As S.C. lawmakers start their second year of trying to reform utility regulation, utilities want to limit the state’s ability to investigate their business practices.

BellSouth and Progress Energy have proposed legislation that would make it easier to block state investigations of utilities. The proposals also would partially lift the ban against private talks between utilities and the S.C. Public Service Commission.

Lawmakers may consider the utilities’ proposals during this year’s session, which begins Tuesday.

Any changes in regulations for the state’s $9 billion-a-year utility industry would affect all S.C. residents. The PSC sets utility rates for every home and business in the state.

Last year, the Legislature failed to settle sharp differences in proposed changes at the PSC, leaving its seven commissioners in their $75,000-a-year posts although their appointments ended in 2002.

The House and Senate passed separate measures to reform the PSC. That came after a General Assembly committee, which reviewed PSC candidates in 2002, suggested commissioners lacked the competence and impartiality needed to protect consumers. A Legislative Audit Council in 2003 said problems with commissioners continued.

The Senate approved tougher reforms than the House — including creating an independent agency to investigate utilities. A conference committee of senators and representatives must settle the differences.

UTILITIES WEIGH IN

Representatives of SCANA Corp., BellSouth, Progress Energy and Duke Power have met with legislative staff members in the past month to discuss reform issues.

The companies are concerned about a Senate proposal to create an independent agency to investigate utilities and their requests to change rates.

Currently, PSC staffers often do double duty — investigating cases and then advising on how to resolve them. Some lawmakers say that creates a conflict of interest that can give an unfair advantage to utilities.

The S.C. Supreme Court has overturned several PSC decisions in the past few years, holding that they were not based on available facts.

BellSouth and Progress Energy have suggested language to limit the power of the proposed investigative agency, according to documents obtained by The State.

Under the Senate bill, the new agency would absorb some responsibilities from the Consumer Affairs Department. Utilities would pay for the new agency’s work.

LIMITED SCOPE

Senators intend for the separate agency to help prevent biased PSC decisions.

But utilities do not want to be “totally at the mercy” of the proposed investigative agency, said Progress Energy attorney Len Anthony.

Assuming legislators create the independent agency, Progress Energy wants the PSC — or an administrative law judge — to be able to stop any investigation it deems unnecessary or too costly.

BellSouth, in its proposed legislation, wants to limit the ability of the proposed investigative agency to obtain documents from utilities. And investigators would not be allowed to show documents they receive to anyone else, if BellSouth has its way.

Company spokeswoman Marcia Purday said utilities need to keep their proprietary information private from competitors. She also said utility documents should be confidential to protect infrastructure that is vital to national security.

PSC member James “Buddy” Atkins said any reform bill the General Assembly passes must ensure that the PSC and any utility investigators have access to all information necessary to protect consumers. Without such information and the expertise to analyze it, a new reform law would be meaningless, because utilities often hide information from regulators, he said.

“The bottom line is, ‘Pass meaningful legislation or don’t pass anything,’ ” Atkins said.

PRIVATE TALKS

Another contentious area of law that utilities hope to shape involves “ex parte” communications — discussions between PSC members and only one party involved in a pending dispute.

In its February 2003 report, the Legislative Audit Council said it found 17 e-mails between utilities and the PSC that were improper. The audit council, which investigates state activities at the request of lawmakers, said commissioners should act like judges and, as such, not engage in private talks.

But some utilities want to relax state law to allow some private talks between utilities and PSC members before pending decisions, if:

• Documents from the communication become public.

• An official witness verifies both what was discussed and that a commissioner did not pledge his or her vote.

Documents obtained by The State show that in December, some utilities still questioned how to deal with one-sided talks.

But utilities were “tentatively OK” with proposed draft language that would forgive “inadvertent” improper talks under certain circumstances, according to an e-mail from BellSouth lobbyist Pamela Lackey to a member of the staff of Senate President Pro Tempore Glenn McConnell, R-Charleston. McConnell leads the Senate’s PSC reform effort.

Lackey referred questions about her e-mail to corporate spokeswoman Purday, who said a forgiveness rule was necessary to protect people who might have spoken to a PSC member about an issue years before it came before the PSC.

SCANA has not taken an official position yet on rules against one-party communications, said spokesman Robin Montgomery.

Duke Power spokesman Tom Williams would not comment on other utilities’ proposals, saying Duke’s own views on potential legislation were “between us and the legislators.”

Eliott Elam, a frequent PSC critic and an attorney with the S.C. Department of Consumer Affairs, said there should be no loopholes in the law that would allow private communication between the PSC and parties in a case.

TOTAL REWRITE

Lawmakers are debating a variety of reform proposals. The contours of reform are still largely uncertain.

Sen. Tom Moore, D-Aiken, chairman of the conference committee on PSC reform, said a new law is likely to pass between February and April.

State Rep. Harry Cato, R-Greenville, sponsor of the House reform bill, said he is “cautiously optimistic” the General Assembly will pass a reform law quickly.

But the law will not be a cut-and-paste mix of features from prior bills, he said.

“We will have to totally rewrite the bill,” Cato said.

Contact McWilliams at (803) 771-8308 or jmcwilliams@thestate.com.