Earlier today the General Counsel of the Public Utilities Commission (“PUC”) filed an affidavit disclosing some (but not all) of the details of newly-appointed commissioner Michael Harrington’s pension from Northeast Utilities (“NU”). The affidavit was filed in response to a motion made at the PUC by REAL members Sandy and Jim Dannis to disqualify Harrington from sitting as a commissioner on matters relating to or affecting Public Service of New Hampshire (“PSNH”), NU or their affiliates. PSNH, New Hampshire’s largest electric utility, is a wholly-owned subsidiary of NU.
The motion to disqualify Harrington was based on REAL’s analysis of Harrington’s material conflict of interest, and strict statutory disqualification, resulting from the pension. A PUC commissioner, like a judge, is supposed to be strictly independent and may have no financial interest in any regulated utility.
Harrington had previously refused to disclose payment amounts or other key information about his pension. He refused to give the pension information to the Executive Council and the public as part of his confirmation hearings. Until today he had stonewalled on the pension at the PUC’s scrubber proceeding even after the motion to disqualify was filed.
The PUC General Counsel’s affidavit clears up some of the open points on Harrington’s pension. The affidavit discloses that:
- Harrington’s pension will be paid by Northeast Utilities. This is critical because it means the pension will be substantially funded by PSNH, which puts Harrington in the directly conflicted position of making regulatory decisions that affect NU’s ability to pay his pension. NU is merely a holding company and its only source of money is dividends or loans from its operating subsidiaries, including PSNH. In 2011 PSNH accounted for 25% of NU’s net income. NU’s pension plan is currently underfunded by more than $1 billion, putting NU pensions among the shakiest of large US companies. Last year, of the $143 million contributed by NU to shore up its pension plan, PSNH put in $112 million, or 78%. PSNH’s continued ability to upstream money to NU – and thus the likelihood that NU will be able to pay Harrington’s pension — depends directly and materially on the PUC’s regulatory decisions relating to PSNH’s business. While not addressed in the affidavit, REAL believes PSNH may be directly liable on Harrington’s pension, which would aggravate the conflict even further.
- Harrington stands to collect more than $450,000 in pension payments from NU. It is beyond any serious argument that money of this magnitude creates a major conflict as well as perception of impropriety and a “captured” PUC. According to the affidavit, Harrington’s pension payments may range from $20,688 per year to $42,084 per year. Assuming a level-pay pension of $22,860 a year per the affidavit, if we assume Harrington has a life expectancy of 20 years when he starts to collect the pension at age 65, the NU payments will total $457,200. Unless Harrington is a multi-millionaire, this is obviously a highly material sum of money. To put it in context, if Harrington were to remain a PUC commissioner for 6 years at $100,000 a year, and we credit his prior 6 years’ service at the PUC, his NH state pension would be $20,000 a year, less than he’ll collect from NU.
Now that some rays of sunshine have finally shone on Harrington’s pension, there is only one reasonable conclusion. Harrington is manifestly disqualified from serving as a commissioner and must resign.
Start with the narrow points. Harrington’s pension puts him out of bounds according to no fewer than three separate statutory standards.
- First, RSA 363:5 absolutely disqualifies any person from serving as a commissioner if he or she has a financial interest in a regulated utility or affiliate. Harrington’s pension entitlement is a direct, current financial interest in NU and PSNH. This is a strict statute, with no threshold amounts or materiality clauses. No serious argument can be made that the statute does not flatly require disqualification.
- Second, RSA 21-G:22 requires recusal if a commissioner has a “private interest” that may affect or influence his or her perspectives. Harrington’s pension is a poster child of a private interest and should disqualify him from sitting on any matter relating to NU or PSNH.
- Third, RSA 363:12, VII requires a commissioner to “disqualify himself from proceedings in which his impartiality might reasonably be questioned.” There can be no serious argument that a reasonable person would not question Harrington’s impartiality in these circumstances. Ask your friends and neighbors – do they think it’s fair if a PUC commissioner stands to collect almost half a million dollars from a regulated utility or its affiliates?
Let’s move to the big picture. The PUC is supposed to be a fair, impartial tribunal balancing the interests of ratepayers (the public) and the regulated utilities. The commissioners are supposed to be like judges, beyond any question whatsoever of conflict or partiality. It’s obvious stuff – the judge in the OJ Simpson trial shouldn’t be on the Simpson family payroll. It would be nothing short of a betrayal of the public trust to have a PUC commissioner like Harrington, who stands to collect close to half a million dollars from a regulated utility or its affiliates, sitting on cases involving those very companies. The situation simply smells and if allowed to continue will de-legitimize the PUC.
It would be theoretically possible for Harrington to recuse himself from all matters relating to or affecting NU, PSNH or their affiliates. But let’s be realistic – this would disqualify Harrington from a huge swathe of the PUC’s docket. There would be all sorts of inefficiencies in bringing on temporary commissioners to hear electricity cases. The right answer is for Harrington to resign.
And isn’t it telling that PSNH, in the scrubber proceeding, is arguing strenuously to keep Harrington sitting as a commissioner on PSNH matters? PSNH’s filing seems positively desperate in its desire to have a commissioner on the NU pension payroll continue to judge PSNH rate requests. This by itself is a strong argument for disqualification.
For the reasons stated above, REAL believes that Harrington should be disqualified from sitting as a commissioner on matters relating or affecting NU, PSNH or their affiliates, and that he should resign in the interests of a legitimate and efficient PUC. We believe it is shockingly unfair that Harrington himself is sitting right now, with just one other commissioner, to make the official PUC decision on the motion to disqualify him in PSNH’s scrubber proceeding. (How does this work – can Harrington defeat the motion by voting to keep himself sitting on the scrubber docket, because then the vote will be at best 1-1 and the motion to disqualify will not be approved?)
If the PUC contorts some sort of hollow rationale and decides to let Harrington continue to sit on NU and PSNH matters, then there is a silver lining. The PUC’s decision will be appealable to the courts. And if REAL is right, a court will find the PUC’s scrubber proceedings tainted by Harrington’s participation. The court will reverse the PUC, toss out any award of cost recovery from ratepayers for the scrubber, and remand for further proceedings before PUC Commissioners who have no conflict. And Harrington will then, at a minimum, have to step down from all NU and PSNH matters.
Stay tuned. It’s still early innings…