Grand jury indicts former state utilities chief Hardy

A Marion County grand jury has indicted David Lott Hardy, the state’s former utilities chief, on three counts of official misconduct.

Hardy was fired from his job as chairman of the Indiana Utility Regulatory Commission by Gov. Mitch Daniels in October 2010.  Hardy allegedly allowed IURC administrative law judge Scott Storms to preside over cases involving Duke Energy Corp. even while Storms was talking with the utility about a job.

“We look forward to vigorously prosecuting this case to its conclusion,” Marion County Prosecutor Terry Curry,  a Democrat, said Monday in a prepared statement.

The grand jury indicted Hardy on Friday. Official misconduct is a class D felony, which can carry a sentence of 6 months to 3 years and a maximum $10,000 fine.

The indictment states that Hardy “knowingly” aided and abetted Storms by communicating with employees of Duke Energy regarding Storms’ prospective employment “while allowing Storms to continue to participate in proceedings involving Duke Energy.”

The two other indictments accuse Hardy of failing to disclose "ex-parte," or private, communication with top Duke officials about cost overruns at Duke’s Edwardsport coal-gasification plant, which is under construction. The communications came as ratepayer groups were fighting Duke’s request to recover additional money from ratepayers to cover cost escalations.

The indictment cites three incidents in which Hardy allegedly received communications from Duke about Edwardsport in 2008 and 2010, including discussions with Duke Chairman James E. Rogers and with former Duke Indiana head James Turner.

The ethics scandal cost both Hardy and Storms their jobs—Storms was fired after later accepting a job at Duke. The case also presented a public relations challenge to Daniels, a Republican, who appointed Hardy as chairman of the commission and has publicly supported the Duke Edwardsport plant. Initially projected to cost $1.8 billion, the plant’s price tag has risen to $3 billion.

Watchdog groups, including Citizens Action Coalition, want Duke to absorb the cost of overruns rather than tapping ratepayers for the increased expenses.

Curry said the official misconduct indictment is significant particularly in light of the $3 billion Edwardsport project’s implications to Duke and to its ratepayers.

“If the public is to have confidence in the ultimate result,” Curry added, “they need to know that everybody played by the same rules.”

A review of e-mails showed that Hardy coached Storms into getting a job at Duke. The e-mails also showed that Hardy met with top Duke officials about cost overruns at Edwardsport, in what CAC complained amounted to ex parte communication. 

Officials at CAC, which has long opposed Duke’s Edwardsport plant, were pleased to hear of the grand jury indictment.

“We’re not surprised. We have felt all along without question … that Scott Storms’ hiring reeked of impropriety and was completely improper,” said Kerwin Olson, executive director of CAC.

The ethics scandal has already come back to bite the state’s biggest electric utility.

The IURC last October reversed a ruling made by Storms. It would have allowed Duke at its next rate case to seek to recover from ratepayers $12 million in costs the utility incurred during a 2009 ice storm.

Also, the commission dismissed a case handled by Storms in which Duke sought permission to tap ratepayers to install "smart" electric meters in central Indiana to help better regulate loads. That project was estimated to cost $22 million.

The case in which Duke sought to collect storm damage costs is most notable. It was the only Scott Storms case the commission decided to reopen for further review after the ethics scandal came to light last year.

It was also the only proceeding involving Storms in which one of the parties—the Indiana Office of Utility Consumer Counselor—had appealed to the state Court of Appeals.

The OUCC argued that Duke’s attempts to recover the ice storm damages during a future rate case amounted to retroactive ratemaking, which is permitted only in the case of extraordinary financial events. Charlotte, N.C.-based Duke reported 2010 revenue of $14.2 billion.