Key Points:

• Gov. Hobs signs bill allowing utilities to transfer debt to bonds

• Bill was written by Arizona Public Service

• Opponents say more oversight of securitization process is needed

Gov. Katie Hobbs signed a controversial utility financing measure into law on May 13, despite calls for a veto from environmental groups and some Democrats in the Legislature. 

House Bill 2679 allows utility companies to transfer debt into low-interest bonds that can be sold to recoup funding from aging or inefficient assets in a process known as securitization. The bill was written by Arizona Public Service and given to Republican Rep. Gail Griffin, R-Hereford, to sponsor. 

The legislation has been a point of contention this session and drew the ire of current and former Arizona Corporation Commission members, Attorney General Kris Mayes, Senate Minority Leader Priya Sundareshan and several environmental groups. 

In a statement released May 13, Hobbs said she worked with a bipartisan group of lawmakers on the bill to take it from a “concerning piece of legislation” to a “common sense, middle of the road solution.”

“HB2679 will lower costs for everyday Arizonans, improve grid resiliency by growing our energy economy, and ensure utilities are being held accountable to deliver cost savings to Arizonans,” Hobbs said. “I heard the concerns from clean energy and consumer protection advocates who opposed the original version of this bill, and I made it better.”

The bill has been a headache for lawmakers since it was introduced in January. It first received pushback from the all-Republican Corporation Commission in February, after commissioners said they were not part of the drafting process and were not made aware of the bill until it was filed. 

In early March, the ACC voted to make its position on the bill “neutral,” with several commissioners expressing frustration with APS and Republican lawmakers for not consulting with them prior to filing the legislation. 

A few weeks later, former commission Chairman Bob Burns, a Republican, sent a letter to lawmakers urging them to hold the bill until the ACC could conduct an evidentiary hearing on securitization. In early April, Mayes, a former commission chair, sent a letter to lawmakers saying she believed the bill could violate the ACC’s constitutional authority to set utility rates.

Despite the backlash, lawmakers pushed forward on the bill and added significant amendments to it in both the House and Senate. Opponents say the changes made were good, but still do not provide enough oversight of the securitization process and do not ensure that utility companies cannot securitize coal plants that remain in operation.

Amendments to the bill resolved some sticking points by removing the ability to securitize unrecovered fuel costs and limiting securitization to utility infrastructure in use at the time of the bill’s passage. 

Sundareshan said she felt “extreme disappointment” with the governor for signing the bill because of all the concerns brought to her office and the rushed legislative process the measure went through.

“The plant that this seems to be intended to allow APS to securitize … isn’t even scheduled for retirement for a number of years,” Sundareshan said, referring to the Four Corners Power Plant in New Mexico. “There’s time in which we could have gotten this right. The rush to sign (HB2679) is really inexplicable.”

Mayes’ spokesperson Richie Taylor said the attorney general still has concerns about the bill’s constitutionality, despite Republican lawmakers claiming amendments had resolved those issues. 

“Once the ACC greenlights a bond’s terms, it cannot later modify how those bond charges are passed on to customers,” Taylor said in a statement “This effectively hinders future commissions from performing their core regulatory duties over utilities. And (HB2679) enables ratepayer subsidization of utilities’ unprofitable investments by allowing a utility to sell a power plan once ratepayers have paid its remaining book value, letting the utility keep all sale proceeds.” 

The ACC has the exclusive authority to set utility rates under the state Constitution and the Legislature cannot modify that authority. A spokesperson for the ACC did not immediately respond to a request for comment on the commission’s current position on the bill. 

Sundareshan said opponents may challenge the legislation in court or ask Mayes to formally weigh in on its legality, but no concrete plans have been formed yet. 

The signing also comes after reporting from Capitol Media Services found APS’ parent company, Pinnacle West, donated $100,000 to a secretive legal defense fund Hobbs used to win election challenges from her former gubernatorial opponent, Kari Lake. Pinnacle West also donated $250,000 to Hobbs’ inauguration fund in 2023 and recent campaign finance reports show a $5,800 donation from the company’s PAC to Hobbs’ campaign in January. 

Not everyone was disappointed with the bill though. The Arizona Chamber of Commerce and Industry called it a “huge win for Arizona ratepayers” in a post on X on May 13.

Griffin, the bill’s sponsor, also celebrated the passage in a statement released May 14.

“By leveraging innovative financing tools, Arizona’s investor-owned utilities like APS and TEP, and public power entities like SRP, AEPCO and rural electric cooperatives, can lower consumer costs and free up capital to invest in new energy generating resources and grid upgrades,” Griffin said. “It’s a smart, forward-looking way to ensure Arizona’s utilities can keep up with rising demand.”