As Rate Case Approached, Avangrid’s CEO Tried to Improperly Influence CT’s Utility Regulator, Documents Allege

Shortly before requesting a substantial rate increase in August of 2022, the CEO of Avangrid, which owns gas and electric utilities in Connecticut, tried to improperly influence the state’s top utility regulator, documents reviewed by the Energy and Policy Institute allege.

Pedro Azagra Blazquez, the CEO of Avangrid, made “thinly veiled” threats that unfavorable decisions by Connecticut’s Public Utility Regulatory Authority (PURA), under its Chair Marissa Gillett, would lead the company to reduce investment in the state, according to a letter memorializing the meeting written by PURA’s General Counsel, Scott Muska. At the same time, Azagra Blazquez seemed to have extended to Gillett a vague offer of future career opportunities.

Muska penned a harsh letter on August 30, 2022 to the General Counsel of United Illuminating, one of Avangrid’s utilities operating in Connecticut, summarizing a meeting between Azagra Blazquez and Gillett on August 25, and expressing concern that “executives of Avangrid … recently demonstrated a brazen disregard for well-established procedural protections, posing a significant risk to the public’s trust in the agency. Such efforts must cease immediately.” Muska copied Paul Mounds, then the Chief of Staff to Connecticut Gov. Ned Lamont, and Nora Dannehy, then Lamont’s General Counsel and now a Connecticut Supreme Court Justice.

The existence of the letter was first reported earlier this month by the CT Mirror, which obtained it through an open records request.

In the letter, Muska described a virtual meeting between Avangrid and United Illuminating executives and Gillett a number of days earlier, noting that Azarga Blazquez had “scheduled individual meetings with two of the Authority’s three commissioners under the pretense of a courtesy communication regarding United Illuminating’s imminent filing of its rate case.” Gillett, Muska, Azagra Blazquez, and Frank Reynolds, President and CEO of United Illuminating, attended the video conference. The letter did not specify which PURA Commissioner took the other referenced meeting with Azagra Blazquez.

The letter asserts that Azagra Blazquez soon began to communicate on substantive topics in a way “reasonably perceived as an effort to influence the Chairman’s consideration of matters pending before the Authority affecting Avangrid and its subsidiaries.”

Specifically, Muska wrote, Azagra Blazquez listed Avangrid’s investments in the state, including in wind, hydrogen, and other renewable energy projects, and added a number of “overt references” to the company maintaining its corporate headquarters in the state.

“Mr. Blazquez then stated that Avangrid has been disappointed by what he deemed to be adverse rulings by the Authority,” Muska wrote. “In a thinly veiled effort, he stated that such adverse decisions have caused investors to challenge Avangrid’s regulatory standing with the state and whether Avangrid should continue to invest here. During his soliloquy, he made no less than three separate references to unfavorable decisions by the Authority resulting in investors advocating for a change to Avangrid’s financial relationship with Connecticut.”

In a footnote, Muska wrote that, “Notwithstanding the adverse rulings, Mr. Blazquez offered to assist Chairman Gillett by providing opportunities for ‘international exposure’.”

Avangrid is owned by Iberdrola, which is based in Bilbao, Spain, and has offices throughout Europe and globally.

The letter concluded that these communications raise serious ethical and legal issues. “Through this communication, Mr. Blazquez was plainly implying that the Authority should weigh Avangrid’s corporate investment strategy in the State when ruling on matters related to Avangrid’s subsidiary public service companies. The timing of Mr. Blazquez’s communications is particularly disconcerting given the imminent filing of Ul’s rate case application and the pendency of several appeals of Authority decisions by Avangrid.”

Muska instructed Avangrid to cease undocketed communications through any medium with commissioners or PURA’s decisional staff without the presence of the agency’s legal counsel.

An Avangrid spokesperson did not specifically respond to a question from EPI about the allegation that Azagra Blazquez offered “opportunities for ‘international exposure’,” instead generally defended the company’s behavior in the meeting.

“This meeting, which took place in August of 2022 – nearly 18 months ago – was meant as an opportunity to establish a good working relationship between Avangrid, United Illuminating, and the Public Utilities Regulatory Authority, which we strongly believe is to the benefit of our customers, stakeholders, and the communities we serve,” Sarah Wall Fliotsos, an Avangrid spokesperson, told the Energy and Policy Institute in an email. “In any such meeting, we always adhere to the highest ethical standards, including our own code of conduct, and as standard practice offer opportunities to share our view of global energy policy, regulatory approaches, and collaboration across all of the markets we operate in worldwide.”

“We believe the opportunity for company officials and regulators to sit down and have productive conversations is critical to advancing state policies and critical energy goals,” Wall Fliotsos added.

The year following the meeting, in July 2023, PURA signaled that it intended to largely reject United Illuminating’s rate hike request. In response, the company embarked on a bitter political influence campaign that centered on attacking Gillett. In an unprecedented move, the utility mobilized its own employees to rally in front of PURA’s offices. A company lobbyist ghostwrote letters of support submitted to PURA by a number of employees and charitable organizations funded by the utility. United Illuminating has recently sued PURA for its decision; the case is pending before the state’s Superior Court.

Wall Street Pressure

The alleged Azagra Blazquez episode highlights a trend of utilities and their investors on Wall Street trying to exert influence on Connecticut’s utility regulators outside of their filings in dockets. In reports from recent months, financial analysts characterized Gillett’s actions as “zealotry” while describing PURA’s other commissioners, Michael Caron and Jack Betkoski, as “rational actors,” the CT Mirror reported.

In a June 2023 email, PURA’s General Counsel Muska warned commissioners that meetings requested by equity analysts might violate ethics rules.

The Energy and Policy Institute obtained the email through an open records request.

“To be more direct,” Muska wrote, “the analysts are looking for insight into how the Authority might rule on current and impending dockets, which falls squarely within the prohibition on ex parte communications as well as raising some State Ethics Code issues. For example, an analyst’s recommendation to buy or sell a utility stock after a private meeting with a member of the Authority might have significant ramifications.”

Muska offered commissioners counsel to navigate these cases.

Corruption Allegations

Accusations of illegality have dogged Spain’s Iberdrola, Avangrid’s parent company, for years, though the company has largely avoided criminal accountability.

Iberdrola’s Chief Executive Ignacio Sanchez Galan had been investigated in 2021 for the allegation that Iberdrola had hired a former police chief to spy on corporate rivals and their executives. A court dropped those charges in 2022 due to a statute of limitations.

A Spanish court recently acquitted Iberdrola and four of its executives of fraudulently increasing electricity prices in 2013.

In the U.S., a cybersecurity vendor of Avangrid’s alleged in a lawsuit that Iberdrola fraudulently profited from wasteful equipment purchases that drove up customer rates. The company dropped the case after Avangrid filed a defamation lawsuit against it, but the vendor said he stood by his claims.

In October 2023, Avangrid created a new Compliance Unit, which it said will be responsible for compliance with the company’s Code of Business Conduct and Ethics.

The alleged comment by Azagra Blazquez to Gillett about “opportunities for ‘international exposure’” could have been at odds with that Code, which reads:

“You are strictly prohibited from influencing or attempting to influence others in the exercise of their duties by offering gifts or other promises of reward or benefit. Take extra care when interacting with government officials to avoid even the appearance of such impropriety.”

“Many of us work with government employees, such as staff for New York PSC, Maine PUC,
Connecticut PURA and federal agencies such as FERC and the EPA,” the Code continued. “This collaboration is important and in the public interest, but these relationships must be carefully managed to avoid ethical risks.”

The post As Rate Case Approached, Avangrid’s CEO Tried to Improperly Influence CT’s Utility Regulator, Documents Allege appeared first on Energy and Policy Institute.

Legislators backed by Dominion contributions to appoint Virginia utility commissioners

UPDATE, 3 pm EST Jan 23, 2024: The Virginia House Labor and Commerce Committee announced Tuesday morning that Sam Towell and Kelsey Bagot are likely to fill the SCC Judge vacancies, if confirmed by the General Assembly. 

Towell served as Virginia’s deputy general attorney for civil litigation, which includes the office’s consumer counsel, for almost five years, before joining Smithfield Foods as their associate general counsel. Towell represented consumer interests as deputy general attorney, advocating for rate cuts and refunds on behalf of Virginia’s electricity ratepayers.

The Virginia General Assembly will nominate candidates to fill the two vacancies on the three-member State Corporation Commission this week, according to senior Democratic legislators leading the appointment process. Dominion Energy contributed more than $1.7 million last year to the legislators who will ultimately decide who regulates the utility.

A political stalemate had left two long-time vacancies on the State Corporation Commission (SCC). Republicans, who controlled the House, and Democrats, who controlled the Senate, failed to agree on who should fill the vacancies and the process for doing so, resulting in Chairman Jehmal Hudson serving as the sole SCC judge for over a year. Democrats won a majority in the House last November, ending the stalemate and giving them control over the decision on who to appoint to the Commission.

The SCC is responsible for setting fair rates for consumers and exercising regulatory authority over Virginia’s monopoly electric utilities, like Dominion Energy and Appalachian Power, who collectively provide electricity to over two-thirds of households in the state. The SCC also regulates gas utilities, insurance, state-chartered financial institutions, securities, retail franchising and the Virginia Health Benefit Exchange.

Virginia is one of only two states that selects its utility regulators by legislative election. Governors appoint utility regulators in 38 states, and voters elect the regulators directly in another 10.

Dominion’s influence on the SCC Selection Process

Over 20 candidates applied to be considered to fill the SCC vacancies, Sen. Creigh Deeds, D-Charlottesville, Chair of the Senate Commerce and Labor Committee, told the Energy and Policy Institute (EPI). 

Deeds, along with Del. Jeion Ward, D-Hampton, Chair of the House Labor and Commerce Committee, are overseeing the process to fill the vacancies, which Deeds said he wants to be “as transparent as possible.” 

Each Chair organized a Judicial Nomination Panel to help narrow down the list of contenders to one finalist. The two finalists will then have a public confirmation hearing before being sworn into their new roles by the State Supreme Court. The ad-hoc process loosely follows the judicial selection process determined by Virginia’s Department of Legislative Services, but notably omits solicited public testimony of a candidate’s qualifications. 

In total, 9 members serve on the House or Senate Judicial Nomination Panel: Senators Lucas, Lucas, D-Portsmouth, Marsden, D-Burke, and Surovell, D-Alexandria, serve alongside Sen. Deeds, and Delegates King, D-Dumfries, Herring, D-Alexandria, Shin, D-Herndon, and Scott, D-Portsmouth, serve alongside Del. Ward.

All but two members of the nomination panels listed Dominion Energy as their top donor in 2023, according to the Virginia Public Access Project.

Dominion is historically one of the biggest political spenders in a state that has no limits on corporate contributions to campaigns, spending over $8,000,000 directly on candidates last year to maintain its influence in the General Assembly. Dominion’s contributions were spread across 94 candidates, seven of whom represented more than 20% of Dominion’s total political giving in 2023.

When asked if Dominion has exercised any influence over the selection outcome, Del. Ward told EPI, “Dominion Energy … [has] shown full respect for the SCC selection process by refraining from providing any input directly to me as the Chair.”

Dominion is known for using its political influence to shape legislative outcomes, illustrated by a series of bills that gave Dominion outsized power to raise electricity rates, skirt regulation, and earn excess profits. But a recent wave of successful utility reform legislation highlights a new generation of legislators committed to curtailing the utility’s excessive influence. A bill introduced last session to bump Dominion’s return on equity from 9.35% to 10.07%, costing customers an extra $4 billion, was initially rejected. Instead, the return on equity settled at 9.70% and base rate-setting authority was restored to the SCC, a power previously stripped from the commission in 2015 legislation.

Potential Contenders to Fill the SCC Vacancies

Of the more than 20 candidates, some are “non-lawyers, Virginia lawyers, [and] … people that [aren’t] licensed in Virginia” Sen. Deeds told EPI when describing candidates who applied to fill the SCC vacancies. Deeds and Ward said they hoped to nominate a qualified candidate that was a “good representation of Virginia,” was qualified to “manage an agency of 700 people,” and “has the ability to handle other issues” outside of energy policy, like “banking and insurance.” The eventual nominees are not required to meet any specific qualifications, as state law requires only one judge on the three-member SCC to be a lawyer, a requirement currently fulfilled by Chairman Jemal Hudson. 

Deeds and Ward both declined to reveal the top candidates being considered for the judicial vacancies, but multiple sources with knowledge of the appointment process told EPI that former state legislator Lynwood Lewis, Apex Clean Energy’s Hannah Coman, and NextEra Energy’s Kelsey Bagot are top contenders.

Lewis served in the Virginia General Assembly for nearly two decades, from 2004 to 2023. He wrote and carried the 2020 legislation in the Senate that entered Virginia into the Regional Greenhouse Gas Initiative, a cap-and-invest program designed to reduce electricity producers’ generated emissions. Governor Youngkin withdrew Virginia from RGGI at the end of last year, when the state’s three-year contract for participation also expired, a decision currently being challenged in court.

While in office, Lewis collected nearly $100,000 from Dominion and Appalachian Power and voted in favor of legislation that weakened the authority of the SCC, an agency that he’s now applying to oversee. 

In 2015, Lewis voted in favor of the 2015 Rate Freeze Bill (SB1349), legislation that Dominion successfully lobbied for, which froze base rates, but allowed rate increases to continue via riders while suspending biennial reviews of company profits by the SCC through 2022. The SCC later found that the law generated at least $365 million in utility over-earnings, according to a 2018 Commission report. In 2018, Lewis voted in favor of the Grid Transformation and Security Act (SB 966) that, among other things, eliminated the SCC’s ability to properly account for overcharges and refund ratepayers. Lewis voted against the 2020 Fair Energy Bills Act (HB1132), which would have restored power to the SCC and reversed limits set by the 2015 Rate Freeze legislation. 

Hannah Coman is the Senior Associate General Counsel at Apex Clean Energy, a clean energy developer which provides power to utilities, corporates, and the public sector under long-term power purchase agreements. Before joining Apex Clean Energy, she worked with the Southern Environmental Law Center, a nonprofit law firm, as an attorney, and intervened in SCC rulemaking proceedings on behalf of environmentals groups like Appalachian Voices. Coman served as Chair of Virginia’s Clean Energy Advisory Board from 2019-2022, helping to establish a pilot program for disbursing loans or rebates for the installation of solar energy infrastructure in low-income and moderate-income households through the "Low-to-Moderate Income Solar Loan and Rebate Fund". 

Kelsey Bagot is a Senior Attorney at NextEra Energy, the utility which is the subject of a Federal Election Commission complaint and a class action lawsuit accusing the company of defrauding investors for withholding material information related to the company’s political scandals. Prior to joining NextEra, Bagot served as Legal Advisor to Republican FERC Commissioner Mark Christie, who was previously a judge of the Virginia State Corporation Commission. While an Associate at Troutman Pepper Hamilton Sanders LLP, Bagot’s practice focused on representing electric and natural gas utilities in regulatory and rate case litigation proceedings before FERC. 

Once interviews conclude, the House and Senate Nomination Panel will deliberate and independently nominate one candidate to fulfill the judicial vacancy, who will go through a public confirmation hearing by the General Assembly, which is expected to happen later this week. 

Header image from the Virginia State Corporation Commission.

The post Legislators backed by Dominion contributions to appoint Virginia utility commissioners appeared first on Energy and Policy Institute.

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