The chairman of the Maryland Public Service Commission regularly consulted with a utility industry lobbyist on how to keep an electricity deregulation plan on track in the face of a huge rate increase, e-mails obtained yesterday by The Sun show.
The messages from February 2005 show how lobbyist Carville B. Collins and Public Service Commission Chairman Kenneth D. Schisler shared sensitive strategy and discussed personnel decisions within the agency. The messages raise questions about the independence of an agency charged with regulating prices set by power companies.
Revelation of the e-mail exchange comes as the Public Service Commission's handling of a looming 72 percent electricity rate increase has drawn the ire of lawmakers and customers of Baltimore Gas and Electric Co., who say the agency has not done enough to forestall the increase.
The messages - in which Schisler spoke of the "lobotomy" that critics had accused him of performing at the agency, and Collins quoted energy executives as marveling at the changes Schisler had wrought in just his first two years as chairman - were described as a "smoking gun" by Senate President Thomas V. Mike Miller.
In an interview, Schisler called Collins an acquaintance of 15 years and said the exchange did not indicate any partiality. Collins could not be reached for comment.
"There is nothing in this e-mail that illustrates that I have taken a side of anyone on anything," he said. "There is nothing in this e-mail that suggests any kind of impropriety."
Lunch with Ehrlich
An attorney with DLA Piper Rudnick Gray Cary, Collins represents Pepco Holdings Inc., Columbia Gas of Maryland, Allegheny Energy and several other utility clients. He was the chief attorney for Gov. Robert L. Ehrlich Jr.'s transition team. Schisler is a former Republican delegate appointed by Ehrlich to head the regulatory agency.
In an exchange Feb. 7 last year, the lobbyist told Schisler that he is "having lunch at the mansion today with the governor at 1 p.m." and asks, "Anything you want me to mention to him?"
Schisler replied that he would be seeking the lobbyist's assistance in countering questions from Miller, who at the time had put together a task force to study the deregulation issue in time for the lifting of caps on rates this summer:
"Tell him [Ehrlich] that I ... will work with you to anticipate and preempt Miller trying to make a political football of this in 06. I have some ideas. My thought is to prepare responses and can them to see if we need them."
In the same message, Schisler addressed the replacement of long-serving staffers at the commission with former utility industry employees, a move that has drawn harsh criticism in recent days as the furor over this summer's planned rate increase grows.
"I am putting data together for our budget hearings in the event someone goes after me on the 'lobotomy' I performed on the agency," Schisler wrote. "I think we have a record to stand on and if they go after me I can defend [it].
It is not uncommon, Schisler said, for the commission chairman to interact with advocates from many sides of the utility industry, including Collins. Schisler said he frequently spoke with members of the regulatory bar, which consists of attorneys representing utility companies, electricity suppliers, consumer advocates and environmental interests.
"Do I know people on all sides of the issues in the regulatory bar? Of course I do. Have I worked with consumer advocates and company officials to work on solving problems? Yes," he said.
Schisler said the "lobotomy" reference was "shorthand to a reckless quote" made earlier by Sen. Brian E. Frosh, a Montgomery County Democrat who had been critical of staff turnover at the commission.
"I found it was insulting to our employees that he would say such a thing," Schisler said. "That wasn't me saying I had employed a lobotomy but rather a cynical reference."
Leading Democrats in the General Assembly called the exchange highly inappropriate and said it offered the clearest evidence to date of what they said were unacceptable Ehrlich administration ties between regulators and the businesses they oversee.
"It's really the smoking gun in terms of tying this administration being in bed with the utility companies," said Miller, the Senate president. "It causes a complete loss of confidence in anything that members of the Public Service Commission say and do at this point in time. ... It's improper, uncalled for and totally unwarranted."
House Speaker Michael E. Busch said the e-mails bolster his notion that the commission and the state's consumer advocacy group - the Maryland Office of the People's Counsel - have become an extension of the Ehrlich administration and its pro-business leanings.
"It reinforces the belief that this legislature and [the] general public is starting to have, that the independence of the Public Service Commission and the Maryland Office of the People's Counsel has been completely compromised," he said.
"The PSC and the Office of the People's Counsel are set up to be independent agencies," Busch said. "And this dialogue from a lobbyist from the utilities company and the constant inferences to the administration continues to bring into question the agency's independence."
Henry Fawell, a spokesman for Ehrlich, said the governor had no comment on the e-mails, portions of which were previously in the public record as part of a lawsuit filed by a former commission employee who sued after she was fired by Schisler - who had not consulted with the four other commissioners before making a series of personnel decisions. The lawyers who represented the employee have strong ties to leading state Democrats.
Customers of Baltimore Gas and Electric are facing a 72 percent rate increase July 1 - an average of $743 per year - as the result of the end of six-year limits on electricity rates. The limits were imposed to ease Maryland's transition into a deregulated energy market, but energy costs have risen much higher than lawmakers expected when they passed a deregulation law in 1999, and competition has not materialized.
Pepco customers face a smaller, but still significant, increase.
Early this year, as the lifting of the price constraint grew closer, Ehrlich asked the Public Service Commission to develop a solution. This month, the commission recommended spreading the increase over two years and charging customers 5 percent interest on the delayed charges. Democratic lawmakers and some Ehrlich allies, such as Comptroller William Donald Schaefer, said the plan was unacceptable.
While Ehrlich has said the 72 percent increase "will not stand," he has not offered a plan for rolling back the increase and has defended Schisler's performance. He proposed a $25 million appropriation to aid low-income customers in paying the higher bills - an amount critics said was insufficient.
"He's done a very good job," Ehrlich said of Schisler, as the governor came under attack from Schaefer at a Board of Public Works Meeting on Wednesday.
The Public Service Commission is not the first state agency to attract allegations of industry interference.
The Sun reported in December that a lobbyist for Constellation Energy, the state's largest owner of power plants, wrote the text of a letter that state Department of the Environment Secretary Kendl P. Philbrick sent to a Senate committee chairman during the 2005 General Assembly session in opposition to a law that would impose tougher pollution controls on power plants. The letter from Philbrick was faxed 90 minutes after he received a copy of it from a Constellation lobbyist, records show. The bill was killed.
In e-mail exchanges with Philbrick and other state environmental officials, a lobbyist for Constellation exulted at killing pollution-limiting legislation in committee.
According to a 2004 report from the Maryland State Ethics Commission, which monitors lobbyist activity, Collins is one of the most highly compensated advocates in Annapolis - he earned $353,330 from lobbying clients that year.
"He was like a third- or fourth-tier lobbyist until the Ehrlich administration came into power," said Miller, the Senate president. "And he rapidly moved up the ranks because of his representation of corporate clients."
Collins works in the firm that employed Edward B. Miller, the governor's deputy chief of staff, who founded a company, GrassRoots Interactive, that was used by convicted Washington lobbyist Jack Abramoff to launder money from corporate clients. Miller's company received a subpoena from investigators looking into Abramoff's case; Miller has not been charged with wrongdoing.
In an e-mail message, Collins told Schisler about how in a meeting with the governor, officials with Pepco Holdings Inc. were "singing your high praises" over Schisler's transforming of the agency and attracting workers with utility company backgrounds.
"Ed Miller heard the singing and also was impressed," Collins wrote.
In another e-mail Feb. 1, 2005, Schisler told Collins of his concern that he was asked by another lobbyist, former House Speaker R. Clayton Mitchell Jr., about Karen Smith - the governor's intergovernmental affairs director, who was soon to be named to the Public Service Commission. Her nomination was not yet public.
Mitchell "is the first person outside of you, the Guv, Craig, Appointments, Allen and Karen that I am aware of to have any info at all," Schisler wrote, describing the small circle of officials who knew of the key personnel decision. "I am kind of disappointed, but I guess it is to be expected. ... Karen told me today that it was still not known on the second floor and that is how the governor wanted it."
Portions of the e-mail exchanges between Public Service Commission Chairman Kenneth D. Schisler and lobbyist Carville B. Collins
From Schisler to Collins, Feb. 1, 2005 8:36 p.m.--"Senator [Thomas V. "Mike"] Miller has apparently set up a task force of senators to review restructuring issues. ... Can you see what you can find out about it and let me know what you hear? ...
"Apparently, Middleton is the Chair. Among the issues to be reviewed is psc [Public Service Commission] and opc [Office of People's Counsel] roles in overseeing dereg. ...
"Also, today Clay Mitchell let me know today he had heard Karen Smith's name in connection with the PSC. I didn't lie to him and told him she had expressed interest but that nothing was final. I requested that he not indicate to his clients or otherwise that I had confirmed her interest. I have no idea where he got her name. This is the first person outside of you, the Guv, [agency chief of staff] Craig [Chesek], Appointments, Allen and Karen that I am aware of to have any info at all. ...
"Karen told me today that it was still not known on the second floor and that is how the governor wanted it. ... "
[Karen Smith was intergovernmental affairs director for Ehrlich when she was nominated for the Public Service Commission during the 2005 General Assembly session.]
From Collins to Schisler, Feb. 7, 2005, 10:24 a.m.--"[Sen. Thomas M.] Middleton, [Sen. Kathy] Klausmeier, etc. have been quick to assert last week, while you were in Texas, that the task force has no effect on 2005 legislation.
From Schisler to Collins, Feb. 7, 2005 11:33 a.m.--"Tell him [Ehrlich] that I am working with Craig [Chesek] and will work with you to anticipate and preempt [Senator] Miller trying to make a political football of this in 06. ... "
"I am putting data together for our budget hearings in the event someone goes after me on the 'lobotomy' I performed on the agency. I think we have a record to stand on and if they go after me I can defend. ... "
"The Post's Matt Mosk called [state personnel director] Ande Fulton last week to ask Craig's salary and about his position. [They] were also asking about Joe Stefan. Who knows what Mosk is up to. The governor may be aware of it. It is not something I would worry him about, but you should know in case he asks."[The e-mail exchange occurred two days before the publication of The Washington Post's first article about Joseph F. Steffen Jr., the longtime aide to Ehrlich who worked with Chesek in the governor's congressional office. Steffen offered to resign, and the governor said he fired him after discussing rumors about the personal life of Mayor Martin O'Malley on the Internet. Revelations of Steffen's activities targeting state workers for firings at various state agencies launched a legislative probe.]
From Collins to Schisler, Feb. 7, 2005, 11:42--Ok, thanks. No end to the Post's curiosity. I don't think I like the line of questions the Post seems to be asking about Craig, in light of the "lobotomy."