What happens when a small group of emboldened regulators gets on the wrong side of one of the most powerful, influential and resource-rich electric utilities in the nation?

As the three members of the Public Utilities Commission weigh whether to let NextEra Energy take control of Hawaiian Electric Industries, a regulatory dust-up that came to a head in Florida six years ago might offer some guidance.

That was when the Sunshine State’s largest electric utility, Florida Power & Light, asked regulators to approve a vast electricity rate increase. The subsidiary of NextEra said this would allow it to invest $16 billion in new technology and construction.

But in early 2010 — a time when the Great Recession was still roiling the budgets of millions of the utility’s customers in a particularly hard-hit state — the Florida Public Service Commission rejected nearly all of the rate hike.

Nancy Argenziano, who led the commission at the time, recently told Civil Beat why she thought the price hike wasn’t justified.

“It was an incredible amount,” Argenziano said. “We knocked it down to what we thought it should have been.”

The Commission chopped the revenue proposal to $75.5 million, from the $1.27 billion the utility wanted.

Were the commission’s five regulators lauded for their stance in favor of cash-strapped residents?

Not quite. By the end of the year, four of the five members of the commission were out of their jobs — replaced by commissioners who have been far more generous with influential power companies.

The lesson, said Susan Glickman, the Florida director of the nonprofit Southern Alliance for Clean Energy, was clear: “If you don’t do what they want, they will get rid of you.”

The story of how and why those commissioners were relieved of their jobs offers a cautionary tale for regulators in Hawaii as they consider not just whether the purchase of Hawaiian Electric is in the public interest, but also whether they would be able to effectively regulate a utility owned by NextEra.

Levers Of Influence

Florida and Hawaii have a lot in common beyond tropical weather, soft-sand beaches, abundant sunshine and the occasional hurricane. Both states have part-time legislatures in which politicians don’t earn enough to comfortably support a middle class family.

Florida legislators receive less than $30,000 per year, about half as much as their counterparts in the islands. And in both states, a single political party dominates — Democrats in Hawaii and Republicans in Florida.

Such factors make it easier for lobbyists to efficiently channel their energies and resources to wield influence.

The watchdog nonprofit group Integrity Florida produced a report in 2014 that focused on the outsized political influence of privately held power companies.

The report found that the Legislature and regulators “routinely side with electric utilities rather than consumers.” It described a “revolving door” for former state regulators who routinely get hired by the major electric utilities, and said the power companies have employed the firms of sitting state legislators.

“All of the utilities collectively get their way, but Florida Power & Light is the 900-pound gorilla.” — Susan Glickman of the Southern Alliance for Clean Energy

From 2004 to 2012, electric utilities contributed more than $18 million to state-level candidates, political parties and committees, according to calculations by Integrity Florida. More than $7.5 million of those contributions came from Florida Power & Light.

And from 2007 to 2013, the four largest power companies spent $12 million on lobbying, with $4.7 million of that coming from the most significant contributor, Florida Power & Light. The company paid 190 lobbyists during that time, according to the report.

The mix of intensive lobbying, millions of dollars in campaign donations, and top-notch lawyers contribute to NextEra’s respected — and feared — ground game at the Legislature.

“In Florida, the Legislature controls the commission, and (the utilities) control the Legislature,” said Glickman.

The result, she added: “All of the utilities collectively get their way, but Florida Power & Light is the 900-pound gorilla.”

State Rep. Dwight Dudley described the Florida Legislature as “virtually a wholly owned subsidiary of Florida Power & Light” and a handful of other energy companies.

Dudley, the ranking Democrat on the Energy and Utilities Subcommittee in the Florida House, said that in the legislative body where he works, “the only things that get heard are what they want heard.”

When Regulators Are Bold

Revelations that employees of the Public Service Commission were too cozy with the utilities they regulated led to a partial shake-up of the commission in 2009.

Charlie Crist, who was then governor, announced he would inject “fresh blood” into the commission. A legislative nominating panel sifted through a large pool of applicants, interviewed those who made the first cut and then sent the governor a list of six qualified candidates to fill two positions.

The governor selected two men — retired journalist David Klement and certified accountant Ben “Steve” Stevens — who he said he hoped would offer a pro-consumer perspective. In such a context, the fact that neither of the two men had worked in the utility industry may have been seen as a plus.

Stevens and Klement quickly joined the commission after it had already begun to examine Florida Power & Light’s proposal to boost base rates by nearly 30 percent, as well as another large electric company’s price hike proposal.

The two men knew they would later face a Senate confirmation vote, but Klement told Civil Beat in a recent interview that he was repeatedly told it was a “routine thing” with virtually no risk involved. On that basis, his family bought and moved into a home within walking distance of the commission offices.

Soon after, Stevens also took his place on the commission. They joined three sitting members, Argenziano, Nathan Skop and Lisa Edgar.

Stevens and Klement dove into thousands of pages of transcripts and many hours of video on the rate increase proposals to get up to speed.

“I killed myself to familiarize myself with that case,” Klement said.

Klement noted the commission’s challenging discussions, long workdays and difficult decisions. “They weren’t just slam-dunks,” he said. “It was very hard — one of the hardest things I’ve ever done.”

The commission ultimately rejected a rate hike for Progress Energy Florida while granting Florida Power & Light the right to raise rates by $75.5 million; about 5 percent of what the utility was asking for.

‘Smear Campaign’

“When we turned their amount down,” Argenziano said, “they went absolutely crazy.”

She and Skop told Civil Beat they were victims of a multi-faceted “smear campaign.”

At least one of the actions Argenziano described involved a business lobby called Associated Industries of Florida.

The group’s website, which refers to itself as “the voice of Florida business” since 1920, tells potential members that AIF “provides you with all of the support and the tools you need to defend yourself against overzealous lawmakers and regulators.”

“The only things that get heard are what they want heard.” — Florida state Rep. Dwight Dudley, speaking of utilities’ influence in his state’s Legislature

The efforts of Associated Industries against Argenziano began well before the rate decision even came down.

In late 2009, the anti-regulation group published more than 2,400 Blackberry PIN message communications between Argenziano and her chief adviser Larry Harris, including their snide running commentary on events at the commission.

In some of those messages — which were not supposed to be retained — the head of the regulatory commission and her aide rudely criticize legislators, her co-commissioners and commission employees.

In one note, Harris suggested in writing that Commissioner Edgar, who had gotten flack for her close relations to some of the people she was supposed to regulate, was a “mean spirited anorexic bi#*h” who was under suspicion by her colleagues.

Barney Bishop, who was then the president and CEO of AIF, argued on the group’s website in 2009 that Argenziano’s communications “reveal a deliberate attempt to alter the outcome of what is supposed to be an impartial rate proceeding process.”

And the Herald/Times newspaper reported that a commission aide had given personal Blackberry identification codes of commissioners to a lawyer for Florida Power & Light, potentially allowing for possible off-the-record communications between the company and commissioners. That aide, Harris, said he did so because he thought, mistakenly, that those communications were part of the public record. Argenziano fired him.

Looking back, Argenziano told Civil Beat the publication of her messages was just one of many components of a campaign to bring her down “for trying to do my job.”

In the meantime, she said, “I was getting calls from legislators saying, ‘If you just shut your mouth, you’ll be able to stay on the (commission) forever and earn a good salary.”

Various media in Florida revealed other techniques that were used to target the commissioners, with the Miami Herald and St. Petersburg Times highlighting Florida Power & Light’s “hardball tactics” in a 2009 article entitled, “FPL secret campaign targets regulators to win rate hike, employees, documents say.”

The article includes sources and references to documents showing that the utility was investigating regulators and working to “challenge their impartiality and post negative comments about them and the governor on the Internet.”

The article accused the utility of conducting background searches on the commissioners’ credit and property records, as well as conducting criminal background searches, among other things.

At the time, Florida Power & Light denied using secret tactics to advance its case for a rate increase.

But Argenziano said that similar credibility-destroying efforts were also deployed against Commissioner Skop, “who while tightly wound, is very smart.”

Skop had been appointed to Florida’s regulatory commission in 2007, leading to a peculiar situation. From 2000 to 2002, Skop was an employee of FPL Energy — which later became NextEra Energy Resources — until he signed a “voluntary” severance deal. Despite that, NextEra executives assert he was terminated.

Contacted recently, NextEra Energy spokesman Rob Gould said that due to the ongoing merger hearings before Hawaii regulators, the company would not comment for this article.

But he shared portions of specific documents filed in the merger hearing in relation to Skop’s testimony, including on NextEra’s conclusion that the Florida commission was biased against Florida Power & Light.

In one of those documents, NextEra Energy Hawaii President Eric Gleason addressed questions about Skop, who recently came to Honolulu to testify at the Public Utilities Commission hearing on NextEra’s acquisition of Hawaiian Electric.

“I was getting calls from legislators saying, ‘If you just shut your mouth, you’ll be able to stay on the (commission) forever and earn a good salary.” — Florida energy regulator Nancy Argenziano

Gleason’s testimony indicates that his company concluded that Commissioner Skop was so skewed against Florida Power & Light that the company “was compelled to take steps to protect its customers and investors from this bias to secure its right to due process and a fair hearing before an impartial decision maker.”

In September 2010, NextEra sought to have Skop excluded from all regulatory involvement that might affect Florida Power & Light.

Another document argues that the regulatory environment in Florida was contentious and politically motivated, and the independence of regulators was “severely compromised.”

From NextEra’s vantage point, according to the company’s response to a document filed with the Hawaii Public Utilities Commission by the Sierra Club, the problems were due to then-Gov. Crist.

In this narrative, by declaring that he was opposed to big utility rate hikes and by promising to take commissioner’s votes on rate increases into consideration in making appointments, the governor was putting undue pressure on commissioners.

As evidence, the document notes that Crist had declined to reappoint two of the sitting commissioners after they voted to allow another electric utility to increase rates.

“This was a signal not only to the newly appointed Commissioners, but also the two Commissioners who would be up for reappointment in 2010,” the testimony states.

Another NextEra filing with regulators in Hawaii says that the proposal to disqualify Skop from decisions involving the company came in a legal motion that “clearly demonstrated that a reasonably prudent person in FPL’s position would fear that he or she would not receive a fair and impartial hearing from Commissioner Skop.”

When the  Florida commission denied that motion, the power company took its argument to Florida’s 1st District Court of Appeals, to no avail.

The bad blood from those encounters was on clear display when attorneys for NextEra cross-examined Skop at the NextEra merger hearings in Honolulu in early February.

Tossed Out By The State Senate

After the rate increase was largely rejected in 2010, Klement said some of his critics began combing through his past in search of dirt.

“There is nothing negative in my background,” said the born-again Christian who spoke of his stable family and the respect of his community, partly due to his 30 years writing editorials for the Bradenton Herald.

Stevens didn’t respond to a request for an interview made via a business partner.

Several months after the rejection of most of Florida Power & Light’s massive rate increase request, Stevens and Klement remained unconfirmed by the state Senate.

To Klement’s surprise, the two men began to face accusations by some Republican senators of not having the relevant expertise for their new job — even though a legislative group had vetted them and proposed their names to the governor who chose them.

Criticism from a few Democrats took a different tactic. Stevens and Klement are both white men, and they replaced a white woman and a black man, making the commission all white and 60 percent male. A member of the Black Caucus led the charge against the two appointees, complaining that the commission wasn’t as diverse as the population of Florida. That man was state Sen. Chris Smith, a former lobbyist for Florida Power & Light.

But it wasn’t entirely clear that the two men were heading toward trouble until just before the end of the legislative session. The Senate, in a single voice vote, approved 533 appointments by the governor, but decided to take a closer look at two public service appointments — those of Stevens and Klement.

“They will come in with heavy-handed tactics. They will start giving out money. I don’t know who pulls the strings or what, but they will map out the path to power and own it.” — Susan Glickman, of the Southern Alliance for Clean Energy

On April 27, 2010, days before the end of the session, the vote took place. Klement was rejected, 21-17, while Stevens went down 23-14.

The Tampa Bay Times described the votes as a “stunning rebuke” to the man who appointed them, Gov. Crist, and the result of a tit-for-tat battle between the Legislature and the state’s top executive over some of his vetoes.

Crist issued a response: “Commissioner Klement and Commissioner Stevens stood up for Floridians by blocking unjustified multimillion dollar rate increases. Removing them from the Public Service Commission only hurts consumers.” (The former governor, who is currently running for a congressional seat, declined to be interviewed for this article.)

Klement put out his own statement at the time. “Today’s vote by the Florida Senate was an example of government at its worst — using vital public regulatory appointments to get back at the governor and to satisfy the wishes of the utility industry.”

He also warned that Florida’s Senate leadership “is bent on appointing utility-friendly commissioners.”

Klement, who is now the executive director at a think tank focused on policy solutions, told Civil Beat that a coordinated email campaign in which a large number of people wrote to state senators to complain about the commissioners helped to justify votes against confirmation.

Unlike Stevens and Klement, Argenziano and Skop didn’t get as far as a vote. They both sought reappointment, but the nominating council of the Legislature rejected their applications.

“If we sat there and took the easy road,” Argenziano said, “we’d still be sitting on the commission and making money without being raked over the coals.”

Asked whether the experiences of her commission might be relevant to Hawaii as it considers whether to allow NextEra to play a large role in the islands’ energy future, she replied, “I’d tell the people of Hawaii to be very cautious in dealing with this company … I wouldn’t trust them as far as I can spit.”

And Then There Was One

Through it all, Florida’s regulatory commission had a fifth member, Lisa Edgar. She was first appointed in 2005 and has remained on the commission under three different governors, having most recently been reconfirmed by the state Senate in 2013. She continues to earn more than $130,000 per year.

Once her four colleagues were replaced in 2010, the new commission quickly reduced energy conservation commitments that Florida Power & Light had previously agreed to. And since then, the commission has been far more generous to Florida Power & Light, allowing a sizable rate hike in 2012, and others.

“Today’s vote by the Florida Senate was an example of government at its worst — using vital public regulatory appointments to get back at the governor and to satisfy the wishes of the utility industry.” — Utilities Commissioner David Klement

In 2014, Crist’s successor, Gov. Rick Scott, appointed a political ally with no known experience with utilities to an open slot on the commission. The Senate confirmed the appointment.

The following year, the Public Service Commission voted unanimously to allow Florida Power & Light to invest as much as half a billion dollars annually in the natural gas business for five years, with the investment coming from the company’s 4.8 million customers, rather than its shareholders. The company said the plan eventually will result in large savings.

“They’re lackeys,” Rep. Dudley said of the commission.

Regardless of what they are, they may soon have another opportunity to decide on a very large rate hike. Florida Power & Light intends to soon seek another $1.3 billion increase — to offset increasing expenses and respond to population growth, the company says.

In the big picture, Glickman said NextEra’s subsidiary pushed four regulators out with the help of the Legislature because that is how things get done in Florida.

In Hawaii, she warned, such a company is likely to find other ways.

“They will come in with heavy-handed tactics. They will start giving out money. I don’t know who pulls the strings or what, but they will map out the path to power and own it,” said Glickman. “That’s what they did here.”