National Grid to pay $1.67M fine over conflict

National Grid has agreed to pay a $1.67 million fine after a probe by the state inspector general found several utility employees improperly treated Department of Public Service staffers to golf outings and restaurant meals in violation of state law, according to an IG report and National Grid.

The probe resulted in disciplinary action against three Department of Public Service employees, two of whom have since resigned, the report said.

The investigation found that for more than eight years, employees in the department's safety section "regularly" accepted gifts from National Grid in violation of the $75 state limit, including restaurant meals and golf games, at a total cost of at least $7,000.

The Department of Public Service is the administrative arm of the Public Service Commission, which regulates private utilities in the state, including National Grid. National Grid operates the Long Island electric grid under a contract with the Long Island Power Authority.

Separate from the National Grid probe, the inspector general found two employees in the DPS safety division released "several" drafts of an investigation into a July 25, 2008, gas explosion in Queens to a consultant working for a another utility, Con Edison, the report said.

The unnamed consultant, a former DPS employee, had previously been the supervisor of the two DPS employees who provided the improper access to the report. The consultant made 17 "suggested insertions" on the draft report, the IG's probe found, a violation of the department's confidential-information policy.

"Laws and policies are in place to ensure that New York State business is conducted without compromise by personal interests and improper influence," acting state Inspector General Catherine Leahy Scott said in a statement. "Individuals charged with these crucial responsibilities have a statutory duty to avoid any conflicts of interest. By accepting these gifts and disseminating confidential information, these employees breached this duty."

The IG's office said National Grid agreed to pay the $1.67 million fine "at shareholder expense in lieu of PSC's commencement of an enforcement proceeding in New York State Supreme Court." The settlement is subject to the Public Service Commission's approval at a meeting next month.

In a statement, National Grid acknowledged the violations, saying it discovered them in the summer of 2010, and "immediately commenced a full internal investigation and simultaneously notified regulators and other authorities."

The company said it has cooperated with state probes and hired a former U.S. attorney from New York "to lead an independent review of the company's ethics and compliance program."

"We are dissatisfied with the underlying conduct that has occurred," National Grid USA president Tom King said in a statement. "We apologize to our customers for letting them down, and it is clear we can and must do better."The IG's office recommended mandatory ethics training for all Department of Public Service employees, "particularly with respect to conflicts of interest, the acceptance of gifts by state employees and the sharing of confidential information." The report also recommended strengthening of DPS's policies on confidential information.

National Grid USA, a division of the London-based parent National Grid, operates natural gas distribution operations in New York City and Long Island under the National Grid name. It also operates the Long Island electric grid under contract to the Long Island Power Authority, a pact that expires in December 2013. LIPA isn't subject to PSC oversight.

National Grid executives have previously been taken to task for relations with the PSC. When the company was seeking PSC approval of the $11.8 billion acquisition of KeySpan in 2007, Newsday reported that Pat Acampora, the former PSC chairwoman, now a commissioner, drove from Albany to a public hearing on the KeySpan buyout with David Manning, then a KeySpan executive vice president of government affairs.

The vehicle was a PSC "agency car," the PSC said at the time, and KeySpan "did not provide any portion of the transportation." PSC members aren't allowed to accept offers of transportation or other perks, Newsday reported at the time. PSC ultimately approved the National Grid buyout.