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For the past 2-plus years, I have personally spent countless hours at the Arizona Corporation Commission for my complaint tied to the 2017 APS rate hike, as an intervenor in the APS rate review, and for many various stakeholder meetings. Over this time, I have studied rate-making and energy policies locally and nationally. I have delved into the history surrounding the creation of the Arizona Corporation Commission (ACC) and Public Utility Commissions (PUC) as they’re known in other parts of the country.
There is currently a push underway at our state legislature to take away the public’s ability to elect our ACC regulators, and instead have all seats appointed by the governor, or potentially other legislators. This would be a slap in the face to both democracy and the public, who our commissioners are accountable to.
This idea isn’t being driven by the voters. It is being driven by two legislators, both of whom received campaign contributions from APS (and its parent company, Pinnacle West), our state’s largest utility monopoly. It follows a strategy devised years ago by one of APS’s consultants – who now serves in upper management at the utility – to ensure less change in the regulatory environment.
Arizona is one of 11 states where the public elects utility regulators. There are two states (South Carolina and Virginia) where legislators elect the regulators, and in all the other states governors appoint them. Research has shown, with abundant examples, that all of these Public Utility Commissions are subject to corruption by powerful electric utility monopolies, regardless of whether they’re appointed or elected.
Unfortunately, no system is immune to corruption, as we’ve seen first-hand in Arizona.
With that said, those states with regulatory bodies where the nominations have predominantly involved the state legislators have been perhaps the most subject to influence by incumbent utilities, given those companies’ traditional political strength with legislators. One can simply look at the spending by the Pinnacle West/APS PAC here in Arizona for a taste of that.
We can also look at one of Ducey’s appointments to the ACC as an example of an appointment that did not, in my opinion, serve the public’s best interest. Andy Tobin, a former Arizona legislator, was appointed to the ACC by Ducey in 2015. He then ran for re-election in 2016 and won after APS/Pinnacle West spent millions of dark money dollars on his campaign.
Tobin proceeded to then rubber stamp the 2017 $95 million APS rate hike with few questions asked. In October 2018, Energy and Policy Institute discovered through a public records request that Tobin frequently texted with APS lobbyists.
Setting just and reasonable utility rates is one of the most important functions of the ACC. It is a complex and time-consuming undertaking, which is why ACC staff and policy advisors do have broad expertise in these matters.
The public’s voice makes a difference
Everyone should understand that only one thing has been shown to be effective in curbing corruption with PUCs both here in Arizona and across the country, no matter what process is employed: the public effectively exerting pressure to counterweight utilities’ political power.
Thanks to tireless research and reporting from organizations, activists and news outlets, the public is currently exerting that pressure on Arizona’s current elected commission – and it has made a difference.
As a result, APS’s management and investors recognized that its brazen intervention in ACC elections, while positive in the short-term, was an unsustainable risk to the company and its reputation in the long term.
Tellingly, investors currently see the proposals to move to an appointed commission as unambiguously positive for shareholder interests.
APS has suffered immense political damage from its ACC election meddling. Its new CEO swore under oath that the company would reverse course. While observers could be forgiven for not trusting APS’s word, the company would suffer massive consequences if it reneged, and it is unlikely to do so.
Given the state of campaign finance law, all methods of selecting utility regulators are subject to undue influence by regulated interests like APS. Barring both state and federal campaign finance reform, that dynamic will not change soon.
But Arizona’s utilities are currently backed into a corner. While they will continue doing everything they can to influence and capture the ACC, election meddling will be a third rail for the foreseeable future. Moving to an appointed system of any kind now would give APS and other utilities an escape hatch from that corner, allowing them to reassert their influence through the legislature or the governor, where the company still has immense influence – and where it hasn’t ruled out funding campaigns or independent efforts to elect favored candidates.
The Arizona Corporation Commission was enshrined in our Arizona Constitution to keep robber-baron utilities in check, and therefore I feel it is imperative for these positions to be accountable to the people – not the power of a few.
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