The Boston Globe recently reported that Attorney General Martha Coakley is asking regulators to investigate the more than $18 million in legal fees New England Gas Co. passed on the Massachusetts customers. On July 7th, The Attorney General’s office filed a complaint with the Department of Public Utilities alleging that New England Gas Co. billed customers for “excessive and impudently incurred” fees.
It is alleged that the main issue surrounding the legal fees is the possible conflict of interest between the utility and their outside counsel, Kasowitz Benson Torres & Friedman LLP. The complaint states that one of the law firm’s partners, Eric D. Herschmann, joined Southern Union’s management team in 2005 and has been its chief operating officer since 2008. Southern Union is New England Gas Co.’s parent company and Herschmann allegedly continues to retain his partnership interest in Kasowitz. Coakley see this as a “clear conflict of interest.”
New England Gas Co. has stated that it has properly disclosed Herschmann’s relationship to the Securities and Exchange Commission. The utility has also stated that Southern Union’s board has evaluated Herschmann’s ties to the firm and determined that Kasowitz should continue to provide legal services to the company. The utility claims that the fees paid to the law firm are “appropriate and fair for the work received and work performed.”
While the public will have to wait for an investigation to determine the propriety of the legal fees, the Globe notes that Coakley has already had success in challenging the expenses of a utility company. Last year, Coakley challenged National Grid’s $100 million rate increase, citing “inappropriate expenses” the company wanted to pass on to customers. The Public Utilities Department ended up approving less than half of the company’s requested rate increase.
The legal fees of utilities companies has become an increasingly debated topic due to increase amount of fees utilities are accumulating. The topic of increasing utilities’ legal fees and who should bear the cost was discussed recently in the Kansas City Star.