


So comments like that do sort of open the door of this
tantalizing question like, should there be legal efforts to try
to treat monopoly utilities as fundamentally different? Like you
said they operate in this different space., they're not like
other private free market companies. Should they be treated
differently from a campaign finance perspective? And I think if
there are constitutional lawyers who are listening to Volts I
hope they will explore that question because it's ripe for that.


David Roberts


But don't you just think like whatever the legal merits, our
Supreme Court will end up getting it and doing whatever is
corporate friendliest regardless of the legal merits? I mean, law
feels so futile these days.


David Pomeranz


Yeah, well I'm certainly not optimistic.


David Roberts


But PUCs are squarely within their rights to say "Don't use
ratepayer money".


David Pomeranz


Yes, absolutely. So that's sort of why we start there, it's just
because it requires no systemic changes, no constitutional
challenges, it's really simple for PUCs to say "No ratepayer
money on politics".


David Roberts


And that is because, by law, utilities are supposed to spend
money in whatever the most just and reasonable.


David Pomeranz


Reasonable. Exactly.


David Roberts


And so this would be under that provision basically saying it is
not fair and reasonable to spend money this way.


David Pomeranz


That's exactly right. And then the challenge becomes, as you
said, okay well, we can say that but how can we tell which money
is very fungible? How can we tell which pot of money this
political activity is being funded by? And so that requires basic
transparency and disclosure reforms. So, right now, if you want
to know whether a utility spend ratepayer or shareholder money on
a given activity, the process basically is to wait for the
utility to go in for a rate increase, and then there's a sort of
quasi judicial rate case. And if you have money and can hire a
lawyer, you can intervene and get status to be an intervener in
that rate case, and then you can ask discovery questions with the
utility and try to find out how that activity was funded. Now, to
be clear, like groups do this. Earthjustice, they do an
incredible job of that around the country. Sierra Club does that.
Consumer advocates in every state try to do that. They're trying
to protect consumers from that, but they're totally outgunned.
And some utility companies don't have rate cases for five years
or longer. Alabama Power in Alabama, they haven't had a legally
contested sort of open rate case with public intervention since
1982. So who knows what they're spending money on.


So what we need is basically, the solution to this is having
annual line item granular disclosures that utilities are made to
file with the PUC in all of these areas. So anything that is
vaguely political, or even adjacent to political, PUCs should be
requiring them to basically submit a spreadsheet every year that
says what they spent, where the money came from. And then you can
kind of check. So that the first step is to make sure the rules
are strong. The second step is to have these disclosures, so that
you can verify that companies are following the rules.


And the third step is enforcement. So this is what we talked
about before, so I won't dwell on it. But if you make the rules
strong, so the utilities know them and they can't say that they
screwed up by accident, and then you have the disclosures, so
that members of the public or regulators can catch if they
screwed up, and they did screw up, or they did break the law and
they charged ratepayers for some political activity, then there
have to be consequences. Otherwise there's no deterrent. And
those consequences should be severe. So we're arguing, like, if a
utility takes a million dollars of ratepayer money and spends it
on, you know, what political trade association or some kind of
politics that they're not supposed to, they should have to return
that money, and then be fined, like, at least that million
dollars and probably a lot more to make the deterrent adequate.
So those are kind of the three steps. We've got better rules,
better disclosure, better enforcement.


David Roberts


Right? And is enforcement, at least what's available today that
we know works, is that mostly just financial? Is that mostly just
fines? Are there other potential consequences? Because for a
company like FirstEnergy that's doing billions of dollars of
business and lobbying on behalf of billion dollar nuclear plants,
there's just unfathomably large amounts of money being deployed
here. And I'm just trying to imagine the size of fine that would
compete with those amounts of money for their interest in there.
You know what I mean? Can fines even get big enough?


David Pomeranz


It's a really good point. Well, I think one answer is let's try
some really big fines and see how they work.


David Roberts


Let's give it a world.


David Pomeranz


Let's give it a college try. But I do agree with your premise
there that some corruption, some kinds of behavior, are so bad
enough that it is hard to imagine a dollar figure that could
adequately deter, especially when they're all counting on not
getting caught. And so, in that case, I do think this probably
would be something that a legislature would need to do and would
be difficult for a PUC to do unilaterally. But I do think in
cases like FirstEnergy, public officials in Ohio ought to
consider whether the company should be allowed to continue to
operate in its current form there. So that can all be part of
enforcement as well.


David Roberts


What about a legislature saying "This balance of public and
private that we tried in investor owned utilities clearly isn't
working, so we're just going to make you public, make you into a
public utility". Has anyone tossed that out there? Is that even
on the table?


David Pomeranz


I think so. People are talking about that. I mean, there are
movements of people where I live, for instance, in California,
who's basically suggested it's a little bit different than these
political issues, but they've basically said that PG&E's
criminality with regard to starting these devastating fires has
been so bad that the only solution really is to have them be
converted into a public power entity. There have been similar
efforts like that in different pockets of the country. There's
one ongoing right now in Maine, and a lot of that I think is
inspired by this problem. If you talk to advocates of public
power, they will say that we just can't trust these investor
owned utilities to not run these political machines that threaten
the integrity of our state government. And I'm very sympathetic
to those views. I'm not sure if that solution will work at scale
everywhere. And it's also worth noting, like public power
entities aren't perfect, they also require good governance and
good accountability. All you have to do is look at TVA.


David Roberts


I was going to say, and they don't necessarily perform better. I
always sort of caution people about that. Like, the issues that
dictate good or bad performance don't necessarily line up with
public and private. But it does seem like, at the very least, if
it was a public utility, it would have less structural incentive
to cheat and lie. Do you know what I mean?


David Pomeranz


I think that's true. I agree with that. And so I think that
option should be on the table in places where that makes sense.
I'm all for people pushing for it. It's a much bigger lift,
obviously.


David Roberts


Yes, all of this is pretty tough.


David Pomeranz


It is. Although, just to back up to some of these changes that
would be easier for a single public utility commission to do, or
a single state legislature. The kind of stuff that we're
outlining in this report, I don't think it would solve every
single problem when it comes to utility political machines. But
something is better than nothing. The status quo is pretty bad.
So let's start trying things. And these are all doable within the
current system. Some of them are being explored now. So just as
some bright spots, some examples. The New York state legislature
recently passed a law that banned utilities from charging
ratepayers for any trade associations that lobby.


I think that's progress. FERC has an open proceeding. So,
inspired by a great legal challenge from the Center for
Biological Diversity. So yes, who's doing lawsuits? Who's doing
legal challenges on this stuff? Center for Biological Diversity
has an energy justice program with great lawyers that are doing
some of this. So they petitioned FERC to take a look at some of
this, and FERC opened an inquiry, they got lots of comments.
Everybody other than the utility said, "Yeah, we need some
accounting changes and some new rules and some better
transparency to prevent utilities from charging customers for
trade associations, for politics, for their politically motivated
charitable giving, for all that stuff".


Interestingly, even people who I don't agree with about anything
agree on this. Like oil companies actually as electricity
customers, weighed into the FERC docket and said, we would prefer
not to pay for their lobbying. Also that happened, and FERC can
act at any time. So you mentioned through federal agencies, FERC
is meant to be independent, for commissioners are appointed by
the President, but they don't act in his direction. But FERC can
do this anytime they want. They've had this notice of inquiry
proceeding. It's been responded to by all parties. They could
draft a rulemaking that makes it harder for utilities to
supercharge your political machine on rates.


And there are some individual public utility commissions who have
disallowed some things, who have done some aggressive
disclosures. So we point out those examples in the report. People
should check them out just to show like this is possible. And our
hope is that more PUCs and legislators start proposing these
things and we'll see what comes of it.


David Roberts


If you're just a listener out there and you didn't realize how
bad this is and are now mad per the you should be mad or about
this episode, they just listen to what can people do? Is there a
particular organization that's working on this? Or is it just a
matter of contacting your own state's PUC or writing your
legislature? Is there a place to sort of centralize this work
that people can go just support?


David Pomeranz


Good question. Well, they can learn more about it at our website.
So that's energyandpolicy.org. We focus pretty heavily on this
stuff. In terms of groups that are taking action, I'd recommend a
couple Center for Biological Diversity, as I mentioned, they are
doing some great legal work on this. There's a group called Solar
United Neighbors who works with rooftop solar advocates and
customers, but they have operations in a lot of different states,
and they have a national advocacy program, and they are invested
in creating some of these kinds of changes. And then if you're
not sure, like, those groups have ways in for you where you live.


The Sierra Club is involved in Public Utility Commission
proceedings in most states, and they're very much invested in
attacking utility political power. So that's another organization
that folks can check out.


David Roberts


Yeah. And worth saying again, as I've said so many times over the
years, PUC meetings are pretty sleepy. You're not going to be
standing in a long line to get in one of those. So a little bit
of noise goes a long way. Especially relative to a lot of other
places you could make noise, like, they don't get a lot of noise
there, so they care.


David Pomeranz


I couldn't agree more. These parts of state government that are
responsible for regulating utilities, they're not very well
known. And for people who want to become active, they can do a
lot as a single person. I'll give a shout out to one activist in
Arizona, a woman named Stacey Champion, who pretty much working
independently, she's a very skilled person, but she didn't have
lots of backers or anything really helped to bring Arizona Public
Service, a utility that was behaving very badly in that state, to
heal over the last years just by getting lots and lots of
attention and doing great organizing work and campaigning.


So it is a place where people can make a difference and
everything's harder alone. So they just kind of need to find some
people who are willing to work with them on it.


David Roberts


Awesome. Okay, well, thank you so much for coming on and walking
through this. It's like with so many things like you, listeners,
probably vaguely know that it's bad, but it's way worse than they
thought. So, David Pomeranz, thank you for coming and sharing
this with us.


David Pomeranz


Thank you so much for having me.


David Roberts


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