A conflict over ethics between Gov. Paul LePage and a member of the state’s Public Utilities Commission has been settled in the short term, but threatens to produce more controversy over the long term.

The conflict was resolved when Gov. LePage recently appointed former Superior Court Judge John Atwood to substitute for commission member David Littell on a high-profile case from which Littell recused himself because of a conflict of interest. That was a reversal of LePage’s earlier position, in which he refused to appoint a substitute for Littell, saying he didn’t believe Littell’s reason for recusing himself was legitimate.

The three members of the Public Utilities Commission (PUC) decide how much Mainers pay for water, telephone, electricity and natural gas service.

But LePage also said if Littell is going to recuse himself on this case, the governor has a list of eight other cases he thinks Littell should remove himself from because of similar conflicts of interest, including a prominent case mounted by citizens opposed to the use of so-called “Smart Meters” at their homes.

“The public deserves to have commissioners that do not selectively avoid cases,” wrote LePage in a letter to Littell that was accompanied by the list of cases.

In response, Littell accused LePage of improperly interfering with the PUC, an independent government agency, and “attempting to direct or influence whether a Commissioner … sits on a particular case.”

If the governor wanted to continue the discussion about his participation in cases, Littell wrote, he should raise the issue through proper Commission channels.

“I do not intend to continue this correspondence,” wrote Littell, “and suggest your office follow the legal requirements for participating in Commission cases and communicating with Commissioners on cases in front of us.”

No bias allowed

A variety of laws and rules govern the behavior of PUC commissioners. The rules are meant to prevent situations in which a commissioner appears to, or actually does, favor a former employee, family member, friend or business associate during proceedings.

The state’s Administrative Procedure Act requires that “Hearings shall be conducted in an impartial manner.” The state’s conflict of interest laws state that “Every executive employee shall endeavor to avoid the appearance of a conflict of interest by disclosure or by abstention.” If a commissioner is an attorney, state Bar rules regarding conflicts apply, and the ethics code of the National Association of Regulatory Utility Commissioners also apply to all commissioners.

The argument between LePage and Littell began on May 5, when Littell recused himself from a case involving the multinational Nestle Waters corporation, saying his past association with Pierce Atwood, a prominent law firm involved in the case, created the appearance of a conflict of interest. Littell was formerly a partner at the law firm, which represents Nestle, and he worked there on legal matters for Poland Spring before the brand was acquired by Nestle. (Fryeburg Water Co. is represented in the PUC proceedings by the Curtis Thaxter law firm.)

Nestle and Fryeburg Water Co. want commission approval of a 25-year contract allowing Fryeburg to sell water to Nestle. The proposal is opposed by some  residents and national water-rights advocates, who say the price Nestle will pay for the water is too low and that the deal could put Nestle’s claim on Fryeburg water ahead of residents’ right to it.

Littell was the third commissioner to remove himself from the case because of conflicts related to ties to a company or law firm. His recusal came seven months after he initially said he did not need to recuse himself, and he said his change of heart came after his potential conflict of interest was featured in stories in the Portland Press Herald about the conflicts faced by PUC commissioners in the case.

After the first two commissioners, Mark Vannoy and Thomas Welch, recused themselves because they had each previously worked for Nestle Waters, the commission was left without a quorum of two to decide the case, and PUC consideration of the deal couldn’t go forward.

That led lawmakers to join with LePage in passing legislation this past spring that allows the governor to appoint retired judges as substitute commissioners. LePage then used his new power under the legislation and appointed retired Maine Supreme Judicial Court judge Paul Rudman to sit as an alternate commissioner with Littell on the case.

But then, when Littell recused himself, LePage responded that an appearance of a conflict wasn’t enough to disqualify Littell from participating in the case.

“By applying the standard you outlined in your memo, as Commissioner you would be unable to participate in cases ranging from telecommunications to wind development,” wrote LePage in a May 13 letter to Littell.

LePage said that he wouldn’t appoint another judge to replace Littell.

LePage’s rejection of Littell’s recusal rationale has prolonged a discussion among lawmakers and agency personnel of state policy regarding conflicts of interest at the Public Utilities Commission.

That discussion was prompted by public concerns about conflicts of interest in the Nestle case, which led, in part, to a study by the legislature’s Office of Program Evaluation and Government Accountability. That study, released in October, 2013, concluded that the “PUC should take additional steps to minimize risk of actual or perceived bias in its regulatory activities.”

LePage began his part of the discussion by threatening not to appoint a substitute commissioner and then, once he withdrew that threat, by challenging the appropriateness of Littell participating in similar cases to the Nestle-Fryeburg one.

Littell’s response was to tell the governor, “The decision to recuse myself … is my responsibility, and I continue to believe I am making an appropriate and correct decision.”

And Littell threw down his own challenge to LePage: If the governor wants Littell to recuse himself from additional cases because of conflicts between his past association with Pierce Atwood and present cases represented by the law firm, why is he not “asking the same” of the other two commissioners at the agency. PUC Chairman Welch, for example, was an attorney at Pierce Atwood before he joined the commission.

But in between the volley of letters between the two, others have weighed in, suggesting that clarification of recusal standards may be in order.

On July 8, Sen. John Cleveland, D-Auburn and Rep. Barry Hobbins, D-Saco, wrote to LePage, saying that “we are committed to work to make changes, if necessary, to further refine the legislation” that gave the governor the power to appoint replacement commissioners in the event of a recusal.

LePage agrees that something should be done, and in his letter appointing Atwood to replace Littell, told the PUC that “I will be submitting legislation in the next session that ensures that this does not occur again and recusal standards are consistently applied.”

And despite his boss’s confrontational approach, LePage’s top energy staffer, Patrick Woodcock, took a more conciliatory tack.

“I think the governor was concerned that perhaps a new standard was being used to explain this specific recusal and there are a lot of controversial cases before the PUC, lots of cases involving the former law firm that the commissioner worked at,” said Woodcock. “I think everybody, all of us, should work to create a consistent and clear and understandable recusal standard.”

Editor’s Note: In a previous version of this story, we incorrectly reported the law firm representing the Fryeburg Water Co. before the state Public Utilities Commission. It is Curtis Thaxter.