Top energy regulator tied to bidders for state work
ALBANY—As New York’s top energy regulator, Audrey Zibelman is in a position to influence a market worth billions of dollars and help set the policy that governs it.
At the same time, Zibelman, who worked in the private sector before Governor Andrew Cuomo appointed her chairwoman of the state Public Service Commission in 2013, has unusually close ties to energy companies vying for work in New York.
Zibelman is a shareholder in a company called Viridity Energy that develops energy grid technology, according to financial disclosures obtained by Capital. Viridity, which Zibelman co-founded and formerly headed before Cuomo tapped her to lead the P.S.C., has at least one project in New York and is listed as a founding partner for a website related to the energy storage market that is also backed by the New York State Energy Research and Development Authority, for which she is a board member.
Zibelman also has ties to other companies vying for state business, primarily through an overlapping series of partnerships or common principals involved in multiple projects.
She recently recused herself, after a question from a newspaper reporter, from a decision that could benefit a separate energy company she’s connected to through a series of overlapping corporate boards and financial backers. The company, Anbaric, has billions of dollars in potential transmission and microgrid projects pending before the state and was founded by her former business partner at Viridity, Edward Krapels. (An Anbaric website describes Viridity as a “collaborator.”)
But, Capital has learned, Zibelman has voted on issues that involve Anbaric in the past and earlier this year, she met with Krapels about Anbaric's competition for lucrative state-assisted microgrid projects.
An Anbaric spokesman said the company expects the state to select it soon to work on microgrids, which are small electrical grids with their own energy source.
Separately, a senior official at the company Zibelman founded, and who also works for her husband's company, is an investor in Anbaric, which has at least three major projects currently seeking approval from the P.S.C. or that are expected to do so in the future.
Zibelman, through a P.S.C. spokesman, said she does not benefit financially from Anbaric's transactions.
“As publicly stated, there is no conflict of interest related to Chair Zibelman and Anbaric’s Poseidon project,” P.S.C. spokesman James Denn said in a statement. “However, given Anbaric is a petitioner and she is a decision maker, Chair Zibelman voluntarily recused herself from the potentially controversial proceeding to avoid even the appearance of a conflict.”
The P.S.C. also said that Zibelman was not required to recuse herself from Anbaric's two other major projects because they were still in the development phase and that her recusal was not required under state law. They did not provide documentation on Zibelman's recusal from the one Anbaric project.
Viridity is listed as a “founding partner,” along with NYSERDA, of the website, GridMarket.com, which is a web platform that promotes energy storage in New York buildings. The joint venture was announced last year, about a year after Zibelman took over as P.S.C. chair. Zibelman said she had no awareness of the relationship between the website and the state.
On her annual financial disclosure, Zibelman only disclosed that her stake in Viridity is worth more than $1,000. However, in a response to Capital, Zibelman said her stake in Viridity had no “book value” and that she received no compensation or dividends from the company.
And Zibelman and her husband are connected directly or indirectly to a number of other companies actively participating in the state's energy grid overhaul, known officially as the Reforming Energy Vision plan. As a company that can help formulate the energy grid of the future, Viridity stands to profit from a reworked grid, particularly in the development of microgrids. Other states are expected to follow the precedent New York sets under R.E.V.
State ethics laws require that public officials in New York should refrain from direct conflicts of interest, as well as the appearance of a conflict of interest. Violations could result in a fine or, in extreme cases, jail time.
According to Meave Tooher, an ethics attorney and the former investigations counsel at the state ethics commission who headed the corruption probe of former state Comptroller Alan Hevesi, Zibelman’s situation presents at least the appearance of a conflict of interest, and merits tougher scrutiny by the state.
“If you just look to the nature of the P.S.C. and the entities they regulate, it becomes clear it's important that those conflicts get examined,” Tooher said.
“It seems like it could create an appearance of impropriety and that can be broader than a direct conflict,” she said. “The state is compelled to act in response to these situations. They should look at them and determine if a public employee has violated the ethical standards set forth in the Public Officers Law.”
Notwithstanding what experts say is an appearance of conflicts, there is no indication that Zibelman, her husband or any of the companies involved have done anything illegal or ethically improper. But the state's public officers law states that officers of state agencies should not create the “impression that any person can improperly influence him or unduly enjoy his favor in the performance of his official duties.”
State public officer law also says, “No officer or employee of a state agency ... should have any interest, financial or otherwise, direct or indirect, or engage in any business or transaction or professional activity or incur any obligation of any nature, which is in substantial conflict with the proper discharge of his duties in the public interest."
The P.S.C. has traditionally drawn its members from the ranks of the utility or energy industry and experts say there are no clear lines regarding the degree of involvement former executives in private industry should have with their former colleagues and companies once they join the P.S.C.
Before her appointment to head the P.S.C., Zibelman was the chief executive officer at Viridity, which has raised tens of millions of dollars in private capital since then. Her husband, Phil Harris, is the chief executive officer of Tres Amigas, a New Mexico-based company that is seeking to raise more than $1 billion to connect the nation's electric grids and allow for greater growth of clean energy.
In April, after questions from a Newsday reporter, Zibelman said she would recuse herself from state proceedings over a proposed Long Island underwater transmission line, the Poseidon Project, that is being developed by Anbaric. She acknowledged that she voted on a proceeding related to the project in 2013, but, they said in a response to Capital, she only had to recuse herself after “Poseidon’s filing had been deemed complete by staff, and potentially moving toward an eventual decision by the Commission.”
It would connect Long Island to the PJM grid, where Zibelman was once chief operating officer.
In response to questions about Anbaric's work in New York, Anbaric founder Edward Krapels issued a one-sentence statement that pointed to the company's decade of work in New York. Company officials did not comment on whether they might enjoy favored status due to Krapels' relationship with Zibelman.
“For more than 10 years and under four PSC chairs, Anbaric has been part of the teams developing energy infrastructure projects that provide value to New York ratepayers, and we look forward to continuing to do so,” Krapels said in a statement.
Viridity, Anbaric and the company headed by Zibelman's husband, Tres Amigas, share at least one other significant connection to each other. Russel Stidolph is listed on company websites as the chairman of the board of directors at Viridity, founded by Zibelman, and the chief financial officer at Tres Amigas, headed by Zibelman's husband. He also founded a third company, AltEnergy L.L.C., that financially backs energy projects including Anbaric, according to AltEnergy’s website. Viridity, the company in which Zibelman is a shareholder, also counts AltEnergy among its financial backers, according to the company website.
Officials for AltEnergy, Tres Amigas and Viridity did not respond to request for comment.
Even if she does recuse herself, as head of the Department of Public Services, Zibelman technically oversees the state employees who will work on the state's approval of the Anbaric projects. An Anbaric official has also been appointed by state officials to work on the state's influential microgrid working group under the Reforming Energy Vision plan to rework the state's energy grid to accommodate more renewables, something the company said is key to its future growth in New York.
In 2013, Zibelman headed the P.S.C. when it voted to approve a request from a project in which Anbaric is involved, the proposed West Point transmission line in the Hudson Valley, to waive some preliminary application requirements, public records show. In 2013, Zibelman also voted to waive some preliminary application requirements for the Posiedon transmission line, which is also developed by Anbaric. Both of those waivers could save the company money. In a response to Capital, state officials acknowledged Zibelman's votes on the Anbaric projects and said “granting waivers in siting cases is common when the requirements can be otherwise met.”
Anbaric transmission has not put a pricetag on most of their projects now in development in New York, but those that would require some approval from the P.S.C. could be worth billions, if their cost is similar to that of comparable projects the company has worked on. In 2013, Anbaric developed the seven-mile Hudson Transmission Project at a cost of about $1 billion. The West Point transmission line, in which Anbaric is involved, is now in the development phase would be up to 100 miles long and run from Albany to near the Indian Point nuclear facility. The Poseidon project, for which the P.S.C. recently hosted a public hearing, would run approximately 80 miles from New Jersey to Long Island.
Anbaric, which is touted on a company website as a “co-founder of Viridity Energy,” has aggressive plans for its New York microgrid business. The company wants to put a large microgrid in the Rockaways as well as at public buildings, hospitals and industrial properties around the state, including some that could provide up to 200 megawatts of power. Anbaric touts its microgrids as being tailored to fit the REV plan to remake the energy grid. To be successful, Anbaric says on its website that New York regulators must “create a regulatory environment in which it is reasonable for the Anbaric – Exelon alliance to make long-term infrastructure investments.”
On an Anbaric website, the company boasts that it collaborates with Viridity on microgrids. Viridity “makes controls for microgrids,” according to Anbaric.
A 15-megawatt microgrid recently completed on Riker's Island cost $122 million. The winners of a $40 million state microgrid competition now underway will “inform the REV process” by demonstrating the benefit of microgrids, according to a state press release. The state has already begun providing money for feasibility studies on where to site the microgrids.
And in 2011, under Zibelman, Viridity cut a deal with ConEdison Solutions —a subsidiary of the utility company Con Edison—on a large energy management project that allowed customers to better take advantage of price fluctuations in the energy markets. ConEdison Solutions also has a representative on the R.E.V. working group. A company spokesman did not return request for comment.
Some past P.S.C. appointees have ultimately not served on the commission because of the potential for conflicts.
A 2008 investigation by the state inspector general into the appointment of Angela Sparks-Beddoe as P.S.C. chair by then-governor Eliot Spitzer found that she had to recuse herself from matters involving her former employer and associated companies. Beddoe was a vice president at Energy East, an electric and gas provider regulated by the P.S.C., and was ultimately not appointed as chair. The report, citing state ethics law, found “a state employee must consider recusing herself on matters involving a prior employer or business relationship from the past two years.”
Other recent commissioners have had some industry connections, and served without public incident, including Garry Brown, who stepped down earlier this year. Brown, an appointee of former governor Eliot Spitzer, was an executive at the New York State Independent System Operator, the nonprofit entity that operates the state's energy grid.
Gregg Sayre, a current commissioner, was previously a lawyer at the Frontier Communications Corporation.
Referring to the P.SC.’s history of members with deep ties to the utility industry they regulate, Common Cause executive director Susan Lerner said, “There is a complete lack of conflict of interest rules,” she said, because state law allows regulators to meet behind closed doors with the industry they regulate before key decisions are made.
Lerner said that while the state needs people with expertise in a highly technical field, there are alternatives to appointing people with active ties to the industry, like recruiting from the ranks of academics, advocacy groups, lawyers and people with federal regulatory experience.
Occasionally, other states have reacted in response to ethical questions involving their top energy industry regulators, including a number in the past year. State and federal prosecutors are looking into close interactions between California's Public Utilities Commission and the utilities its members regulate. Florida lawmakers recently passed legislation to tighten what many see as the closeness between that state's Public Service Commission and utility companies. Arizona's top utility regulatory body is under scrutiny from watchdogs and media outlets for extensive texting with utility lobbyists.
Utility regulators need to project the perception they are treating issues fairly and would not be compromised by any previous work, said Janice Beecher, director of the Institute of Public Utilities at Michigan State University. Beecher, speaking generally and not specifically on Zibelman's case, said business experience can be valuable for a regulator, but also a liability if they have not distanced themselves from their previous work.
“You want a process that is fair and perceived as fair,” she said. “You have to look the public in the eye and tell them the best you could.”
There is no timeline for the P.S.C. to consider or approve R.E.V. projects or the transmission lines and microgrids. The commission's next monthly meeting is on June 17.