APS docs reveal it funded 2014 ‘dark money’ effort supporting commissioner’s son

By: - April 1, 2019 4:38 pm

Justin Pierce at a 2014 forum for statewide candidates. Photo by Gage Skidmore | Flickr/CC BY-SA 2.0

A cache of documents released by Arizona Public Service on Friday confirm what many political observers have long suspected: The utility giant provided funding to a dark money organization that spent heavily to help a powerful corporation commissioner’s son win his race for secretary of state.

According to the documents, which APS released in response to subpoenas from Commissioners Robert Burns, Boyd Dunn and Sandra Kennedy, APS’s parent company, Pinnacle West, gave nearly $10.7 million to organizations that spent in the races for Corporation Commission in 2014. The Arizona Free Enterprise Club, a conservative advocacy group, was the greatest recipient of the company’s largesse, receiving $5.8 million.

The Arizona Free Enterprise Club spent about $450,000 in the 2014 Corporation Commission election, helping to ensure the victories of Tom Forese and Doug Little, who were viewed as APS allies on solar energy and other issues.

But the group also spent $733,000 to aid Justin Pierce in his unsuccessful race for secretary of state.

Pierce is the son of Gary Pierce, who in 2014 was finishing his second and final term on the Corporation Commission. During this second term, Gary Pierce took two notable actions that were favorable to APS. He voted against a 2013 surcharge levied on solar customers for use of APS’s power grid because he believed the fee to be inadequate. And he moved to shut down a 2013 debate over deregulation, which would have stripped APS of its state-enforced monopoly and opened the energy market up to competition from other utilities.

APS refused to confirm or deny at the time that it was the source of the money that the Arizona Free Enterprise Club was spending in the races for both Corporation Commission and secretary of state. That refusal lasted for five years, until the company complied with the subpoena on Friday. Even when the company announced in 2016 that it would be open and transparent about its political spending moving forward, it refused to discuss its campaign-related spending from two years earlier, saying only that if APS spent in the election, it was well within its rights to do so.

But in the political world, APS was almost universally believed to be the source of AZFEC’s spending in the 2014 secretary of state Republican primary contest. The group spent to boost Pierce and to attack Wil Cardon and eventual winner Michele Reagan.

Given the elder Pierce’s recent track record at the commission, that raised some uncomfortable questions about what interest APS had in the race for secretary of state. At the time, APS refused to say whether it was behind the spending, and the Arizona Free Enterprise Club wouldn’t comment on where it received the funding for its pro-Pierce campaign.

APS spokeswoman Jenna Rowell wouldn’t comment on the secretary of state race or the company’s revelations about the funding it provided to the Arizona Free Enterprise Club.

Rowell said the company’s only comments on the spending in the 2014 secretary of state race are those in a letter from Barbara Lockwood, APS’s vice president of regulation, that was part of the company’s filing with the Corporation Commission on Friday. Lockwood’s letter did not mention Justin Pierce or the 2014 secretary of state race. It isn’t clear what, if any, direction Pinnacle West provided to the Arizona Free Enterprise as to how the money was to be used.

Gary Pierce, Justin Pierce and Arizona Free Enterprise Club President Scot Mussi did not respond to messages from the Mirror.

During the 2014 campaign, Gary Pierce said he’d never made any deals with APS to cast votes in exchange for aid to his son’s campaign. Mussi at the time said AZFEC’s backing of Justin Pierce was to ensure that the successor to the governor had strong, free-market principles.

None of the 307 pages of documents related to APS’s spending in the 2014 and 2016 elections mentioned Pierce or the secretary of state race. Burns, Dunn and Kennedy’s subpoenas sought information only on any spending by the company to influence races for Corporation Commission.

In Sept. 2013, Gary Pierce made a surprise move to close a docket that Burns had opened on deregulation. The procedural move passed on a 4-1 vote, ending a deregulation push that would have been financially disastrous for APS.

About two months later, Pierce dissented on a 3-2 vote to impose a $5 fee on solar customers for use of the power grid. He and APS believed the fee was too low and could shift costs onto non-solar customers. 

AZFEC reported to the IRS that it received nearly $7.9 million in 2014; $5.8 million of that we now know came from APS. Of that, the group used about $1.8 million for campaign spending and contributed another $81,500 to two political action committees dedicated to electing Republican legislative candidates.

It also reported giving about $3.6 million in grants to other organizations. The biggest chunk of that was about $2.7 million AZFEC gave to Save Our Future Now, a dark money organization that also aided Forese and Little in their Corporation Commission race that year. APS acknowledged in its disclosures on Friday that it also gave $3.5 million directly to Save Our Future Now, which group spent nearly $2.8 million in the Corporation Commission race that year.

Under federal law and IRS rules, 501(c)(4) nonprofit organizations like the Arizona Free Enterprise Club cannot be primarily used to influence elections, meaning the majority of their money must go toward non-campaign purposes. Providing grants to other organizations can help fulfill that goal.

Since 2016, Pinnacle West has disclosed to the U.S. Securities and Exchange Commission in annual and other filings that a grand jury issued subpoenas to it as part of an investigation by the U.S. Attorney’s Office for Arizona. It said the subpoenas seek records involving “certain Pinnacle West officers and employees, including the CEO,” as well as communications between the company’s employees and an unnamed former corporation commissioner. Pinnacle West said it’s fully cooperating with the U.S. Attorney’s Office.


Correction: A previous version of this story inaccurately described Gary Pierce’s 2013 vote on fees for solar customers.

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Jeremy Duda
Jeremy Duda

Jeremy Duda is a Phoenix native and began his career in journalism in 2003 after graduating from the University of Arizona. Jeremy Duda previously served as the Mirror's associate Editor. Prior to joining the Arizona Mirror, he worked at the Arizona Capitol Times, where he spent eight years covering the Governor's Office and two years as editor of the Yellow Sheet Report. Before that, he wrote for the Hobbs News-Sun of Hobbs, NM, and the Daily Herald of Provo, Utah. Jeremy is also the author of the history book “If This Be Treason: the American Rogues and Rebels Who Walked the Line Between Dissent and Betrayal.”