Ex-governor to serve on board that needs OK on project from PUC, where his son works
Former Gov. Mike Rounds has been named to the board of directors of a company that plans to build a multibillion-dollar network of transmission power lines across the Dakotas – a job that will pay him $75,000 next year, plus that amount in stocks.
While it’s not unusual that a former politician such as a governor would be named to the board of directors of a private company after leaving office, this appointment has raised concerns about a potential conflict of interest.
That’s because ITC Holdings of Novi, Mich. – the company for which Rounds now works – eventually will need its project to be approved by the South Dakota Public Utilities Commission, where most employees are carryovers from the Rounds administration. That includes analyst Brian Rounds, son of the former governor.
Howard Learner, executive director at the Environmental Law and Policy Center, a Chicago-based clean-energy group that has an office in Sioux Falls, said Rounds’ appointment “doesn’t pass the smell test.”
“It’s the exact sort of thing that feeds public cynicism about the revolving-door nature of politics,” Learner said.
Only elected officials such as commissioners are subject to state laws regarding conflicts of interest, and there is a sizable gray area involving what constitutes improper contact between state regulators and businesses.
ITC Holdings, Mike Rounds and Brian Rounds all deny that a conflict of interest exists in this case.
Rather, Mike Rounds’ appointment is a way to “add to the mix of experience and background of our board,” said Daniel Oginsky, senior vice president and general counsel for ITC. The company’s 10-member board of directors also includes a former congressman and a Clinton-era secretary of energy.
Oginsky insists that Rounds was hired not for the political weight he can bring to bear in Pierre, but for “his public policy expertise, his insights – especially someone coming from Middle America – and also his business experience.”
For his services, Rounds will be paid $75,000 a year, plus $75,000 in company stock and an additional cash payment if he serves as a committee chairman or director, according to financial disclosure forms filed with the Securities and Exchange Commission.
No ‘advocacy on my part,’ Rounds says
Rounds left office in January after two terms as governor. This is his first appointment to the board of a publicly traded company, and he described his new role as an adviser who sticks to the “confines of the boardroom.”
“In this particular case, I would not expect there would be advocacy (for ITC projects) on my part,” Rounds said. He also denied any potential conflict stemming from his son’s position.
“When I was governor, we always respected the fact that he was an analyst,” Mike Rounds said. “I didn’t ask him about what they were doing; I didn’t ask about the rate cases he was working on. If he didn’t tell me about it, I didn’t ask him about it. We always left it that way.”
3,000 miles on line to move wind power
Since 2009, ITC Holdings has been laying the groundwork for a massive transmission network called the Green Power Express: 3,000 miles of high-voltage lines designed to move power from “high capacity wind-rich areas to Midwestern and Eastern states that demand clean, renewable energy,” according to the project’s description.
ITC estimates the project’s cost at $10 billion to $12 billion.
The company is developing partnerships with several wind developers and regulated utilities in the state, including Sioux Falls-based Northwestern Energy, Iberdrola Renewables and Montana-Dakota Utilities.
ITC also sent a lobbyist to Pierre for the first time this year. The lobbyist, Joe Dudak, no longer is with the company.
No ‘imminent plans’ for filings in S.D.
Rounds’ appointment does not create a conflict of interest, Oginsky said, because “we don’t have any imminent plans to make filings in South Dakota. We may in the future, but I don’t want to speculate about that.”
The project’s description, federal filings and conceptual map show the project tapping wind farms in South Dakota and other states, with lines running through the transmission hub at the Big Bend hydropower plant in Fort Thompson. Unless plans change substantially, the project will need permits from the PUC and siting authorities in seven other states. The timeline for obtaining these permits is unknown, Oginsky said.
Oginsky described Green Power Express as merely a “conceptual example” of what such a transmission project might look like – a “catalyst to drive thinking” about the need for additional transmission in the region.
But SEC filings show that the company already has spent $5.5 million to develop the project and, in May, the Federal Energy Regulatory Commission approved ITC’s proposed rates for selling power on the Green Power Express. The project still needs to go through the planning process with the regional grid authority before the company can begin collecting siting permits.
Brian Rounds says he’d be impartial
Patricia Van Gerpen, the PUC’s executive director, is responsible for assigning analysts to each case, and it’s at this point that potential conflicts of interest are taken into account, said Leah Mohr, the PUC’s deputy director.
But it’s up to each analyst to disclose conflicts, and neither Van Gerpen nor Mohr would say whether Brian Rounds would be excluded from consideration on an ITC docket item.
“There are innumerable hypothetical situations,” Mohr said. “We simply do not assign a person to a docket at any time we believe there is a conflict of interest.”
In an email, Brian Rounds said he has faith in his ability to work impartially, but that assignments are left up to Van Gerpen.
“My function as a PUC staff analyst is to complete and provide technical analyses and recommendations to the commission,” he said. “I am not a commissioner. I am not making the decisions. I don’t believe there is a conflict of interest, and I think the commission can mitigate whatever perceived conflict might arrive down the road.”
Hanson doubtful of potential conflict
PUC Chairman Gary Hanson said that his rule, both personally and professionally, is that if you have to ask whether there is a conflict of interest, there probably is. But, he said, he has confidence that no one at the PUC would work on a docket if they had a conflict that might influence their analysis.
In addition, the commission does not give favorable weight to an analyst’s opinion over other parties who testify, general counsel John Smith said in comments provided by Mohr.
PUC analysts generally do not recuse themselves, and state laws that require officials to disclose conflicts of interest apply only to commissioners, not staff, Smith said. The same is true of “ex parte” laws that bar outside communication between a state agency and companies that have a pending interest in front of that agency, he said.
State law doesn’t cover informal talk
Besides, Smith added, the ban on ex-parte communication applies only to formally open PUC dockets, or to “matters that are sufficiently defined with respect to coming before the commission to where case ‘issues,’ and knowledge of what they are would exist.”
In theory, that means Mike Rounds could call PUC commissioners to talk about the Green Power Express project as long as it isn’t yet a formal docket item or about to become one. And because Brian Rounds is not a commissioner, he and his father legally could talk about the project at any time, even if he were assigned to the case.
Again, Mike Rounds said that he does not anticipate his new role including advocacy for ITC projects.
Meanwhile, what “sufficiently defined” means is unclear. Mohr said the PUC does not have any internal rules or ethical guidelines outside of existing state law that might clarify this.
In a statement provided by spokeswoman Sara Rabern, the attorney general’s office said that sufficiently defined, in this context, is difficult to describe.
“The closest we can come to would be it can’t concern a matter that is before the commission in an administrative hearing context or a matter that will very likely be in front of the commission in an administrative hearing context.”
Pam Bonrud, who left the PUC as executive director in 2005 to lobby for Northwestern, said she “shies away” from lobbying on issues as they come closer to fruition. A successful lobbyist is a credible lobbyist, she said, and her personal guideline is to avoid even the perception of impropriety.
Former PUC analyst sees a problem
Northwestern, which has signed an “expression of interest” in the Green Power Express and has a confidentiality agreement with ITC, does have dockets open before the PUC, including a contract dispute with Clark wind developer Oak Tree Energy. Brian Rounds is an analyst in the case.
Steve Wegman, executive director of the South Dakota Wind Energy Association and a former PUC analyst, said that creates a problem.
“So if you rule against Oak Tree, did (Oak Tree) get a fair shake? The answer is probably no,” he said.
Trusting judgment, conduct of analysts
Smith disputed that, saying this overstates the influence one analyst has on the outcome of a case.
“Our employees are professionals, and their judgments and analyses are not affected in any meaningful way by nonmaterial outside inter-relationships having no bearing on the cases before us,” he said.
But Wegman said having Mike Rounds in the ITC board room appears questionable, and such decisions can turn public opinion against badly needed transmission projects.
“It taints them,” Wegman said. “South Dakotans pride themselves on their government officials (being) fair and honest.”
Mary Boyle, a spokeswoman for the government watchdog group Common Cause, did not want to comment specifically on the Rounds situation, but said that generally: “In politics, perception is reality. You want elected officials where you have full confidence that they are acting in the public interest.”
Green Power Express could help fill a need
Energy developers blame a longstanding transmission bottleneck as the chief impediment to harnessing the region’s substantial wind resources. In response, a handful of proposals have sprung up in recent years to build transmission from the Great Plains to energy-hungry cities farther east.
The Green Power Express promises to carry 12,000 megawatts of power from Iowa, Minnesota and the Dakotas to Chicago, Minneapolis, Madison, Wis., and other urban centers.
“Rather than waiting for each individual developer and project to be integrated into the system, the Green Power Express seeks to serve as a backbone system that resolves queue issues and takes an ‘if you build it, they will come’ approach,” according the company’s 2009 filing with the Federal Energy Regulatory Commission.
ITC describes the Green Power Express as “truly green,” a project that “may result in a reduction of up to 34 million metric tons of carbon emissions, the equivalent of the annual emissions of about seven to nine 600 megawatt coal plants.”
Concerns sprout with coal connection
But Learner’s organization, for one, isn’t on board. ITC cannot credibly prove that Green Power Express is not in fact a “greenwash” project designed to carry coal-fired power from Basin Electric’s Antelope Valley Station near Beulah, N.D., Learner said.
This 900-megawatt plant, built at the mouth of a lignite coal mine and next to a coal gasification plant, is the westernmost node on ITC’s project map. In addition, the map does not show the line hooking up with wind farms in the so-called wind belt of the eastern Dakotas.
Oginsky demurred when asked why a transmission project designed to move wind power would begin at a coal plant.
“I’m not really in a position to speak to that,” he said. Company spokesman Bob Doetsch said he would try to find someone at ITC who could. As of Friday, he had not.
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