STATE OF ALABAMA ETHICS COMMISSION commmssiones MONTGOMERY. AL 9108 ene Aton Jey dna Cit hls, Chi reanncnet ‘See Taney, A, September 1, 2016 raxisnyaten Gots ie eC le onsite: wisn go ADVISORY OPINION NO. 2016-22 James H. Anderson, Esq. Copeland, Franco, Screws & Gill, P.A. 444 South Perry St. Montgomery, Alabama 36104 Conflict Of Interest/Member Of Alabama Public Service Commission (PSC) Entering Lease Agreement With Entity Doing Business In The State Of Alabama ‘A member of the Alabama Public Service Commission (PSC) may not enter into a lease agreement whereby he would lease land to a private corporation for the purpose of locating a solar generation facility which will, in turn, be offered in response to a Request for Proposal by a utility which the Public Service Commission (PSC) regulates. It should be noted that this opinion applies to this set of facts only, and should not be interpreted or applied to any other set of facts Dear Mr. Anderson: ‘The Alabama Ethies Commission is in receipt of your request for a formal Advisory Opinion of this Commission, and this opinion is rendered pursuant to that request.James H. Anderson, Esq. Advisory Opinion No. 2016-22 Page Two QUESTION PRESENTED, May a member of the Alabama Public Service Commission (PSC) enter into a lease agreement whereby he would lease land to a private corporation for the purpose of locating a solar generation facility which will, in turn, he offered in response to a Request for Proposal by a utility which the Public Service Commission (PSC) regulates? FACTS AND ANALYSIS The facts as have been presented to this Commission are as follows: Chip Becker is a member of the Alabama Public Service Commission (PSC). Coronal Development Group is a company from Charlottesville, Virginia, Coronal constructs utility atade solar projects and sells the power generated from those projects on the wholesale elcetricity market. Coronal wants to lease land from Mr. Beeker and is generally interested in developing projects in Alabama Coronal Development Group is not registered as a principal in the State of Alabama, not is Ryan Gilchrist, their employee, registered as a lobbyist. Coronal has extended an offer to Jease Mr. Beeker’s land (451 acres located in Greene County, Alabama) on the following terms: $500.00/acte over the term of 25 years (plus two five-year extension options). The estimated annual lease payment based on his acreage is, therefore, $225,500.00. If the terms of the lease do not change, the total lease payments would be $5.6 million dollars over the initial 25-year term. Coronal is interested in Mr. Beeker’s property because it lies near an existing electric transmission facility to which Coronal can eventually connect. Other than entering the lease agreement, Mr. Beeker will not have any involvement in any aspect of Coronal’s business. Mr. Beeker did not solicit the lease. Coronal approached him. about it. Mr. Beeker had no prior knowledge or familiarity with the company or any of its principals or employees. Mr. Beeker states that as a PSC member, he has no authority over Coronal Development Group's activity. No one has entered into any contractual agreements at this point. If Coronal enters a sales agreement to sell the electricity that is ultimately generated from the solar facility that would be located on Mr. Beeker’s property to an entity which the PSC regulates, then Mr. Beeker understands that he would have to abstain from considering and/or approving any sales agreement or any other transactions between Coronal and any entity which the PSC regulates. Coronal has entered such collaborative agreements with other OperatingJames H. Anderson, Esq. Advisory Opinion No. 2016-22 Page Three Companies of Southern Company in an arrangement which allows the Operating Company to diversify its energy portfolio. This is what Coronal does, Mr, Anderson argues that current Alabama statutes that govern the provision of retail electric service preclude the PSC from regulating a solar company as a utility or otherwise. He states that Coronal will only be able to offer wholesale electric service which is not regulated by the Public Service Commission. He further states that the only time wholesale offerings might come before the Public Service Commission is if an entity which the PSC regulates wants to enter into an agreement to buy such wholesale electricity from Coronal. This is the issue that Mr. Becker understands he would have to recuse himself from if we were to approve the lease, and it is what Coronal intends to do with Mr, Beeker’s lease, as it has done in other places. Mr. Anderson attached to his request for an Advisory Opinion an e-mail dated June 21, 2016, from Ryan Gilchrist, an employee of Coronal Development Group. In that e-mail, Mr Gilchrist states, “In preparation for the Request for Proposal that Alabama Power is expected to release in August, we are building a portfolio of land that meets the ideal criteria for solar development. As of today, we have signed nine lease option agreements with landowners throughout the State of Alabama.” The PSC regulates Alabama Power. Mr. Anderson argues that the Legislature, in declaring their findings in § 36-25-2(b), did not intend for public officials, like Commissioner Beker, to be denied a business opportunity available to all other citizens if there are no apparent conflicts of interest, and that the speculation that something may change as to the law or regulations, does not create a fact situation that makes entering into a lease agreement which such an entity illegal. Asan elected member of the PSC, Mr. Beeker is a public official subject to the Alabama Ethics Law, Ala, Code § 36-25-1 (27). While the law allows public officials and public employees to have outside business and financial interests, just as members of the general public can have, they cannot do so when a conflict of interest exists, nor can they use of allow others to use their official position for personal gain. Ala, Code §§ 36-25-1 (8); 36-25-2(b); 36-25-5(a). Finally, as a member of a regulatory body, “no person” can offer a member of a regulatory commission, and no member of a regulatory commission can accept, a thing of value from someone associated with a business the Commission regulates, “other than in the ordinary course of business.” Ala. Code § 36-25-12, To the Commission’s knowledge, no one has violated any of the above sections at this, point, and the PSC may never regulate Coronal. In this particular fact scenario, however, the identity of the Lessor as a member of the Public Service Commission, when combined with the stated purpose of the lease to be presented as a part of a package offered to a utility the PSC regulates, and Coronal’s stated business purpose and previous leases, matters. Coronal intends to offer a package of leases to a utility the PSC regulates which will include a proposal to buy theJames H. Anderson, Esq. Advisory Opinion No, 2016-22 Page Four electricity generated on land which a member of the PSC owns. This is the lease’s value to Coronal. The lease itself contemplates that action, The RFP has not occurred at this point, but the Commission is not satisfied that Mr. Becker’s public position is irrelevant to Coronal, nor can we conclude that the lease would not present a conflict between Mr. Beeker's private interests and official responsibilities if executed. Although there is no previous Advisory Opinion direetly on point with the present question, the Commission has held that business relationships with entities that intend to do business with entities the public official regulates create conflicts of interest. See, e.g., AO99-25 (“Deputy Director of the Birmingham Airport Authority may not enter into business ventures with firms that conduct business with the Birmingham Airport”); AO96-31 (“There is an inherent conflict of interest when an employee of a regulatory agency [ADEM] has outside employment with a business whose clients may be regulated by ADEM.”).. The lease is being contemplated in anticipation of presentation to a utility the proposed Lessor regulates as a public official. The relative position of these parties creates a question as to whether executing the lease would violate § 36-25-5(a)'s prohibition of allowing someone else to use your position for personal gain and whether it would present a conflict of interest between Mr. Beeker's private interests and his official responsibilities. At the very least that perception is created. rerefore, the Commission declines to approve this particular lease under these particular circumstances. CONCLUSION A member of the Alabama Public Service Commission (PSC) may not enter into a lease agreement whereby he would lease land to a private corporation for the purpose of locating a solar generation facility which will, in turn, be offered in response to a Request for Proposal by a utility which the Public Service Commission (PSC) regulates. It should be noted that this opinion applies to this set of facts only, and should not be interpreted or applied to any other set of facts.James H. Anderson, Esq Advisory Opinion No, 2016-22 Page Five AUTHORITY By -2vote of the Alabama Ethics Commission on September 1, 2016. Se ToPécliing, Ret Sr Cireult Tudge’ > Chair Alabama Ethics Commission