Members of the Arizona Corporation Commission got their long-awaited chance to personally question retiring Arizona Public Service CEO Don Brandt, and some used the opportunity to excoriate him over the company’s controversial political activities.
During a special hearing on Wednesday, Commissioners Bob Burns, a Republican, and Sandra Kennedy, a Democrat, launched blistering critiques of Brandt for APS’s multimillion-dollar election spending over the past five years, as well as recent revelations that an elderly woman in Sun City died last year after the company shut off her power on a 107-degree day over an unpaid $51 bill.
As a state-enforced monopoly, APS has a special constitutional privilege that comes with a guaranteed customer base, the recovery of the cost of doing business and a return on equity, Burns noted.
“With that privilege, in my opinion, APS has an elevated level of responsibility to the public trust. The vast amount of money spent by APS in the recent political campaigns, I believe, has violated that public trust,” Burns said.
APS political spending
Burns, the commission’s chairman, opened the hearing by reciting a litany of grievances over APS and parent company Pinnacle West’s political activities in recent years, including its $10 million dark money campaign to elect two pro-APS commissioners in 2014, along with a $4 million campaign on behalf of three commission candidates in 2016, including Burns himself.
Burns repeatedly mentioned the “Pacheco playbook,” a reference to APS executive and lobbyist Jessica Pacheco, who guided many of the company’s more controversial political activities. Burns said that playbook included disrupting and subverting the commission, and electing commissioners who were favorable to APS in order to “capture the commission.”
He suggested that the controversial 2017 rate hike that the commission approved for APS was a result.
Kennedy, who was the target of APS campaign spending in 2014, accused Brandt of “scheming, plotting and planning,” and said he single-handedly destroyed the reputation of APS, and to a lesser degree the commission.
“Mr. Brandt, your behavior is that of a kingpin who operates a company to mainly benefit himself. You have, in essence, created a machine to purchase every and any elected official and defeat anyone in your way, to purchase any and every law firm, and to bend the purpose of established nonprofits to suit your ends,” she said.
Kennedy also noted that Brandt has benefited personally from what she described as unprecedented political activity by APS.
“Was it really worth it? Do you have enough money now?” she asked.
Brandt will retire on Nov. 15. Jeff Guldner, who is currently APS’s president, will replace him as the head of both APS and Pinnacle West.
Burns asked Guldner if he would commit at the hearing that APS will no longer engage in campaign spending. Guldner said he couldn’t make any such commitments because he wasn’t yet CEO, but that he’ll be happy to come back after he officially replaces Brandt.
If Guldner doesn’t make such a commitment, Burns strongly suggested that the commission would find ways to hurt the company’s bottom line. He said the commission may need to change the way it determines APS’s return on equity, and said it may want call Pinnacle West board members in front of the commission to discuss the issue.
Guldner said he’ll be CEO soon, pledges to come back once that happens. Burns says, “consider yourself invited as soon as you’re sworn in.”
— Jeremy Duda (@jeremyduda) September 4, 2019
“Consider yourself invited as soon as you’re sworn in,” Burns said.
Brandt and Kennedy’s interactions dominated much of the hearing, and were often testy. Kennedy repeatedly grilled Brandt and other top APS employees over a number of issues, but didn’t get straight answers on questions about Guldner’s role in the company’s political spending, Brandt’s salary and compensation, and customer satisfaction.
Several times she criticized Brandt for letting others talk and answer questions for him.
Some questions, such as how many former commission employees are on APS’s payroll, were answered later on in the hearing. Brandt and APS attorney Bill Maledon, who sat beside Brandt throughout the hearing and answered many of the commissioners’ questions, pushed back on other questions, including when Kennedy asked how much of Brandt’s compensation package was made possible “by your purchase of elected officials.”
Maledon said he didn’t think the question was appropriate or accurate.
“It’s just not the kind of question that ought to be asked at a proceeding like this,” Maledon said.
Kennedy also made a point of mentioning a long-running federal investigation into APS and Pinnacle West’s campaign spending, questioning Brandt on whether the probe is still ongoing. Maledon said the investigation is still active, but that the company expects it to end soon.
Kennedy asks Brandt if, to his knowledge, the FBI’s investigation into APS is still active. Maledon says US Atty’s Office in Phoenix was investigating campaign contributions, and probe is still active. “We expect and hope that it will end soon.”
— Jeremy Duda (@jeremyduda) September 4, 2019
As part of the investigation, dubbed “Operation High Grid,” the U.S. Department of Justice in 2016 indicted former Commissioner Gary Pierce, his wife Sherry, lobbyist Jim Norton and utility owner George Johnson in an alleged bribery scheme. A jury deadlocked in the case last year, and federal prosecutors declined to re-charge the defendants.
Disconnections and customer death
Commissioners Boyd Dunn, Justin Olson and Lea Marquez Peterson largely steered clear of APS’s political spending, focusing instead on the issue of power disconnections for nonpayment, which was originally the only item on the commission’s agenda.
The topic of electricity shut-offs was prompted by the death of Stephanie Pullman, a 72-year-old woman who died last summer after APS disconnected her power over a delinquent bill. Out of respect for Pullman’s family and their desire not to be dragged into the hearing, commissioners and other participants in the hearing didn’t refer to her by name, and referred to her power disconnection and death as “the incident.”
Commissioners questioned Brandt about the process and protocol APS observes prior to shutting off customers’ electricity.
Daniel Froestcher, APS’s executive vice president for operations, said if customers don’t pay their bills within 28 days, nearly two weeks after they’re due, the company mails an official warning that their power may be disconnected. If the past due amount isn’t submitted after the next monthly bill goes out, customers receive an automated phone call asking them to contact the company about payment or “crisis bill assistance.” The last step before disconnection is a door hanger left on the premises.
Some commissioners questioned why APS doesn’t speak with customers in person, either over the phone or face to face.
“Is the personal contact basically the door hanger?” Dunn asked. “Why is there no other attempt to knock on the door or communicate with the person outside of the mailer or the door hanger?”
Brandt and Froetscher said the answer came down to employee safety.
Froestcher said his job with APS in the early 1980s was to go to customers’ homes to inform them of pending disconnections and attempt to collect payment. He said angry customers unleashed dogs on him multiple times, verbally threatened him and, on one occasion, pulled a weapon on him. Brandt related the story of an APS employee who was actually turning a meter back on in the Anthem area on the Friday before Labor Day weekend in 2010 when a customer sicced two dogs on him, resulting in massive injuries that required plastic surgery.
APS doesn’t turn off customers’ power unless their delinquent bills are more than $50, Froestcher explained.
Pullman owed $51 when her power was turned off, prompting Kennedy to ask Brandt, “How do you feel knowing that one of your customers died for just one dollar?”
Brandt called Pullman’s death a tragedy, but noted that APS has several programs to help customers who need help with their electricity bills, though he said some are hesitant to discuss their financial problems or ask for help.
“If that customer would have called, I am almost certain that that individual would not have been cut off, regardless of what the amount was,” Brandt said.
And Froestcher emphasized that customers who have medical needs requiring electricity, such as dialysis or oxygen treatments, are exempt from disconnections. Some customers are three- to five months overdue, while one hasn’t paid an electricity bill in 12 months, Brandt said.
In June, the commission imposed a temporary moratorium on power shutoffs. The commission will set new permanent rules for disconnections in October.
Maledon pushed back when Kennedy alleged that other customers had died as a result of power disconnections. Maledon said APS analyzed shutoff incidents going back to 2009, and found only four that had any indication of health issues related to the disconnections. He said APS doesn’t believe any of those deaths had anything to do with the customers’ power being shut off.
“We do not agree with the characterization … that there have been multiple deaths,” Maledon said.
Though the commissioners, especially Burns and Kennedy, bored down on Brandt over APS political spending, they largely avoided perhaps the biggest unanswered question of the utility’s controversial foray into electoral politics.
In 2014, Pinnacle West spent $733,000 spent aiding Justin Pierce’s campaign for the Republican nomination for secretary of state. Pierce is the son of Gary Pierce, who in 2013 made a key procedural move to end debate over a deregulation proposal that APS opposed and that would have had severe financial consequences for the company.
APS and Pinnacle West have never explained why they spent the money in a race for secretary of state.
Kennedy didn’t question Brandt about why Pinnacle West spent to aid Justin Pierce’s question, though she asked one question that touched on the issue.
She asked whether he thought it was appropriate that Pacheco reserved a room at the Phoenix Country Club for a Pierce fundraiser in October 2013. He said it was, calling it a common courtesy that lobbyists often extend to candidates. He said neither Pacheco nor APS incurred any expense.
Kennedy followed up with a more accusatory question, asking, “Was it a payment for something that could have occurred here at the ACC?” Brandt said it was not, and that Pierce simply would have gone to another lobbyist if Pacheco hadn’t granted his request.
Co-equal branches of government
Burns didn’t reserve his criticism for APS alone. In his opening remarks, he accused Gov. Doug Ducey’s administration of interfering in commission business.
When former Commissioner Tom Forese, one of the two commissioners elected in 2014 with the help of APS’s dark money campaign, was preparing to take over as chairman, he tried to fire then-Executive Director Jodi Jerich, though he didn’t have that authority, Burns said. During that time, he said, an unnamed employee of the Arizona Department of Administration contacted Jerich and said they were there to assist with her termination, “again without any authority to do so.”
“My question is, did the governor know that this kind of activity was happening in his agencies?” said Burns, who noted that former Ducey staffer Ted Vogt replaced Jerich as executive director.
Burns accused former Commissioner Andy Tobin, whom Ducey appointed to fill a vacancy on the commission, of trying to dismantle the commission and said he immediately became “very disruptive.” He said the tactics were part of the “Pacheco plan.”
He also accused the Ducey administration of involving itself in APS’s 2017 rate case.
And he criticized Ducey’s actions in appointing Peterson to replace Tobin, whom he had appointed Department of Administration director, without notifying the commission – “not even the common courtesy of a phone call” to a co-equal branch of government. And he said it was inappropriate for Ducey to hold her swearing-in ceremony at the governor’s office instead of at the commission, which Burns called “an additional display of disrespect to a co-equal branch.”
Peterson, who gave her opening remarks after Burns, didn’t respond to his comments.
Patrick Ptak, a spokesman for Ducey, said Burns’s comments on Wednesday were the first time the governor’s office had heard many of his concerns.
“Our policy has been to let the commission do its job, while we do ours, making responsible appointments when necessary, as the constitution calls for,” Ptak told the Mirror.