Utilities Gamble With Household Money — Episode 187 of Local Energy Rules

Tony Bartelme:

Failure isn’t necessarily a bad thing. We, you know, it’s a very human thing for us to fail. And failure can be a gift when we learn from them. And in South Carolina, we learned a few lessons. We learned that, you know, it’s probably best not to have utilities run amuck and charge their rate payers for projects with unproven design and lie about it in the process. And it helps to have regulators who are paying attention. Now the big question is, when you learn a lesson, do you fall back? Do you unlearn that lesson? And that’s kind of where we’re at now, I think.

John Farrell:

The state of Colorado recently passed legislation to prevent electric utilities from using their customer’s money to lobby on behalf of the private monopoly corporation. And I’d like to believe that some of the lawmakers involved had been inspired to explore this issue by Tony Bartelme, a project writer for the Charleston Post and Courier in South Carolina. Tony wrote a landmark piece called Power Failure that indicted electric utilities in several states for lighting, as he called it, a bonfire of risky spending, using money from captive customers on several high profile project failures. I had the pleasure of speaking with Tony in May, 2023 to learn about what motivated him to pursue this deeply researched piece, and whether it still has relevance today. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance. And this is Local Energy Rules, a podcast about monopoly, power, energy, democracy, and how communities can take charge to transform the energy system. So Tony, welcome to Local Energy Rules.

Tony Bartelme:

Yeah, John, it’s great to be with you today. Thank you for your appreciation of puns too, <laugh>.

John Farrell:

You’re welcome. You know, we had a good run too with podcast titles being puns because one of my early employees that helped me develop the podcast was also a big fan. It’s less popular lately as we’ve gotten a communications director who seems to think that not everything has to be a pun, but we’ve had a good run of it, at least in the past. I would love to just start off by asking you sort of a couple background questions really about how you ended up writing this piece. I think maybe specifically what sparked your interest in this topic back in 2017, but maybe also stepping back and asking you kind of what in your life, your training, your background led you to a path of reporting on utility issues in general.

Tony Bartelme:

Yeah, sure thing, John. So I’m a project reporter here in Charleston, South Carolina, but you can probably tell from my voice that I’m not from the south. I’m actually from Minneapolis originally, and I went to college in Chicago, and I had an economics class there really early in the morning, which unfortunately resulted in a kind of a poor grade. However, there was an issue that I carried with me for many years, and that was this idea of economic externalities. And in layman’s term, it’s essentially what a company produces that’s extra to that production. And that extra is usually a cost passed on to other people at their expense. Air pollution is a classic example of an economic externality, and embedded in those economic externalities are usually the seeds of some injustice. And so if you kind of look at the world through that, that lens, you start identifying both social and economic injustices that make fantastic stories. So that’s what I look for.

John Farrell:

Yeah. And so what was catching your eye then as you were working that? I mean that the, the piece that you did was extraordinary. It was definitely a kind of long form reporting a lot of detail about utilities in multiple different states. What put you or your editor onto this issue as one that you needed to cover back in 2017?

Tony Bartelme:

Yeah, the origin of that story really was one of South Carolina’s biggest scandals. And you have to go back a little bit. There was a consortium of utilities that launched a project to build a nuclear reactor in the central part of our state. And they had high hopes for that. And they, even before they built that, they began to change, you know, through their lobbying apparatus began to change kind of the rule book about how plants are financed, these nuclear plants are financed. And long story short, that nuclear project was so poorly designed and built and engineered and built that it never was built. We spent 9 billion building a couple of reactors that just went belly up. And it became so obvious, despite the sunny statements from the utility executives, it became such an obvious failure that they, they cut it midway and it essentially was this giant failure. And everybody in the state was asking themselves, you know, how did this happen? And so we dug really deep and that was the origin of power failure.

John Farrell:

And if I remember correctly, the cost was not negligible. So not just 9 billion being a huge amount of money to spend on a power plant that would never produce electricity, but it was gonna have a significant increase in the amount that the average customer would pay on a monthly basis.

Tony Bartelme:

And it was gonna be a significant increase that that even began long before they had produced power. And it was something that would last for decades. So it was this huge, huge impact on every single rate payer in the state.

John Farrell:

You used this really pointed phrase in the article, quote, a bonfire of risky spending. Could you talk a little bit about what were the policies that allowed these private utility companies to spend so much money on what ended up being a spectacular failure?

Tony Bartelme:

So in 2007, the South Carolina legislature passed something called the Baseload Review Act. And one of the most memorable things about that act is that it begins with the statement, an act to protect South Carolina rate payers, which is, it turns out kind of like saying clean coal, but essentially that law was part of a larger trend where utilities essentially could pass the cost of construction to the rate payers as they designed and engineered and built these giant projects. What that does is that essentially passes the risk to the rate payers. And you know what happens when you know you have a chance to spend other people’s money that opens a door toward risky spending. And what we found is that that was happening not only in South Carolina, it was happening across the Southeast and Midwest. This sort of rewriting of the rule book essentially launched 40 billion in new power plants and upgrades in a 10 year period.

John Farrell:

And just to be clear for folks, you know, the typical way that utilities pay for power plants absent this kind of rule is that they assume all of the financing risk and construction risk, and they are allowed to come and recoup those costs once the power plant is done and it’s operating, and then they go to regulators and they say, okay, we built this 9 billion nuclear plant, it’s now operating and producing electricity. We think that the expense of it was prudent, please let us collect that money from rate payers. But in this case, that typical process was short circuited and they were allowed to spend the money ahead of time, which as it turns out, was a very bad idea. <laugh>.

Tony Bartelme:

That’s right, John. So it’s kind of easy to understand if you look at it in terms of a grocery store. You know, grocery company builds a store with the idea that they’ve thought really hard about this decision, that they think this is gonna make money and it’s a good decision. So they assume all the, the risk and pay for the construction of that grocery store. They do not pass that cost onto the customers until that grocery store begin selling the groceries. But in South Carolina and other states, we were essentially creating these grocery stores that charge customers for the construction of the grocery stores, not the groceries themselves.

John Farrell:

We’re going to take a short break. When we come back, we discuss whether utility regulators were asleep at the switch, what lessons Tony has learned from writing power failure, and who still needs to read that article. You’re listening to a Local Energy Rules podcast with Tony Bartelme, project’s writer for the Charleston Post Courier in South Carolina.

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John Farrell:

So in theory, the way that this system is supposed to work is that we have these private companies that are electric utilities and they’re given a monopoly over a particular area. So if you live in Charleston, if you live in Minneapolis and you wanna get electricity, there’s only one company you’re allowed to buy it from. And there’s supposed to be these state regulatory bodies, public service commissions, public utility commissions, they go by a few different names, most of them very similar that are supposed to be look, overseeing the work of these utilities and making sure that the things that they’re doing are appropriate and and reasonable. Were the regulators just asleep here, why did that system of state oversight work in this case? How did it, how did it fall apart?

Tony Bartelme:

Yeah, that’s, you’re exactly right, John. The, you know, utilities are legal monopolies, most monopolies are illegal, but you utilities have this legal monopoly status that works as long as the regulators are watching what they’re doing. And it’s the regulators who assess the prudence of a particular power plant project or an attempt by a utility to ask for rate increase. In South Carolina, the utility regulators were asleep at the wheel and they were not only asleep at the wheel, they were misled as well. So in their defense, the utility executives in South Carolina, as they were building this nuclear plant, essentially lied to them and told them that everything was going pretty well when they knew very well that it was a dumpster fire.

John Farrell:

Outta curiosity, did you end up interviewing any of the regulators for this piece to kind of get some of that perspective? Or did was most of the work in documenting the enormous costs of the choices that the utilities had made?

Tony Bartelme:

Yeah, I didn’t interview, I didn’t personally interview the regulators. Another reporter did. I did interview some of the executives who were involved in the project. And you know, when you talk to these executives, it’s, it’s kind of a, I dunno, it’s an interesting experience because you’re sitting there and I think some of them really believed that what they were doing was going to work. And it kinda gets to the heart of you can believe in a sunny scenario to the point where you don’t really realize lying to people. And so, I don’t know it, that would probably be kind of the best defense that they could offer for what they did. They certainly had plenty of data to know that their project was not being done well and the regulators needed to be told that to be able to make their decisions.

John Farrell:

I think I recall that there have been some consequences for some of these decisions where in some places either the legislature or the regulators have required shareholders to pick up some of the cost overruns or the costs for things that weren’t built. Were there ever consequences that you recall for any of the utility executives or even for the utility regulators who were not paying very close attention?

Tony Bartelme:

So that’s a very interesting question because in South Carolina there were significant ramifications. The utility executives for Scana, which was the one of the utilities involved in the nuclear project, several, several of them pleaded guilty to criminal charges and ended up doing some jail time. The original act upon which that nuclear project was based, the Baseload Review Act, was repealed in 2018. Another utility executive lost his job. He, and overall there was this, this fury among the electorate to do something. So hopefully, and you know, and at the same time, the, the regulators too were replaced. Several of the regulators were replaced with a more active group. Let’s just say that.

John Farrell:

I know you are a South Carolina based reporter, so you might not know the answer to this, but I was curious if you saw similar consequences in some of the other places. I know you talked about a plant in Mississippi as part of the piece. You mentioned the Midwest. I think Indiana might have been one of the other states, if I’m not mistaken.

Tony Bartelme:

Well, I think the most interesting example was next door in Georgia. So as we were building these nuclear reactors, Georgia Power, the Southern Company, a consortium of a of utilities in Georgia were building an identical twin. And the regulators in Georgia actually were pretty much on the ball and making lots of warnings about what was happening. But the difference in Georgia is that the utilities had such a bigger rate base, they had many more customers that they could spread the costs around that they just kept on going at it. And their reactor that they’ve been working on for more than a decade, finally started generating some electricity just the other day after 35 billion spent. And it’s still not done. So no, there were very few ramifications in Georgia other than the rate payers are stuck with some, a mountain of bills for foreseeable future. And in some of the other states too there, you know, there was another project in Mississippi that we looked at. It was a coal plant, again, a Southern Company project that also went absolutely nowhere. And again, hundreds of millions of dollars up in smoke.

John Farrell:

I’m curious if there was any lessons that you learned in doing the reporting on that piece. Does your approach to writing about things that happened in the energy sector about electric utilities change after publishing that piece or from, based on the research that you did for it?

Tony Bartelme:

I think failure isn’t necessarily a bad thing. We, you know, it’s a very human thing for us to fail, and failure can be a gift when we learn from them. And in South Carolina, we learned a few lessons. We learned that, you know, it’s probably best not to have utilities run amuck and charge their rate payers for projects with unproven design and lie about it in the process. And it helps to have regulators who are paying attention. Now, the big question is, when you learn a lesson, do you fall back? Do you unlearn that lesson? And that’s kind of where we’re at now, I think.

John Farrell:

Do you, are you saying that you’re at this moment of where there’s a risk of unlearning that lesson or there are actual examples of things happening right now that seem to be indicating that people haven’t learned that lesson?

Tony Bartelme:

I would say that we’re at the risk of unlearning that lesson. And I say that because just the, intense focus on what was happening created all this scrutiny and I, and I think people behave a little better when they’re watched. And so there was that spotlight. That spotlight has moved on to other things that always makes me pay attention. Perhaps we need to take another look.

John Farrell:

It feels like a good opportunity for me to talk to you about a way that some states are still having a lot of scrutiny. So in Colorado recently, and I think there’s also a bill now up in Connecticut, there have been efforts to look at this issue around utility accountability. So in Colorado, the process started with there were at least one or maybe more fairly substantial rate increases being proposed by the investor owned utilities by the, the private monopolies. And the legislature started holding hearings kind of asking about like, why is this happening? This is multiple big rate increases over multiple years. And one of the things that the legislators identified as the problem was the power of these utilities to influence those who are supposed to be watching them.

The bill in Colorado, for example, will prohibit utilities from charging customers for their lobbying of legislators to get them to pass policies favorable to their business, from paying for dues to trade associations such as the Edison Electric Institute, which is often lobbying on behalf of utilities either at the state or, or maybe more significantly at the federal level. The bill may even result in limiting the amount that utilities can bill to customers for the time their lawyers spend in front of the public service commissioner of the public utilities Commission asking for a rate increase and instead say that that has to be billed to the shareholders of the corporation. So I guess I’m kind of curious if you feel like in, given what you had seen in South Carolina and these other states, these sort utilities run amuck, do you feel like the efforts that they’re making in Colorado and then the bill in Connecticut is very similar and addresses some of the similar things? That those might be actually helping to address some of the underlying behavior that led to, as you called it, the bonfire of risky spending?

Tony Bartelme:

I think the amount of campaign money and lobbying that is going into state legislatures is distorting policy. And I think there’s ample evidence to show that even that these regulators have been influenced by, by lobbyists in campaign money. You know, in Georgia, the electric industry lobbyists, applied commissioners with, you know, expensive meals and fancy hotel stays and you know, all of that has a corrosive effect on, on policy. So I think what’s happening  in Colorado is an interesting, you know what, I think the devil’s in the details. We’ll see what happens. Does that sort of take some of the, the influence away from utilities? I hope so. In South Carolina where there was an attempt about three years ago, I think to, to prohibit members of the legislature from receiving campaign contributions from utilities and that bill went up in flames very fast.

John Farrell:

I’m kind of not surprised. There’s been some good reporting on energy policy stuff in Virginia and that I’ve been compiling in a report that I’ve been working on, and it’s just striking how many tens of thousands of dollars over various election cycles the utility companies are putting into contributions to legislators. I can understand that it would be very hard for them to want to turn that down.

Tony Bartelme:

Yeah, I think, you know, several years ago when we did the power failure project, we calculated that 1.4 billion was spent on federal lobbying by power companies and their allies, and they gave 112 million to federal candidates, millions of more into statewide races. It’s a huge amount of money that, you know, is distorting policy.

John Farrell:

I think it’s interesting because the Colorado bill is noteworthy for being one of the first in recent memory to even address this issue about utility political power. But the thing that’s sort of disappointing to me is that, and I I’m kinda curious what you think about this. My sense of it is that if I am a captive customer of the utility, so as we referenced earlier, if I’m a Charleston resident or Minneapolis resident, I can’t pick my utility company, which means that the usual means available to me as a U.S. consumer of something to change where I spend my money, if I don’t like the politics of the company that I’m buying from is not available. So I just think about, I remember 10 years ago or something, there was a boycott of Barilla pasta because they were saying things that were, you know, not supportive of marriage, for example, or, you know, there are people in Florida are boycotting Disney because they were in opposition to the governors don’t say gay law. And I guess I’m kinda curious as someone who is obviously as a reporter, as a journalist, as someone who’s, I think representing what the First Amendment is all about, how you feel about the idea that utilities have this power at all. My argument honestly has been why should utilities be allowed to lobby period? Because they have this privilege of being monopoly companies and that it seems to me that that free speech ought to go hand in hand with competition and choices for customers.

Tony Bartelme:

Great point, John. Yeah, I think one of the, one of the root causes or one of the most pervasive feelings during our big nuclear fiasco was this sense of powerlessness, this lack of power, this inability to even vote on what was happening to your power bill. So the regulators are, you know, that’s, that’s our, essentially our conduit to making changes. But I don’t know if many people know who our regulators are and how to contact them and whether that’s even something that they should do. It’s, there’s no real democratic connection to policy.

John Farrell:

Are there other things that you had hoped that I would ask you about that I haven’t yet, or other pieces about the article or your other things that you’ve been working on that are related that you’d wanna chat about?

Tony Bartelme:

I’ve been working on some non-utility things for a while now. I just working on a lot of climate change stories where I look at, at stories that other people are neglecting and I, I try to identify issues that are essentially hidden in plain sight. And one of the stories I’ve been working on is about how dust from the Sahara floats over the Atlantic and essentially turns on and turns off our hurricanes. And climate change is gonna do something to that mechanism. You, you try to look for the invisible.

John Farrell:

Yeah, that’s fascinating. Is that a piece that will be done soon or something that’s kind of longer term?

Tony Bartelme:

It’s a piece that’ll be published in later June, late June, June 25th. And for that project we were fortunate enough to get a grant to go to Western Africa and, you know, put our feet on the sand and dust that is actually transported across the ocean. And then really the thing that kind of got me most excited was talking to the researchers who are doing work there who are so often neglected because science has this forever tilt toward Europe and the United States, and they, their voices tend to be drowned out.

John Farrell:

Well, let me ask you one last question about Power Failure. This piece that you wrote so notably six years ago, if I had a $10,000 budget for communications, who do you think really needs to have that article in in their hands? How could it continue to provide benefits for folks who are concerned about the ways that utilities wield their power that they spend customer money? Who do you really wish would read that piece given that, I think unfortunately it’s still very relevant in 2023, it just as it was in 2017?

Tony Bartelme:

I think it’s incredibly relevant today. So I would hope that anybody who pays a power bill would read it because even though it’s pretty long, it helps you understand why your bills are so high, some of the abuse that takes place. And you know, if you kind of understand this financing mechanism, maybe you can make some better decisions. Maybe you can contact your lawmakers to contact those regulators and prevent another 9 billion fiasco.

John Farrell:

Well Tony Bartelme, thank you so much for joining me on Local Energy Rules. Thank you for your reporting work. That piece really inspired me, frankly, to spend more time looking at this issue of utility accountability. And I think many others who have also been doing work in that space. I’d be remiss if I didn’t mention Energy and Policy Institute, which does an incredible amount of work across the country helping to document these kinds of issues from Virginia to the southeast, to Florida to Colorado, California. And I like to believe that they were similarly inspired by this work as well as they’ve been growing their portfolio of looking at utility accountability. So thank you again for your work and for taking the time to talk with me today.

Tony Bartelme:

You bet, John, thank you for digging into this. It’s really important.

John Farrell:

Thank you so much for listening to this episode of Local Energy Rules with Tony Bartelme, projects writer for the Charleston Post Courier in South Carolina, where we spoke about his landmark reporting on the bonfire of risky spending ignited by several monopoly electric utilities. On the show page, look for links to the 2017 article, Power Failure, as well as stories about the recently passed law in Colorado, the nuclear plant in Georgia that has become a financial boondoggle, and a link to the work of the Energy and Policy Institute, a nonprofit exposing utility misbehavior across the country. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear how we can take on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.