Outcry over Esty chat with utility investors delays Senate vote
The state Senate postponed a vote on a renewable energy bill Wednesday after environmentalists raised questions about the propriety of Connecticut’s top energy official discussing the measure Tuesday in a wide-ranging conference call with stock analysts and investors.
Daniel C. Esty, the commissioner of energy and environmental protection, who talked about energy issues on a call arranged by UBS Securities, hastened to apologize to legislators for what he called a matter of clumsy timing.
“I should have been more attentive to the fact that legislation was pending,” said Esty, who could be seen making the rounds of leadership offices at midday. “In retrospect, that was a miss. I should have been more careful.”
Esty and other participants in the call said he divulged no proprietary or inside information, instead talking generally about the Malloy administration’s goals of promoting renewable energy as cheaply as possible.
But the controversy highlighted tension between environmentalists and the administration of Gov. Dannel P. Malloy over the state’s commitment to renewable energy. Those tensions are growing more visible.
A broad array of environment groups oppose the pending legislation, which they say will create a demand for the Northern Pass transmission line that Northeast Utilities wants to build to give Connecticut better access to hydro-electric power generated in Canada.
“This is really a sweetheart deal for NU,” said Chris Phelps, the state director of Environment Connecticut. “Large-scale hydro does not need large-scale incentives.”
The environmentalists say the Malloy administration intends to create greater demand for hydro-power through revisions to the state’s “Renewable Portfolio Standard,” which requires power companies to buy some of their electricity from renewable sources.
Phelps and others say hydro-electric power is a well-established industry, while wind and solar still are struggling to establish themselves as economically competitive sources of electricity.
Esty, a Yale professor widely published on energy policy when hired by Malloy in 2011 as the state’s first commissioner of a new energy and environmental protection department, said lowering costs is a major policy directive from the governor.
“The governor always says we don’t have a clean-energy policy. We have a cheaper and cleaner energy policy,” Esty told the Mirror.
In a transcript of the UBS call released Wednesday night, Esty used similar language, saying hydro-electric power would be part of a mix, but with no guarantees.
“Again one of the principles of Gov. Malloy’s approach is that we don’t pick winners,” Esty told the analysts and investors. “We are very much focused on creating a platform for private entrepreneurial activity. We’re very much focused on harnessing competitive pressures and economic incentives to bring down costs.”
Some environmentalists immediately raised an outcry Wednesday morning over Esty’s participation in the conference call, which was organized by Julien Dumoulin-Smith, a UBS analyst who closely follows Northeast Utilities.
A week before the call, Dumoulin-Smith upgraded his view of NU stock from “neutral” to “buy,” with anticipated changes on the Renewable Portfolio Standard as part of his rationale:
“We are upgrading shares to Buy ahead of a potential revision to Connecticut’s Renewable Standards, enabling the state to contract for NU’s proposed Northern Pass transmission project which would import Canadian hydro resources down into Connecticut.”
Tom Swan, the executive director of the Connecticut Citizen Action Group, said the willingness of Esty to brief stock analysts and investors was “outrageous.”
“A commissioner making a presentation to investors with the title of ‘UBS access’ should be very alarming for everyone in Connecticut. It implies that our government and access to our government will be made available to the highest bidder,” Swan said.
The subject line of an email promoting the call was “UBS Access: Conference Call: Connecticut Energy Policy with Commissioner Esty.”
The Malloy administration, UBS and some legislators saw nothing nefarious in Esty’s participation.
“The timing of this call certainly wasn’t ideal,” said Mark Ojakian, the governor’s chief of staff. “That said, we want our commissioners out there engaging with different communities, so that we can make clear how we are moving the state forward on any number of issues.”
Sen. Bob Duff, D-Norwalk, co-chairman of the Energy and Technology Committee, said he had confidence in the commissioner.
“I wasn’t on the call, nor have I seen the transcript. But I have no reason to believe that Commissioner Esty would have shared any kind of insider information with one group of people over another. That’s not the Dan Esty I know.”
House Minority Leader Lawrence F. Cafero Jr., R-Norwalk, one of the leaders Esty visited Wednesday, said he asked Esty if he had said anything about state energy policy that he would not have shared in any other public setting.
“He said he didn’t, and he is going to share the transcript,” Cafero said.
Cafero said the timing was unfortunate, since it could create the appearance that he was sharing information with investors on the eve of an environmental vote in the legislation.
“The timing sucks, but based on what he said, I don’t think it was malicious or devious,” Cafero said.
House Speaker J. Brendan Sharkey, D-Hamden, who also met with Esty, said he wants to learn more about the conference call.
“I’m concerned about the appearance this might give to the public about the appropriateness of having these kinds of conversations as legislation is pending,” Sharkey said. “And I think Commissioner Esty has acknowledged he could understand that concern.”
Rep. Lonnie Reed, D-Branford, the other co-chair of the Energy and Technology Committee, said she was “astonished” by Esty’s call to investors, calling it an unwanted distraction.
“This other thing is a drama that is taking place on a different stage, and I find it disconcerting and not helpful,” she said.
Dumoulin-Smith, the analyst who organized the call, expressed surprise over the controversy, but declined to comment on the record.
“Yesterday’s call was a regularly scheduled conference call with a vast array of investors, regulators, industry officials, policymakers and other participants,” said Megan Stinson, a UBS spokeswoman. “UBS requires that speakers on these calls not disclose or discuss any material non-public information.”
Jeff Kotkin, the vice president of investor relations for Northeast Utilities, said Dumoulin-Smith frequently invites public officials and others with utility expertise to participate in conference calls for investors.
“It’s not unusual for analysts to want to get public-policy officials talking directly to their clients, who are institutional investors, as opposed to only hearing from the companies,” Kotkin said.
The controversy was not the first in which Esty’s sensitivity to appearances was at issue — and Northeast Utilities was an element then, too.
Esty spent three days in October 2011 trying to respond to questions about his lucrative consulting and speaking income before joining the administration. Malloy stood by his commissioner, who released a list of global speaking engagements that paid him $1.2 million since 2006.
“I know that impressions matter, and we want to be very clear about addressing any past work I’ve done,” Esty said in 2011.
Jan Ellen Spiegel contributed to this report.
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