From Indiana, where investigative journalists are on the trail of Gov. Mike Pence and his curious "economic development" junkets with his utility executive buddies...
When are a utility's "economic development" donations a back door to corporate favors and lobbying, and when do they benefit the consumers the utilities serve?
Curiosity was raised when Gov. Pence took several foreign and domestic junkets, with his utility executive buddies in tow, for the purposes of "economic development" in Indiana.
When are a utility's "economic development" donations a back door to corporate favors and lobbying, and when do they benefit the consumers the utilities serve?
Curiosity was raised when Gov. Pence took several foreign and domestic junkets, with his utility executive buddies in tow, for the purposes of "economic development" in Indiana.
Gov. Mike Pence took a quick trip to New York City this week with a "delegation of Hoosier business leaders and economic development professionals" in an effort to coax businesses to relocate to Indiana to escape the "high-tax metropolitan area."
Oddly, the only business leaders from Indiana who accompanied Pence and eight economic development staff folks on the trip are all executives at public utility companies.
IEDC staff posted pictures of Pence in a corporate suite at a New York Yankees game where the home team was taking on the Boston Red Sox.
Who's paying for this?
Apparently the utilities are, by "donating" to the Governor's Indiana Economic Development Corporation, a nonprofit subsidiary of the state's economic development agency.
Apparently the utilities are, by "donating" to the Governor's Indiana Economic Development Corporation, a nonprofit subsidiary of the state's economic development agency.
Donors have paid for Gov. Mike Pence to travel overseas, rent luxury sports suites, lobby lawmakers and fly to Iowa ahead of its first-in-the-nation presidential nominating contest.
The list reveals that more than 50 companies, trade groups and governmental entities contributed $2.19 million to the foundation from January 2014 to June 2015.
The majority of that money — about $1.7 million — came from utility companies. Duke Energy and its foundation gave the most — more than $456,000. Other contributors included lobbying firms, industry groups, regional economic development agencies, universities and large Indianapolis companies such as Eli Lilly and Co. and Dow Agro Sciences.
"We continuously seek donations for the foundation to support our business development efforts," said Indiana Economic Development Corp. spokeswoman Abby Gras. "As you can see, there are a number of donors from economic development groups to businesses who donate to the foundation. I can't speak for those donors, but I imagine they donate because they see the value of the state's economic development efforts and support the continued growth of business and job creation in Indiana."
Or maybe they donate for a different reason:
"It creates another opportunity, for example, with utility companies, which are heavily regulated at the state level, whose profits are really dependent on how they are treated by state government, it gives them the opportunity again to build relationships to be seen more as friends than somebody who needs some careful watching," said Julia Vaughn, policy director for Common Cause Indiana.
Executives from the same companies that fund the trade missions often accompany Pence on those trips, providing valuable access to the state's top executive.
"What they are effectively doing is looking for business, and so what we have as a result are policies at the administration level and the legislative level that favor the utility business plan, which isn't necessarily in the interest of the public," said Kerwin Olson, executive director of the Citizens Action Coalition.
And the line between economic development and lobbying is very blurry.
The foundation's funds have even been utilized for lobbying efforts.
Since November, the Pence administration has spent at least $2,950 on a website to promote his $84 million "regional cities" initiative, which is intended to boost economic development across the state by leveraging private investment. During this year's legislative session, when lawmakers threatened to reduce the amount Pence was seeking, the website criticized his fellow Republican lawmakers and urged people to "TAKE ACTION!" by sending a form letter to their legislators.
Foundation money also was used to purchase gift bags for 25 key lawmakers. The bags included letters of support for the initiative from local mayors and a magnetic paperweight with paper-clip men.
The recently released list of donors shows why utility executives get to share in the junket spoils:
Indiana Michigan Power $424,000
Duke Energy $381,654
Vectren $267,150
Northern Indiana Public Service Company $260,000
Indianapolis Power & Light $157,500
Duke Energy Foundation $75,000
NIPSCO $50,000
Hoosier Energy $37,500
Indiana Municipal Power Agency $28,883
American Electric Power $10,000
That's a lot of donations. Assuming the IEDC's purpose is purely the creation of jobs and tax revenue in Indiana to benefit the citizens, what do utilities get out of it, aside from a private conversation with Gov. Pence in a suite at a baseball game?
"Economic development benefits everyone," said Brian Bergsma, director of communications and government affairs for Indiana Michigan Power. "Job creation creates better streets, better schools, better economic opportunities for everyone."
Duke Energy spokesman Lew Middleton said the company has an ongoing relationship with the IEDC, where it meets with state economic development officials on a regular basis.
"We do hope to attract new businesses to our service area," Middleton said, "and at the same time, then be able to increase the number of jobs in any given community where a business might be thinking about locating. It sort of helps raise the quality of life for all the citizens in a particular community when new jobs come to the area."
And jobs and economic development increase power company sales of electric power, increasing a utility's profit. The utilities may also argue (but they didn't think of it yet, so I'll help them out) that spreading their fixed costs over a bigger customer pool lowers each customer's overall share of those costs, incrementally lowering their bills.
But who's doing the math? Will each customer's savings outweigh his share of the "economic development" donations, plus the utility's increased costs to serve additional customers? In addition, the donations are spread over all customers of the utility, while the economic development is actually taking place in a very small portion of its service area.
For example -- Indiana Michigan Power serves customers in both Indiana and Michigan. What benefits are the customers in Michigan getting from economic development in Indiana?
And how much of the "economic development" donations are really being spent on economic development? Could economic development be undertaken without expensive sports junkets? How many other benefits are being given away at these "economic development" schmooze-fests? Are the utility executives there to promise cheaper (or free?) electric rates for industries that relocate to Indiana? If so, are the captive ratepayers picking up the tab for that in exchange for a few jobs? Why do only a few benefit at the expense of the majority? And when does "economic development" cross the line into straight up political pandering and lobbying?
The list of "donors" also includes many non-utility corporations, however the amounts of these donations were small. Non-utility corporations must balance their "donations" against their profit margin. They must include the costs of their donations in the cost of their product, so that holds "donations" in check. If generous giving increases the cost of a company's product, it will suffer in the marketplace as customers go elsewhere for a cheaper product.
However, in the case of a regulated utility monopoly, customers are captive, and must pay whatever costs a utility incurs, subject to regulatory approval. Does sharing a red hot and a beer with Pence at a ball game grease that approval? Everybody wins! Except the consumers. They lose.
But who's doing the math? Will each customer's savings outweigh his share of the "economic development" donations, plus the utility's increased costs to serve additional customers? In addition, the donations are spread over all customers of the utility, while the economic development is actually taking place in a very small portion of its service area.
For example -- Indiana Michigan Power serves customers in both Indiana and Michigan. What benefits are the customers in Michigan getting from economic development in Indiana?
And how much of the "economic development" donations are really being spent on economic development? Could economic development be undertaken without expensive sports junkets? How many other benefits are being given away at these "economic development" schmooze-fests? Are the utility executives there to promise cheaper (or free?) electric rates for industries that relocate to Indiana? If so, are the captive ratepayers picking up the tab for that in exchange for a few jobs? Why do only a few benefit at the expense of the majority? And when does "economic development" cross the line into straight up political pandering and lobbying?
The list of "donors" also includes many non-utility corporations, however the amounts of these donations were small. Non-utility corporations must balance their "donations" against their profit margin. They must include the costs of their donations in the cost of their product, so that holds "donations" in check. If generous giving increases the cost of a company's product, it will suffer in the marketplace as customers go elsewhere for a cheaper product.
However, in the case of a regulated utility monopoly, customers are captive, and must pay whatever costs a utility incurs, subject to regulatory approval. Does sharing a red hot and a beer with Pence at a ball game grease that approval? Everybody wins! Except the consumers. They lose.
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