Arizona’s utility watchdog has become the utilities’ guard dog

The Arizona Corporation Commission is supposed to protect customers from monopoly utilities, but a blistering new Arizona Court of Appeals decision shows the opposite happened in a major APS rate case.

The commission’s hearing process helped create, defend and preserve a utility-friendly solar charge that APS itself had not requested. That is a troubling sign of regulatory capture reaching into the commission’s own courtroom.

APS proposed the same rate increase for solar and nonsolar residential customers. It also said the cost study later used to justify the solar charge was meant for future cases. Administrative Law Judge Sarah Harpring recommended the charge anyway. 

The court described it as “something no one asked for.”

Harpring introduced the charge after the hearing was over. Customers had not been told it was under consideration and had no fair chance to challenge it.

That is not neutral judging.

The commission grudgingly ordered a rehearing, acknowledging that challengers needed another opportunity to be heard and present evidence. But the second hearing was a farce.

Administrative Law Judge Belinda Martin treated the key cost study as largely untouchable. She limited challenges to the commission’s reasoning, allowed reliance on testimony that could not be meaningfully cross-examined and put the burden on customers to prove why the charge should be removed.

The state Court of Appeals forcefully rejected that approach. Due process, it said, is “a right, not a favor.” The court threw out both the solar charge and the second decision approving it.

This case is about more than rooftop solar.

Commission staff and administrative judges are supposed to test the commissioners’ decisions against the facts and the law — not help build a desired result and then block challenges to it.

The same pattern has appeared elsewhere. On renewable-energy and energy-efficiency rules, the commission chose the result first and directed staff to carry it out. On formula rates, it pushed toward more automatic utility rate increases while fighting over whether normal public protections applied.

The issue is how an agency with exclusive ratemaking authority behaves: decide first, narrow public input, and treat legal safeguards as obstacles.

And the commissioners cannot blame the judges. Harpring and Martin made recommendations. The elected commissioners turned them into official orders. They approved a surprise charge after being warned that nobody had proposed it and customers had never had a fair chance to fight it. Then they approved a second process that protected the first decision instead of honestly reconsidering it.

They also used the commission’s public platform to sell the result. In a December 2024 news release, then-commissioner and now Chairman Nick Myers declared that rooftop-solar customers paid less than 70% of their cost of service and were being subsidized by non-solar customers. He said the rehearing confirmed that conclusion and called the charge “just and reasonable.”

But the court found that the rehearing was not the fair test the commission claimed. The key study was shielded from full reconsideration, evidence challenging it was restricted, and the burden was wrongly placed on customers instead of APS.

The commission promoted a disputed result as settled fact while the process beneath it remained deeply flawed. It used one flawed decision to protect another.

A regulator is captured when it stops asking whether a monopoly has proved its case and starts asking how the monopoly’s advantage can be saved. An administrative court is captured when legal procedure becomes the tool for saving it.

A captured regulator is dangerous. A captured hearing process is worse – it gives favoritism the appearance of law.

Arizona ratepayers deserve utility watchdogs, not judicial robes placed on utility guard dogs.

Abhay Padgaonkar is a management consultant and longtime consumer advocate.