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What does this Duke Energy case mean for utility transparency?

A recent case involving Duke Energy Florida could set a precedent for more secrecy around utility regulation.

A legal case involving a Tampa Bay power company could result in less transparency on future utility regulation.

State utility regulators on Tuesday upheld an administrative law judge’s decision requiring Duke Energy Florida to return $16.1 million to customers. The judge found that the utility did not act “prudently” in charging customers for replacement power after a generator at its Bartow natural gas plant was damaged in 2012.

The public decision follows a legal proceeding unusually shrouded in secrecy on the grounds the opening the decision could have exposed trade secrets. While the case swung in favor of customers, some consumer advocates worry it could set a precedent for more secret proceedings down the line.

“It’s unprecedented, and it’s many multiples of the scope of confidentiality that’s been afforded to the entire process in my 35 years,” said Charles Rehwinkel, lawyer with the Office of Public Counsel. His office represents utility customers in the regulatory process.

The case centered around a replacement Duke Energy made when a blade in the Weedon Island plant’s steam turbine broke in 2012. After repairs, the plant was able to produce power until October 2016, when it was shut down because of “excessive vibration. After a brief return to power, the plant was again powered down from February 2017 to April 2017.

The eventual repair that brought the plant back online caused it to produce less power than it had before, dropping from 420 megawatts to 380 megawatts.

Customers were charged for the cost of buying power lost during the February outage on the wholesale market — $11.1 million — and the cost of the reduced output of the plant — $5 million.

The plant had five outages since it first began generating power in 2009, the two most recent of which were unplanned.

“We accepted the (judge’s) recommended order as filed, finding no legal basis for rejecting or modifying the factual findings or conclusions of law,” Florida Public Service Commission chairman Gary Clark said in a release. “The Florida statutes set a high bar for rejecting an (administrative law judge’s) findings.”

In a statement, Duke Energy said it is “disappointed” with the decision and will “determine the next steps” after reviewing the commission’s order.

“We believe we have always operated the Bartow plant prudently,” spokeswoman Ana Gibbs said in a statement. “We are very proud that our efforts have saved customers millions of dollars through more efficient operations.”

Because Duke Energy has the option to appeal, there is currently no set date on when customers could see a refund.

What was unusual about this case was the amount of information treated as a trade secret.

Because the specifics of the plant’s issues centered around the design of the generator, portions of testimony relating to that design were considered exempt from public disclosure. Mitsubishi Hitachi Power Systems designed the steam turbines, and Duke Energy requested confidentiality.

Instead of being hashed out before the Public Service Commission, which regulates utilities in the state and is required to have open hearings, the case was sent over to the Department of Administrative Hearings where it could be closed to the public. The commission is required to maintain open hearings.

Typically, when there is specific information that is confidential, it can be redacted or talked around in public hearings. At a recent hearing for Duke Energy’s Crystal River power plant, for example, a witness was asked to refer to a specific line on a specific page and comment on it without revealing publicly what that information was.

But because the proprietary information in this case was so intertwined with the repair work, nearly the entire case and proceedings were confidential.

Rehwinkel said that for this particular case, the confidentiality made some sense. It would have been particularly difficult if not impossible to conduct a public hearing on it because of how closely the confidential information related to whether or not Duke Energy should have charged customers the amount it did.

What it could set utilities up for in the future, however, is the ability to shut out the public from larger portions of public matters going forward on the basis of trade secrets.

“It’s like a boundary that’s been crossed,” Rehwinkel said. “This gives you sort of a blueprint for how things can be done in the future. I don’t think that would be good public policy.”