The state’s largest utility is staying out of the Republican primary race for two open Arizona Corporation Commission seats, risking a shakeup that could have serious ramifications for the company.
Whether the literal powerhouse that is Arizona Public Service has had a change of heart about its history of election spending or recent events have given the company pause, only company insiders can know. A representative of the company declined to comment for this story.
But by not spending in the primary, APS leaves itself vulnerable to unfriendly newcomers and a commission willing to take another crack at retail electric deregulation.
That would open up the energy retail and generation markets to competition for utilities like APS that are currently allowed to operate as regulated monopolies.
Eight candidates are vying for the open seats this year, five of whom are running as Republicans.
Incumbents Tom Forese, commission chairman, and Justin Olson were running in the Republican primary as a slate but recently parted ways. Though Forese pushed back on rumors of the rift earlier this week, their split became clear when Olson criticized him during a Republican primary debate August 14.
Commission observers have speculated that Forese’s lackluster campaign could cost him the election.
That could be enough to pave the way for Rodney Glassman, who has staked out a clear anti-APS position on the campaign trail. Also in the running are Jim O’Connor and Eric Sloan, both of whom support reviewing last year’s APS rate hike.
Olson has also been known to take positions that conflict with the company’s interests, expressing willingness to dig into election spending in 2014 and opening the door to the deregulation conversation. Both are topics Commissioner Bob Burns is fond of as an ardent APS foe.
Three Democrats are also facing off in the primary. Former Commissioners Bill Mundell and Sandra Kennedy have teamed up against Kiana Maria Spears, who has been criticized for her campaign treasurer’s three-decade history with APS. Mundell previously served on the commission as a Republican but has said he switched parties because of APS’s influence over his GOP colleagues.
Ultimately, seven of these eight candidates are likely votes in favor of at least entertaining deregulation.
Competition would radically alter the environment in which APS currently operates.
As a legal monopoly regulated by the Corporation Commission, APS has guaranteed customers, guaranteed growth and guaranteed profits. The latter translated to spending power in the 2016 election cycle, during which APS was not shy about backing its allies and spending against its foes. However, the company has categorically refused to say if it was the source of millions in dark money spent in 2014.
But such activities have brought APS and its benefactors under scrutiny.
Former Paradise Valley Mayor Vernon Parker said it was a bad move for APS to start spending in the Corporation Commission elections to begin with. Parker ran unsuccessfully for a seat on the commission in 2014. He said he has no doubt APS was the source of nearly $900,000 in dark money that was spent against him in the Republican primary that year – ironic because he said he likely would have sided with the company more often than not.
He said APS’s spending has tainted the commission and those perceived to be beholden to the company, offering Forese as an example. Now, Parker suspects the so-called “Ghost Lobby” trial in particular has made APS reticent and waiting to see what more could unravel.
“Operation Ghost Lobby” was the name given to the federal bribery case brought against former Corporation Commissioner Gary Pierce, his wife Sherry Pierce, lobbyist Jim Norton and utility owner George Johnson. The case went to trial but ended in a hung jury, and has since been dismissed.
Parker said that case just scratched the surface, and there’s more not yet known that could expose APS.
“Ghost Lobby” stemmed from “Operation High Grid,” a larger investigation into spending in the 2014 elections, widely believed to include APS’s involvement.
“Hopefully, they’ve seen that being involved in the Corp Comm races can drag them into things that they probably should not be involved in,” Parker said.
Then there’s the far more optimistic possibility he entertained: “No pun intended here, but hopefully they’ve seen the light that it’s best to let the voters make up their own minds.”
But attorney Court Rich, of Rose Law Group, scoffed at the notion that APS has “seen the light” and decided that it’s inappropriate to spend in elections.
“Someone was seriously making that statement?” Rich said. “The idea that APS has decided to get out of politics – there’s no evidence to support that.”
Rich is the director of Rose Law Group’s Renewable Energy Department. His solar energy clients have fought APS for years. While APS hasn’t gotten involved in the Corporation Commission races just yet, it has spent millions on a campaign to keep the Clean Energy for a Healthy Arizona initiative off the ballot.
If approved, the initiative would mandate that 50 percent of electricity generated in Arizona come from renewable sources by 2030. APS and its allies argue that such a high mandate, which far exceeds current Corporation Commission mandates, would increase power costs.
And Rich anticipates APS will “continue to spend like crazy in the general election.” For now, the company seems comfortable with the race and is simply waiting to see who comes out on top after the primary. Perhaps then a negative campaign against its least favorite candidates would be the most prudent use of the company’s money, Rich said, or maybe APS doesn’t anticipate a major shakeup at the commission in any event.
No candidate will ever say he or she is beholden to APS, Rich said, but even an unwilling Republican would likely be better for the company than a Democrat on the commission.
“Certainly it’s fashionable for candidates on either side to not speak highly of APS right now,” he said. “But maybe they have a better feeling about some of the primary candidates and they don’t think they have to worry.”
With deregulation back on the table, though, APS may have to rethink its strategy entirely.
Commissioner Bob Burns, who will leave office in 2020 because of term limits, insists it’s re-regulation.
“That was a $5 million-plus word fought over in 2013,” he said, referring to the last time the commission considered the issue.
At first, all five commissioners at the time were on board, Burns recalled, but APS turned it into a “public political campaign.”
“And then all hell broke loose, and money started flying,” he said. “I guess you could say it was never in the control of the commission.”
The effort died soon after.
Then-Commissioner Gary Pierce flipped and moved to end discussion of the issue after the commission was advised that deregulation would likely require a voter-approved amendment to the Arizona Constitution. Then-Commissioner Brenda Burns was the only dissenting vote as her colleagues voted 4-1 to end the debate.
Bob Burns said APS sees the prospect of competition as a significant threat to its income.
He’s heard the phrase “utility death spiral” thrown around in years past, but he doesn’t hear that anymore and disagrees with the premise anyway.
Burns sees technology on the rise and capable of altering the status quo. Even if that means APS won’t be in the energy generation business in the future, he said distribution needs will still give the company space to function.
And that space may well be APS’s future: a distribution monopoly but perhaps not much more.