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South Carolina's utility regulators hired a consultant with deep ties to investor-owned power companies, creating concerns among lawmakers and those in the state's solar industry.

The seven-member Public Service Commission hired Pegasus Global Holdings to advise on developing new rules for solar power in the state. The commissioners' decision to tap Pegasus, however, is being criticized for potentially violating a new state law. 

Earlier this year, the state Legislature unanimously passed the Energy Freedom Act. That bill called for the commission to hire a "qualified independent third party" to help set the prices that Duke Energy and Dominion Energy will pay for electricity from solar panels owned by independent power producers. 

Lawmakers who sponsored and wrote that legislation don't believe Pegasus fits the definition of an independent consultant. 

Pegasus's chairwoman, Patricia Galloway, previously served on the board of directors for SCANA Corp., before the Cayce-based utility was taken over by Dominion Energy this year. 

The company continues to operate as an associate member of the Edison Electric Institute, an influential trade association representing the country's investor-owned utilities. 

And Pegasus received at least $3 million from Duke Energy in 2011 to defend the utility's handling of a multibillion-dollar coal-gasification project in Indiana, which struggled with cost overruns and slipping construction schedules. 

State Rep. Peter McCoy, R-Charleston, called the Public Service Commission's decision to hire Pegasus a "slap in the face." 

"One of the key words in the Energy Freedom Act is the word 'independent,' " McCoy said. "That word is in there for a reason. That word is in there to protect the public. They are blatantly disregarding the intent of the legislation that we passed and spent two years working on." 

Pegasus, which is based in Washington state, did not immediately respond to emails asking about its previous business with Duke Energy and other investor-owned utilities. 

Duke Energy and Dominion Energy said they had no role in the PSC's selection of Pegasus. Aimée Murray, a spokeswoman for Dominion, also pointed out that nobody officially objected to Pegasus advising the commission, but she said any group that doesn't agree with the company being hired should make that known to the PSC. 

The Energy Freedom Act waived the state's procurement rules and allowed the utility commissioners to hand pick a consulting firm to assist them. Joceyn Boyd, the chief clerk for the PSC, said Pegasus was chosen "due to the breadth of their experience."

The PSC interviewed the company, she said, but was not aware the consulting firm was paid by Duke Energy in the case in Indiana. 

The commission was, however, aware that Galloway served on SCANA's board. Boyd said Galloway made a "commitment that she would not be involved in any way with Pegasus’ consultation with the PSC."

"We intend to take appropriate steps to protect the integrity of our work and to reassure the parties and the public that Pegasus or any other vendor hired to perform duties under the statute is free of any conflict of interest or bias," Boyd added. 

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Grant Reeves, the senior vice president with The Intertech Group, said he is troubled by the utility commission's decision. 

"On the surface, it looks tone deaf," said Reeves, who is also a co-chair of the S.C. Clean Energy Business Alliance. "The appearance of the consultants that were hired doesn't seem to pass the test of impartiality since they have such deep roots in advising utilities."

State Sen. Tom Davis, R-Beaufort, wants to learn more about why the commission chose Pegasus and whether the utility regulators considered any other consulting firms.

The PSC, Davis pointed out, has been criticized in the past for being too cozy with the utility industry, especially after the abandonment of two nuclear reactors at V.C. Summer station. 

In recent months, Davis thought the commission was doing a better job of scrutinizing the state's electric utilities, which operate as large regulated monopolies. But the contract with Pegasus makes him question that. 

"It makes me wonder if we've gotten to the heart of the problem at the Public Service Commission," Davis said. "It makes me wonder if we still have some work to do."

Davis thinks the seven utility regulators should revisit their decision to contract with Pegasus. Otherwise, he said it could open up any future decisions to a challenge in court. 

Reach Andrew Brown at 843-708-1830 or follow him on Twitter @andy_ed_brown.