House committee delays action on bill to elect utility regulators

FRANKFORT — A state House committee on Thursday debated, but delayed action on, a controversial bill to revamp the Public Service Commission so that its members are elected rather than appointed by the governor.

Senate Bill 151 wasn't on the public agenda of the House Tourism Development and Energy Committee. But chairwoman Leslie Combs, D-Pikeville, brought it before the committee for action Thursday morning. Two other Pike County lawmakers, Rep. Keith Hall, D-Phelps, and Sen. Ray Jones, D-Pikeville, backed the bill.

Utility rate increases, which are granted by the PSC, have hurt poor people, particularly in Eastern Kentucky, and an elected PSC would be more responsive to consumers, Jones said.

Currently, the three members of the PSC are appointed by the governor and confirmed by the state Senate. Under Jones' bill, a seven-member PSC would be elected by voters.

The Senate passed the bill last week. At the last minute, senators scrapped language that would have limited it to a study of the feasibility of an elected PSC.

"Now, I can't tell you that a politically elected commission is the be-all, end-all solution," Jones told the House committee Thursday. "But I can tell you the current system is broken."

Jones, a lawyer, said he did not file the bill as a favor to one of his clients, Utility Management Group, which holds the contract to manage Mountain Water District in Pike County. Since 2008, the PSC and the state auditor have issued reports critical of Mountain Water District.

Also, the Appalachian News-Express in Pikeville reported this week that the PSC has requested documents from the water district concerning its finances and UMG's operations, including the negotiations that led UMG to get the management contract.

Hall, the state representative, owns a company that does construction work for the water district.

Hall and Rep. Larry Clark, D-Louisville, surprised each other by announcing that they both had asked legislative staff to prepare an amendment to the bill, once again limiting it to a study. It was unclear who was the author of the amendment that emerged, so the committee postponed taking further action.

A special committee meeting will be held for the bill in the near future, Combs said.

Leaders of the Kentucky Chamber of Commerce, the Kentucky Association of Manufacturers and other business groups spoke against Jones' bill.

While any rise in energy prices is troublesome, the business leaders said, an elected PSC introduces uncertainty into the regulatory process. Based on other states' experiences, they said, an elected PSC can be influenced by big campaign donations from utility companies, who essentially can buy their rate increases.

"In Tennessee, the scandal-plagued elected commission was replaced in 1996 with an appointed authority," environmental and consumer lawyer Tom FitzGerald, sitting with the business leaders, told lawmakers.

House Speaker Greg Stumbo, D-Prestonsburg, told the House committee that the PSC needs more legislative scrutiny, although he's not certain that electing its commissioners is the best alternative, as compared with having more appointed commissioners or setting minimum expertise requirements for the commissioners.

Stumbo said that, as the state's attorney general from 2003 to 2007, he investigated "inappropriate" acts at the PSC that he cannot publicly describe because of rules on prosecutors' conduct. "The system needs to be reviewed. It needs to have public light shed on it," Stumbo said.

PSC spokesman Andrew Melnykovych said Stumbo probably referred to a 2004 investigation that he conducted into allegedly improper communications between the PSC and officials with Louisville Gas and Electric Co. and Kentucky Utilities Co. The PSC granted the companies a rate increase worth $101.4 million after hearings that Stumbo's office participated in.

Stumbo's investigation led to no prosecutions, and the PSC adopted rules adding transparency to its communications, Melnykovych said.

"There were some legitimate concerns raised at the time," he said. "The PSC addressed those concerns through its own internal procedures."

This story was originally published February 25, 2011 at 12:00 AM with the headline "House committee delays action on bill to elect utility regulators."