The state’s utility regulator drew intense scrutiny from legislators last week for failing to regulate the electric industry ahead of the February blackouts. Many of its top staffers have worked for the power companies it oversees.
Public Utility Commission Chair DeAnn Walker became the most prominent Texas official to fall in the wake of the February blackouts, announcing her resignation Monday after growing bipartisan calls from lawmakers for her to step down.
The Public Utility Commission (PUC), which regulates electric, telecommunication, and water services in the state, has come under intense scrutiny in the past week after state legislators grilled Walker during oversight hearings about the winter crisis. During her testimony before the House and Senate, Walker had tried to play down the extent of her regulatory powers over both ERCOT, which operates the state electric grid, and the electric power industry.
The commission has been under fire from lawmakers for failing to exert its regulatory authority after the 2011 winter power outages and ahead of the blackouts this February. In 2014, the commission softened an order that would have required energy companies to identify and address all possible failure points in their equipment due to extreme weather after a big power plant company argued against it. The commission has also been criticized for failing in its role as the regulator of ERCOT; disbanding its enforcement division and firing ERCOT’s independent reliability monitor without replacing it. Now, there’s growing concern about what the PUC will do to maintain competition among retail electricity providers as many companies are likely to go bankrupt and corporate giants NRG Energy and Vistra—which together already control more than 70 percent of the market—become more dominant.
In 2017, Governor Greg Abbott appointed Walker as chair of the commission, making her the top official in Texas overseeing the electric industry. She was previously Abbott’s senior policy advisor on regulated industries. But before that, Walker worked at CenterPoint Energy, a publicly traded utility based in Houston, for 17 years as an associate general counsel and then director of regulatory affairs. That tenure included the period when the state restructured and deregulated its electricity market. As part of that deregulation, CenterPoint Energy was spun off from the energy giant Reliant in 2002. State lobbying records show that Walker registered as a lobbyist in 1999 and 2000 for Reliant and its predecessor. Before joining the private sector, Walker had worked at the PUC for nearly a decade as an assistant general counsel and administrative judge.
While many saw Walker’s long résumé of both government and industry experience as an asset during her time as Commission chair, her to-and-fro from regulator to regulated and back is emblematic of a broader pattern at the agency. Several top staffers have, in recent years, swung through the revolving door: gaining experience at the PUC, then going to work for a power company, then returning to work in the agency’s top positions.
Consumer advocates and government watchdogs say that the constant whirling of the revolving door may weaken the integrity of the Commission’s oversight duties. “It’s a huge problem,” says Tom “Smitty” Smith, former director of Public Citizen Texas, a consumer advocacy group. “We have a bad case of a revolving door where people come work for a period of time at the PUC, get experience, and go out and work for a regulated industry, and then often come back,” often to a top staff post. While commissioners are the ones who are the ultimate decision-makers on almost all matters at the agency, top staffers are depended on to offer regulatory analysis, guidance, and recommendations that inform those decisions.
In December, John Paul Urban—the PUC’s executive director, charged with running the agency’s day-to-day operations—left. A few weeks later, he was hired as acting CEO and senior vice president of the Association of Electric Companies of Texas (AECT), an industry association that represents the biggest power companies in the state, all of which are regulated by the PUC. Urban registered as a lobbyist for the group a month later, earning up to $280,000 this year, per state filings.
But this wasn’t Urban’s first trip through the revolving door between the agency and the industry it’s charged with regulating. Urban first joined the PUC as director of government relations and external affairs in 2011. In 2014, he left to work for NRG Energy, one of the state’s largest electricity generators and sellers. During that time he was also a registered lobbyist, earning up to $200,000 a year, according to state filings. In 2018, Urban served on the AECT board of directors as an NRG representative but resigned when the PUC hired him to be the agency’s top executive. That same month Urban’s predecessor Brian Lloyd—a former aide to Governor Rick Perry resigned—his post only to be hired two months later by Sempra Energy as a director of regulatory strategy.
Other top staffers have also gone through the PUC revolving door. The current deputy executive director Connie Corona first joined PUC in 1997 and worked there for six years on electric market policy as the state embarked on industry deregulation. In 2003, she left to work for NRG Energy as a director in its regulatory affairs department, where she spent 15 years, according to her LinkedIn profile. She returned to the PUC in 2017 as the Competitive Markets division director and was promoted to chief program officer overseeing all key regulatory and oversight divisions before ascending to her current post.
Rebecca Zerwas, the PUC’s current Director of Market Analysis initially worked for the PUC as a market analyst for a few years before also joining NRG Energy’s regulatory affairs department in 2013. In 2018, she was hired as a regulatory affairs manager for CenterPoint Energy’s electric business, a position that involved interacting with the PUC. Diana Zake, a former director of the competitive markets division, was hired in 2018 after nearly 20 years working for a number of Texas power companies’ regulatory departments, according to her LinkedIn. She also spent a stint at ERCOT as a market rules coordinator.
Tom “Smitty” Smith, who has followed the PUC for years, says the cycle from regulatory agency to private sector and back has upsides and downsides. “The good news is that when they come back, they often have a far greater understanding of the nature of the electric industry,” Smith says. “But while they’re out, they are able to share the secrets of the regulators and design programs that enable them to essentially play off the commission’s weaknesses or know the loopholes in the law so they can design programs that avoid regulatory scrutiny.”
Smith and other advocates say it’s not necessarily a problem that the PUC hires staffers from the power sector, since they can bring unique technical expertise that is useful to the agency—and often hard to come by. But there’s a risk if the agency relies largely on people from the industry it oversees to fill the key positions.
“Given the incredible complexity of the energy-only marketplace in Texas and its uniqueness within the entire American electricity delivery system, our agency’s ability to properly understand the issues and properly apply regulation is enhanced by the experience gained in the public and private sector,” PUC Director of External Affairs Andrew Barlow said in a statement.
State revolving door law prohibits commissioners and most former agency employees from ever getting paid by a company to provide services relating to a “particular matter” that they were personally involved in at the agency. But that is narrowly interpreted to only include a specific investigation, contract, application, or rulemaking. That means former employees are allowed to go work for companies on other related matters, like a different permit application or administrative proceeding—even if they deal with similar issues they worked on at the agency.
Barlow said that the PUC “operates under some of the strictest statutes pertaining to post-agency employment of any agency in the state.” On top of the state’s revolving door laws, Texas’s Public Utility Regulatory Act also specifically prohibits former PUC employees from working for a “public utility” that was “in the scope” of their “official responsibility” for one year after their departure while commissioners are prohibited from working for a public utility for two years after their departure.
But according to the law, “public utility” only applies to the companies that transmit and distribute power throughout the grid. Since deregulation, this is the only part of the state’s electricity system that is fully regulated by the Commission and commissioners must approve rate hikes proposed by these companies, which include Oncor, Centerpoint, and American Electric Power. So, for instance, a former employee can’t immediately leave to work for an Oncor or CenterPoint right after helping commissioners decide whether to approve that company’s rate hike. But that part of the law doesn’t cover much else in the electric industry—including power generation companies and retail electricity providers.
That includes NRG Energy, a common destination for PUC staffers. To avoid conflicts of interest and adhere to the law, NRG said that it relies on its code of conduct, which says that “It’s important to recognize conflicts of interest and to disclose them when they do or might occur.”
The code also states: “In the course of our work, we frequently communicate with judges, government employees and regulators who decide on the permits, applications, bids, contracts, rules and rates that affect our business. We forcefully advocate our positions on the record and avoid informal or personal contact with these decision makers about a pending matter when doing so would constitute an improper attempt to influence their determination.”
The other other end of the revolving door—coming from industry to agency—is largely self-regulated. “Employees who have recently joined the PUC after leaving an entity we regulate have often walled themselves off from matters they either believed they could not handle impartially, or believed their involvement would create an appearance of impropriety,” Barlow said.
On Wednesday, Abbott promoted PUC Commissioner Arthur D’Andrea, who he appointed in 2017, to chair of the commission. D’Andrea was a longtime Abbott aide, serving as deputy solicitor general when Abbott was attorney general and joining the Governor’s Office as an assistant general counsel.
Read more from the Observer:
ERCOT Increased Revenue and Executive Pay In Years Before Texas Power Outages: Top ERCOT officials collected six-figure salaries while failing to prepare for extreme weather events that they were warned about.
The ‘Culture of Violence’ Inside Austin’s Police Academy: Recent audits of the city’s cadet training spotlight a warrior-cop culture that pervades policing, even in a so-called progressive city.
How the Winter Storm Exacerbated Problems in Texas Lock-Ups: After the near-total collapse of the state’s electric grid, many jails and prisons lacked heat and running water.