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Utilities Secretly Lobbied Congress by John Mintz Washington Post, May 11, 2000

Some of the nation's largest electric utilities have secretly funneled millions of dollars through two front groups--one headed by well-known conservative leaders to appeal to Republicans, the other affiliated with unions--to stop Congress from deregulating their industry.

The campaign, which at times was run out of the offices of the utilities' CEOs, was so secret that some Washington lobbyists for these same companies were kept in the dark about many of its activities, according to documents stamped "confidential" by the effort's organizers.

The documents offer an inside view of the industry's clandestine efforts to wage its political battle through newly minted entities with innocuous-sounding names. While the use of such groups has become a common device in lobbying campaigns, it is rare to obtain a detailed operator's manual for such an effort, complete with candid assessments of individual lawmakers' vulnerabilities and specific budgets for waging grass-roots campaigns in their districts.

Although the two groups--the conservative Citizens for State Power and the liberal Electric Utility Shareholders Alliance--have advertised heavily against deregulation, until now only those involved in the effort knew the organizations were the creation of the same network of utilities. This network believed using seemingly independent surrogates made their case more believable and shielded them from political risk.

A 1998 memo said the utilities ran the groups in an arm's-length way described as "discreet, guarded and highly confidential. . . . Fear of congressional reprisals conditioned this style. . . . It would be prudent to avoid rash openness."

Their ongoing "grass roots" lobbying campaign was designed to influence members of Congress by whipping up hometown ferment with radio ads directing listeners to call "1-800-BAD-BILL" and telephone banks wired to connect angry home district residents to congressional offices.

The goal of the operation, on which the utilities spent $17 million over the last 3 1/2 years, was to bottle up legislation in a single congressional panel, the House Commerce Committee's energy and power subcommittee.

The utilities' stealth campaign is one reason energy deregulation legislation has been stalled, although last fall one partial deregulation bill was reported to the full committee. Commerce Chairman Thomas J. Bliley Jr. (R-Va.) is a staunch industry critic determined to move a bill.

The documents describe meetings in Washington steak houses such as Sam & Harry's where utility lobbyists and consultants shaped strategies for stopping Bliley. The dozen or so participants in the operation--who called their effort "The Project"--address each other in the memos with the kind of blunt talk that isn't often found in civics textbooks.

"The trendline is ominous in that a spirit of accommodation and compromise is definitely taking hold," said one document in 1998, when the utilities feared Bliley was winning over committee colleagues. "The number one goal of 'The Project' has always been to bottleneck legislation."

The participants speak of the need to "demonize" the federal agency that regulates utilities and to use debates about nuclear power as "a highly provocative wedge issue" to destabilize legislative adversaries.

The memos were given to The Washington Post by deregulation advocates, and participants in "The Project" confirmed their authenticity.

The effort has outraged some congressional advocates of power deregulation. Rep. Steve Largent (R-Okla.)--whom the conservative front group, Citizens for State Power, attacked in home district radio ads last year--said it is "bogus" for a group to claim the conservative mantle by protecting big utilities.

"They're wearing a conservative hat, but they ought to be wearing a profit-making hat," said Largent. "The best interest of conservatives is to create competition."

Citizens for State Power (CSP) is headed by two leading lights of the conservative movement--anti-tax and Republican activist Grover Norquist, and David Keene, chairman of the American Conservative Union--and is run day-to-day by a veteran GOP operative, Craig Shirley. It denied for years that it took industry funds, but in recent years acknowledged taking some such money while offering no details.

The Electric Utility Shareholders Alliance (EUSA) also was created by utility funds, with the International Brotherhood of Electrical Workers kicking in small sums. It acknowledged some of its utility backers a few years ago but uses populist language to argue that federal deregulation would cause layoffs and hurt mom-and-pop utility shareholders.

The documents detail how the Washington political consultants who run "The Project" call into action one or another of these two groups depending on circumstances. They used the right-leaning CSP to broadcast ads criticizing Largent in his conservative Tulsa district and employed the more liberal EUSA to air commercials against Rep. Rick White (R-Wash.), who a year later lost his seat representing a more moderate Seattle district.

In its effort to stymie federal deregulation, "The Project" at times argued both sides of an issue before different audiences. Its participants told environmentally minded legislators that various deregulation bills weren't aggressive enough in reducing utility pollution but dispatched others to argue to pro-business members that Congress should not threaten deep emissions cuts.

While energy deregulation is an arcane concept to the public, it is an extraordinarily high-stakes struggle for the nation's $300 billion-a-year power industry. The battle pits investor-owned utilities against large manufacturers that want cheap power and independent power companies, such as Enron Corp., that want to compete with utilities. For one House Commerce subcommittee markup last year, lobbying firms paid temp workers to wait in line outside the hearing room for two days so the firms would have seats at the markup.

Most investor-owned utilities don't want the federal government to deregulate their businesses and introduce competition. These utilities say that if need be, they prefer that state legislatures and state utilities commissions do the job because they are less heavy-handed than federal officials. So far 26 states have taken the step.

Deregulation advocates say that the state efforts result in a confusing regulatory checkerboard and that federal action would lower energy prices and encourage investment in clean energy sources.

Many top GOP leaders were eager to deregulate utilities when they took over Congress in 1995, seeing it as a test of a bedrock conservative principle: opening the marketplace to competition.

Within months, a group of utilities sprang into action, organized by a law firm with a thriving utility practice. The firm, which now goes by the name Ryan, Phillips, Utrecht & MacKinnon, enlisted several existing clients and, later, numerous other firms.

Soon, the firm had brought in nine utilities that paid from $300,000 to $700,000 a year to fund "The Project" during the years they participated. The main corporate participants, the documents said, were Carolina Power & Light, Florida Power & Light, Texas Utilities, Illinois-based Commonwealth Edison, Reliant Energy (formerly called Houston Industries), Ohio-based First Energy, Michigan-based Consumers Energy, Florida-based TECO and Union Electric Co. in Missouri.

"The Project" was run by law firm partner Jeffrey MacKinnon, a former top aide to Rep. Joe Barton (R-Tex.), chairman of the House subcommittee; and Tim Ridley, a former Democratic staff member in Congress who now runs a firm specializing in "grass roots" lobbying campaigns.

They and the utilities ran the two front groups and supervised more than 50 "mobilizations" in congressional districts, in which radio aids were aired. Banks of trained telephone operators arranged for home district residents to send telegrams or place calls to congressional offices. The groups also arranged for influential citizens in the members' home towns to spread their message--including the car dealers who sold members their cars.

While most of the ads were not particularly negative, others used sarcasm or debatable statistics to attack their targets.

The one broadcast against Largent said he was favoring "Boston, bureaucrats and biomass" because the House member had joined with Rep. Edward J. Markey (D-Mass.) on a measure that industry officials said could have required utilities to use alternative energy sources. A memo from late 1998, six months before the campaign, gave a taste of the utilities' displeasure with him, describing the firms as "highly alarmed by Largent's obtuseness" and noting they "could make Largent's life very uncomfortable."

Some congressional Republicans hold Citizens for State Power partially responsible for defeating White, who lost his swing seat to a Democrat, Jay Inslee. A year before the November 1998 election, the group aired an ad saying White wanted to raise utility rates by 35 percent, and it also circulated a poll and memo among political professionals showing that White would be beaten easily, in part because of his embrace of deregulation.

"For the first time in this debate there were palpable political consequences for appearing to support" deregulation, a June 1998 document said. "In the case of Rick White, those consequences were direct and career threatening."

White said he doubted the ads played much role in his defeat, but he recalls his unease at realizing a GOP group was targeting him.

"I was a loyal member of the Republican cause, and this was a case of shooting a friend in the foot," he said.