By: Elizabeth Ouzts, Energy News Network
April 29, 2020
North Carolina law allows the utility to hide which candidates benefited from its political spending.
Duke Energy funneled half a million dollars through a tax-exempt political group to pay for polling, television ads, and mailers in advance of North Carolina’s March primary, new documents submitted to the Internal Revenue Service show.
At least three state legislative candidates got help from the entity named Citizens for a Responsible Energy Future, according to media reports and filings with other federal officials. But that aid accounted for less than a tenth of the group’s total expenses, leaving the full extent of its beneficiaries unknown.
Called a “527” for the section of revenue code under which it’s regulated, the group created Jan. 30 by two former Duke executives is separate from the company’s official political action committee. Unlike the PAC, the 527 can take donations directly from corporations and make unlimited expenditures promoting candidates, but it can’t explicitly advocate voting for anyone.
“This way they can spend direct corporate money on North Carolina elections without violating the state campaign finance law,” said Craig Holman, a lobbyist with Public Citizen who’s authored numerous studies on 527s. “It also obfuscates how they are spending the money.”
Reports submitted to the IRS show that in February, the 527 received two contributions of $250,000 from Duke Energy Carolinas, the larger of Duke’s two utilities in North Carolina. It spent almost all of that income by March 4.
The forms list expenses such as “Direct Mail Services” and “TV Advertising and Shipping.” The known examples of these communications walk right up to the legal line, touting candidates’ virtues without mentioning the March 3 election. But under a recent change to North Carolina law, Citizens for a Responsible Energy Future doesn’t have to disclose the candidates who benefited.
The spending comes during a pivotal election year that could have long-lasting implications for the investor-owned monopoly utility, which is facing increasing pressure from lawmakers to hasten its transition to clean energy and loosen its control on the electricity market.
Duke confirmed the contributions but maintained that shareholders, not its ratepayers, will cover the costs, and regulators have proposed rules clarifying that the utility can’t propose otherwise. But critics say the proposal could still allow utilities to bill customers for donations to 527s.
“I continue to worry that the definitions … are too narrow,” longtime campaign finance watchdog Bob Hall wrote to commissioners last year, “and will result in ratepayers being charged for more, not less, political spending by regulated utilities.”
‘Those checks don’t exist’
Campaign finance reform advocates have long sought to curb the role of deep-pocketed special interests in politics. Without limits, the rationale goes, a Fortune 500 company like Duke could bankroll the election campaigns of key legislators and hire an army of lobbyists to influence the rest — getting its way on energy policy whether or not it’s in the public interest.
Politicians have conceded this argument up to a point. Today in North Carolina (as in 21 other states), corporations can’t donate directly to PACs, candidates or their committees. Individual contributions to candidates and political action committees are capped at $5,400 per election. PAC contributions, in turn, are capped at the same amount.
But major efforts to stem the political influence of well-heeled private interests have been set back by the U.S. Supreme Court. In 1976, it upheld limits to candidates and PACs but ruled that restricting political spending altogether violated the First Amendment. Only communications with magic words such as “vote for” or “cast your ballot for” could be constrained; issue advocacy communications that championed or demeaned a candidate without mentioning the upcoming election could not.
In the decades that followed, 527s emerged as a common way for wealthy individuals and corporations to inject unlimited resources into promoting and defeating candidates; they simply avoided the magic words. Conservative groups like Swift Boat Veterans for Truth and liberal donors like George Soros became household names.
Then came the 2010 Citizens United decision, allowing corporations to put their largesse behind electioneering, too. Super PACs could take corporate and union money and use words like “vote for” in their communications so long as they didn’t coordinate with candidates. Dark money nonprofits not required to disclose their donors could also receive such contributions, then give unlimited sums to like-minded Super PACs.
Justices have repeatedly ruled that disclosure and reporting would counteract this flood of corporate money, said Paul Ryan, vice president of policy and litigation at Common Cause. “If the public doesn’t like how a corporation is involving itself in politics, the public can respond by not buying that company’s product,” he said of the Supreme Court’s reasoning. But, he added, “those checks don’t exist in North Carolina when you’re talking about a monopoly utility.”
‘You have to connect the dots yourself’
While North Carolinians can’t choose their electric providers, they can choose their politicians, and campaign finance disclosure is supposed to help voters make their choices. But a recent change to state law makes that much harder during the primary.
Passed in 2018 in the wake of the absentee ballot fraud scheme in the state’s Ninth Congressional District, an elections bill contained a four-line provision on reporting that got little public attention. “For a time, the revised statute didn’t have that particular change in it,” said Hall, the longtime former director of Democracy North Carolina. “It was so small.”
But it made a big impact on how 527s report to state officials. Under the old law, any communication within 60 days of a primary or general election that reached a certain number of people and named a candidate was considered “electioneering,” and had to be reported to the State Board of Elections. Under the new law, only communications 30 days before even-numbered-year general elections qualify.
Thus, Citizens for a Responsible Energy Future isn’t registered with the elections board and didn’t report helping any candidates this winter, omissions that appear to be legal. “It doesn’t come to mind immediately that they broke a law,” Hall said. “The law has been designed to let them do this.”
Former North Carolina House candidate David Perry nevertheless filed a complaint against the 527 in March, alleging it should have reported spending that aided his opponent Charlie Miller, who won the Republican contest easily. Wilmington-area news source Port City Daily reported the move, including copies of the mailers vaunting Miller, a Brunswick County education board member who once worked at a Duke nuclear plant. (In an email to Port City Daily, the group’s president, Tony Almeida, called the complaint “baseless and frivolous.”)
The only other public records of Citizens for a Responsible Energy Future’s expenses are with the Federal Communications Commission, which is supposed to receive reports from television stations. Campaign finance experts say these are almost certainly incomplete, but they offer a glimpse of how the 527 allocated its spending to specific candidates.
In support of Cumberland County Democrat Rep. Elmer Floyd (who lost) and Davidson County Republican Rep. Steve Jarvis (who won), the 527 reserved television time for $112,000 of ads and was invoiced for $40,000 of that. But IRS filings show the group spent $285,000 on television ads and $82,000 on mailings, and its total expenses were $454,000, suggesting that many more candidates got a boost from Citizens for a Responsible Energy Future.
Duke referred all questions about the 527’s spending to the group itself. There is no phone number listed on any of its public filings, and the email address provided was no@email. Neither Almeida or treasurer Scott Gardner, who both worked for Duke for decades, responded to questions from Energy News Network sent via LinkedIn messages.
Clues as to who got extra backing come from Duke’s PAC, which reported spending $301,000 in contributions to 77 state legislative candidates. Fourteen of these faced a primary challenger, including Floyd, Jarvis and Miller. Nearly all supported a controversial ratemaking bill championed by the company, and most were Republicans who received the maximum of $5,400.
The patchwork of information shows how inadequate the reporting requirements for 527s are, Public Citizen’s Holman said. “You have to connect the dots yourself.”
Better or worse protections for ratepayers?
Duke says it does not and will not bill ratepayers for its contributions to 527 organizations, including Citizens for a Responsible Energy Future — a key point for an investor-owned utility trying to maximize stock dividends. “These costs will continue to be funded by shareholders in accordance with the law,” said spokesperson Grace Rountree by email.
Yet Rountree did not specify the law to which she referred, and advocates have long complained that the utility inappropriately charges customers for such expenses.
Following a petition from Durham-based climate activist group NC WARN and Friends of the Earth, the state Utilities Commission issued draft rules last year clarifying that political contributions — along with a raft of other advertising and lobbying expenses — could not be billed to ratepayers.
Advocates applauded the direction of the rules, which commissioners are still deliberating. But Hall worries that gifts to 527s could be considered fair game for ratepayers because the draft rules only prevent gifts that result in “vote for” communications. “Contrary to improving things,” he said, “I think it could actually make them worse.”