Esty Criticized, And Then Apologizes, For Briefing Clients Of Investment Firm On Energy Issues A Day Before Scheduled Vote on Energy Bill

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Environmentalists are blasting state energy and environment Commissioner Dan Esty for briefing clients of an investment firm in a conference call Tuesday about state plans and pending legislation on energy that could benefit Northeast Utilities – which paid Esty $205,000 in consulting fees before Gov. Dannel P. Malloy appointed him in 2011.

“I was really shocked to learn that Commissioner Esty briefed [UBS Securities’] investors about changes in Senate Bill 1138” – a bill pending in the state Senate that would significantly change Connecticut\’s clean-energy requirements – hours before that information was made public on the state’s legislative website in the form of an amendment, said Roger Smith, co-director of the Connecticut chapter of the national group Clean Water Action.

“To me, that seems like an improper thing for an environment commissioner to do,” Smith said in a phone interview Wednesday.

Esty denied that on the phone later Wednesday, saying it’s his job as commissioner to talk to everyone including the investment community about what he’d described in the conference call as the Malloy administration’s push for “a cheaper cleaner and more reliable electricity structure for the state of Connecticut.” Esty insisted he’d disclosed no confidential information.

But he did admit that the timing of his participation in the UBS conference call was “terrible” and he had apologized to legislative leaders about it – because the energy bill was supposed to be to be voted on in the state Senate Wednesday.

Plans for Senate action fell apart in early afternoon amid questions by environmental advocates – but also after the legislative liaison for Malloy’s office, Paul Mounds, raised a question with Esty about the commissioner’s participation in the UBS conference call on the eve of a planned vote on the bill.

“Let me be clear – I had no intent to get out in front of the legislative process,” Esty said. “This was booked weeks and weeks ago [with UBS].” But, he said, “it looks like was stepping on the legislative process. … Had I to do it again, I should have looked a calendar [and decided that Tuesday] was probably not a good day to do a call with a lot of folks interested [in the state’s energy plans and pending legislation].”

“I get that the timing here was terrible, and I was insensitive that the legislation was about to be taken up,’ Esty said. The vote has now been postponed, probably for a week, Esty said — adding that he thinks that\’s good because it all allow all voices to be heard, and questions answered.

A day earlier, Esty talked for a half-hour in an afternoon conference call organized by New York-based UBS Securities. “Good Morning Clients,” a UBS executive wrote in an email promoting the call. “With the state of Connecticut recently releasing its first-ever Comprehensive Energy Strategy, we are hosting a call … with Commissioner Daniel C. Esty.” The focus would be on energy strategy, including renewable energy sources among other issues, the email said.

Esty, a longtime Yale professor with expertise on the environment and energy policy, had been a corporate consultant and author on those subjects prior to becoming DEEP commissioner. One of his clients was Northeast Utilities, which paid him $205,000 for consulting work from 1997 to 2005. After Courant disclosures about that in 2011, Esty said he had put Northeast Utilities on a list of a couple-dozen companies whose regulatory issues he would recuse himself from.

Northeast Utilities had no role in Tuesday’s conference call, but New York-based UBS – which conducted the call – had recently issued an update to clients in which it had changed its position on the utility company’s stock from “neutral” to “buy,” in part based on the state of Connecticut’s position with regard to hydroelectric power in renewable energy policy – and what was being discussed as the potential contents of Senate Bill 1138.

The idea apparently was what’s good for hydroelectric power is good for the Canadian power producer Hydro-Quebec and Northeast Utilities, which is its partner in a proposed power transmission line that is causing controversy in New Hampshire because it would cross the national forest in the White Mountains.

“We believe NU shares should see a flurry of positive events drive shares higher through 2013. We anticipate that in the near term Connecticut’s SB1138 has the potential to pass the House and Senate, revising the states’ [renewable energy procurement standard] to allow a portion to be met with large-scale hydro. This would in turn allow Hydro-Quebec (who is in turn having NU build the line on their behalf) to contract with the state and gain economic certainty around the line.”

Smith, the Connecticut chapter co-director for Clean Water Action, said that when he saw the UBS memo about NU’s stock, something clicked in his head. “For a couple of months I had been scratching my head over why Commisisoner Esty and {the Department of Energy and Environmental Protection] were so determined to support natural gas and Canadian hydro-power. It wasn’t until a few days ago, when I saw a memo from UBS Securities … that I realized that NU stood to gain tremendously from the state’s energy strategy, and particularly Senate Bill 1138.”

However, Esty said in Wednesday’s interview that he made it clear during the conference call that there was no advantage for hydroelectric power, or to Hydro-Quebec, in the new version of the bill that came out Tuesday. The new bill makes hydroelectric power a contingent option, not an immediate or direct one, under the bill that would call for renewable energy sources, such as wind and solar power, to account for 20 percent of the state’s energy consumption by the year 2020, he said.

Although hydroelectric power is considered a renewable, clean energy source, hydroelectric power from mammoth producers such as Hydro-Quebec not in the same renewable category as solar, wind, biomass and landfill gases under the legislative proposal, Esty said.

Hydroelectric power usage could increase if the primary renewable energy sources don’t hit their percentage goal as time goes on, Esty said, but he added that there would be a competitive bidding process under the state’s procurement mechanism – under which other hydroelectric power producers would have an equal chance with Hydro Quebec.

In Tuesday’s conference call – for which The Courant signed on to listen, after a source said it was happening – Esty was asked by a UBS executive: “You say cheaper, cleaner energy. … How does hydro fit into that?”

Esty answered that there was “a lot of dialogue” about it in state government now, adding that legislative action “could come as early as” Wednesday (although ultimately, it didn’t). Included in his answer was a statement that there would be “a bidding process that would allow not only Hydro-Quebec, but the maritime provinces and perhaps others to compete for long-term contracts.”

The 153 people who signed up for Tuesday\’s conference call were mostly from the investment field, and utility or energy companies. There were a few government officials and one Sierra Club representative.

 

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6 thoughts on “Esty Criticized, And Then Apologizes, For Briefing Clients Of Investment Firm On Energy Issues A Day Before Scheduled Vote on Energy Bill

  1. Lee

    It is too bad the state shot down Broadwater which would have provided cheaper natural gas and propane. Since the environmental groups played a large role in that, I would not listen to what they have to say. Anything the would produce cheap and clean energy, the environmental groups seem to be against.

  2. BTF

    Lee, your last sentence was right except for the word “seem”. They are against ANY action that doesn’t foster more ratepayer funding of expensive instate wind and solar energy. They don’t care about the economy (1 green job is worth sacrifice 10 regular jobs, to them), they don’t care about compromising (anything less than getting everything they want is not good enough)and they don’t even care about the environment (near zero emission hydro isn’t good enough, neither is natural gas). What they really care about is having an agenda upon which they can fundraiser to their base – wealthy white liberals.

  3. Roger

    Imported LNG is actually much more expensive than the natural gas we use here in New England. Pretty much all the import terminals got cancelled and now the game is to build export terminals! In CT we get gas around $3.50/MMBtu. Japan imports gas at $14MMBtu.

    We need to do more to support cheap energy efficiency, fixed-price wind energy and in-state solar to get off the fossil fuel roller coaster.

    1. deep44

      Esty disclosed non public information regarding an SEC regulated business to a group of bankers. Not only was it inappropriate but Illegal.

  4. jharrity

    It seems sometimes that the field of energy policy is also a minefield. People may agree or disagree with Commissioner Esty’s proposals, but these insinuations of impropriety are undeserved. Commissioner Esty is wrestling alligators in trying to make state energy policy more effective and rational. Not every move is perfect, but hey — these are alligators. Commissioner Esty is doing a good job straightening out our collective mess in energy.

  5. Alpinglow

    Broadwater was a terrible idea, and it wouldn’t have done anything for Connecticut energy costs.

    Esty is a brilliant guy at the pinnacle of his field. Malloy’s decision – combining energy and environmental policy and regulation and unifying that mission – was a masterstroke and the energy strategy is great for Connecticut and long overdue.

    If only Esty could stop getting himself into trouble with faux pas like these.

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