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Issue: Judge Daniel Kiley

Court rejects Burns’ bid to unearth APS campaign spending

Bob Burns explains why he was the lone vote against selecting Tom Forese as new chairman of the Arizona Corporation Commission (Capitol Media Services photo by Howard Fischer)
Corporation Commissioner Bob Burns (Capitol Media Services photo by Howard Fischer)

State utility regulators have no legal right to investigate their colleagues to determine if they are biased, a judge has ruled.

In a decision released Wednesday, Maricopa County Superior Court Judge Daniel Kiley rebuffed the efforts by Bob Burns to launch a probe into whether one or more of his colleagues on the Arizona Corporation Commission acted improperly in supporting a rate increase for Arizona Public Service because the company provided financial support for their political campaigns.

Kiley, in an extensive ruling, said due process does require that there be an “unbiased adjudication of disputes.” And he said that Burns has a “commendable concern” to ensure that all involved in rate cases have their rights protected.

“However, such due process rights belong to the litigants to the dispute, not to members of the body adjudicating the dispute,” the judge wrote.

In this case, none of the parties to the rate case raised any questions of bias. In fact, all of the 29 parties, including the utility, the Residential Utility Consumer Office and a host of intervenors, all signed off on the deal to allow APS to collect an additional $7 million a month from its customers.

The judge also said he can find nothing either in the Arizona Constitution or state statutes that gives one commissioner the independent authority to investigate whether his or her colleagues should be disqualified from voting on an issue.

Kiley’s ruling has implications beyond this specific dispute and this specific rate case. It also sets the rules for what can happen — and who can question the bias of commissioners — in future rate cases where utilities and others are providing direct or indirect financial help to elect the very regulators who are deciding the issue.

Burns said he is weighing whether to appeal.

The latest ruling is an outgrowth of Burns’ contention that APS or parent Pinnacle West Capital Corp. was the source of $3.2 million spent by “dark money” groups to elect Republicans Tom Forese and Doug Little to the commission in 2014.

Those groups claim their status as “social welfare” organizations under the Internal Revenue Code exempt them from disclosing donors. And APS will neither confirm nor deny it was the source of those dollars.

In 2016 APS openly spent more than $4 million to defeat Democratic candidates, helping to ensure the election of Republicans Andy Tobin, Boyd Dunn — and Burns himself. But Burns, whose reelection bid also was aided with money from solar interests, contends APS didn’t really want him, but feared him less than the Democrats.

Last year the commission voted 4-1 to approve the rate hike deal, with Burns the lone opposition.

Burns at first tried to get access to the records of APS and Pinnacle West to determine if they were behind those 2014 donations. But Kiley, in a prior ruling, said such a subpoena can be issued only if it has the support of the majority of the commission, something Burns did not have.

That left Burns with the argument, just rejected by Kiley, that he should be allowed to investigate whether the other four commissioners had conflicts of interest, meaning they never should have been allowed to vote on the rate hike in the first place.

Even if Burns does not appeal, this may not be the end of the matter.

There is a pending request before the commission to reopen the APS rate case amid charges by consumers that their actual bills went up far more than the utility had promised. That request, currently being reviewed by a hearing officer, is not expected to go before the panel until at least next month when there will be two new commissioners, neither of which voted for the rate hike and both of whom have expressed some support for Burns and his efforts to explore any links between campaign spending and commission action.

That could provide Burns the three-vote majority he needs to pursue the very APS and Pinnacle West records he sought in the first place.

 

Judge insists he can decide extent of commissioner’s powers

Bob Burns explains why he was the lone vote against selecting Tom Forese as new chairman of the Arizona Corporation Commission (Capitol Media Services photo by Howard Fischer)
Bob Burns explains why he was the lone vote against selecting Tom Forese as new chairman of the Arizona Corporation Commission (Capitol Media Services photo by Howard Fischer)

A Maricopa County Superior Court judge said he has the legal right to decide whether state regulator Bob Burns has the unilateral power to subpoena utility executives, even in the face of opposition of the other four members of the Arizona Corporation Commission.

In an extensive ruling Monday, Judge Daniel Kiley rejected arguments by Arizona Public Service that he is legally powerless to intercede in what the company contends is a dispute among commissioners.

APS attorney Mary O’Grady said that, at the very least, Burns should have to wait until the commission rules on its pending rate increase request.

But Kiley said this isn’t a simple internal dispute among commissioners. Instead, he pointed out, Burns wants a clear ruling on the scope of his constitutional and statutory authority as an elected member of the panel to compel the production of evidence and examine witnesses.

“Resolving such disputes is clearly within the province of the judiciary,” the judge wrote. “Moreover, Arizona courts have long recognized that declaratory judgment relief is an appropriate vehicle for resolving controversies as to the legality of acts of public officials.”

Tom Forese, chairman of the Arizona Corporation Commission (Capitol Media Services photo by Howard Fischer)
Tom Forese, chairman of the Arizona Corporation Commission (Capitol Media Services photo by Howard Fischer)

Kiley also rebuffed an argument by Chairman Tom Forese that the dispute between Burns and the other commissioners is “really a political question” beyond the scope of the judge to resolve.

“This case presents issue of constitutional interpretation and statutory construction that are squarely within the scope of judicial authority,” the judge said.

Kiley’s ruling came as the commission voted Monday to pay to hire separate attorneys for the other four commissioners to defend themselves in the lawsuit. That’s because Burns has expanded his legal claims beyond just the issue of his individual rights as a commissioner to questions about whether the other four may be disqualified from voting on the APS rate hike because the company provided – or is believed to have provided – cash to help get them elected.

But the panel refused to pay for Bill Richards, Burns’ own attorney, who the commissioner said has been working for free. Burns said he was told the policy is for taxpayer-financed legal help only when commissioners are defending their actions.

“I’m on offense, they’re on defense,” he said. But Burns said he hopes that Kiley eventually orders the commission to pick up the bill for his lawyer, too.

More immediate is the question of how much power does Burns – or any other commissioner – have to issue subpoenas and demand testimony from witnesses over the objections of his or her colleagues.

Burns wants documents from APS and parent company Pinnacle West Capital Corp. showing what they spent not only to influence the 2014 election. Two outside groups spent $3.2 million to elect Forese and Doug Little but have refused to disclose their funders.

He also wants information on the company’s spending on lobbyists and charities. And he wants to question CEO Don Brandt and others.

APS initially challenged his actions as premature. Kiley agreed, telling Burns to seek permission from his colleagues.

But when he did that, the other four voted to reject his request. Kiley, in Monday’s ruling, said that puts the question of Burns’ legal rights squarely before him.

And there are legitimate questions.

The Arizona Constitution spells out that the commission “and the several members thereof” have the power “to inspect and investigate the property, books, papers, business methods, and affairs of any corporation whose stock shall be offered for sale to the public.” Pinnacle West is a publicly traded corporation.

And the constitution specifically spells out the right to demand documents over regulated “public service corporations” like APS.

It also says that individual commissioners have the same power as a court “to enforce the attendance of witnesses and the production of evidence by subpoena.”

Kiley said it is now up to him, as the judge in the case, to decide whether the constitution and parallel statutes give Burns the independent powers he claims he has.

Judge rules clean energy measure to stay on ballot

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Arizona Public Service has faltered in its attempt to keep a renewable energy measure it opposes off the November ballot.

In a 33-page ruling, Maricopa County Superior Court Judge Daniel Kiley rejected the contentions of the APS-funded group that backers of the Clean Energy for Healthy Arizona initiative had effectively tricked people into signing initiative petitions.

During a five-day trial, they pointed out that the proposal, requiring utilities to generate 50 percent of their power from renewable source by 2030, specifically uses the term “clean energy.” But attorneys for the utility noted that Proposition 127 would not include nuclear power in that 50 percent mandate.

They contend that nuclear power is “clean” energy because it does not produce airborne emissions. And in using that term, they said, it may have fooled petition signers into thinking the measure does something it does not.

Kiley, however, said no one was misled.

“The fact that the initiative excludes nuclear power is made clear,” he said, not only in the title of the measure but also in the 100-word summary on each petition and in the actual text of the measure. There, he said, it defines “renewable energy” as excluding nuclear or fossil fuels.

But Kiley sidestepped the question of whether nuclear is “clean,” saying that is not for courts to decide.

The judge did disqualify a large number of the more than 480,000 signatures that were submitted by initiative organizers.

In some cases he found evidence of fraud, such as multiple names on the same petition sheet that seem to have been signed by the same person. And Kiley also said that the signatures of circulators who did not show up in court after being subpoenaed also had to be tossed out.

But the judge rejected the key contention of the utility-financed effort that initiative organizers knew that more than half the signatures they submitted were invalid. That claim was based on an internal review by campaign workers that they could verify just 47.3 percent of the signatures they had in hand.

Utility attorney Brett Johnson told Kiley that proves the campaign knew they were submitting invalid signatures in hopes that turning that many petitions in to election officials would “flood” the system and leave them unable to properly verify the signatures.

Kiley said that internal analysis proves no such thing.

He said that validity rates in that analysis was “intended as a conservative, ‘worse case scenario’-type estimate” to get a baseline idea of what the committee knew it could prove in a challenge. He said it was never meant to be an estimate of the signatures organizers believed to actually be valid.

For example, the judge said, the campaign committee, to be on the safe side, did not count any signature as “valid” where the address on the petition did not match the voter registration records.

“This is an unrealistically pessimistic assumption,” Kiley wrote. He pointed out that the county recorders, who actually checked a random sample of signatures, were able to find and validate many of them despite the fact that the addresses on the petitions did not match voter records.

He also slapped down the idea that the campaign committee’s own internal records and analysis should somehow govern his ruling.

“The relevant issue is whether the signatures submitted by the committee are valid,” Kiley said. “What the committee’s personnel (or any other party or employee of a party, for that matter) (ITALICS) thinks or believes about the validity of those signatures is irrelevant.”

And there’s something else. Kiley said that even if he accepted the committee’s own validity rate,it would not matter: It still would leave the campaign with more than the 225,963 valid signatures needed to make the ballot.

None of that, however, is going to stop Arizonans for Affordable Energy, the group set up by APS and its parent, Pinnacle West Capital Corp., from making a last-ditch effort to keep the issue from going to voters. Campaign spokesman Matthew Benson said an appeal is being prepared to the Arizona Supreme Court.

In fact, Benson said in a prepared statement that his organization is doubling down on the claim – the one that Kiley just rejected – that the internal analysis done by initiative organizers of the petitions should be proof there are insufficient valid signatures.

That decision to appeal is not a surprise. APS and Pinnacle West already have spent nearly $10.4 million in the effort to quash the initiative and its mandate.

APS, like most other Arizona utilities, is under a directive from the Arizona Corporation Commission to generate 15 percent of its power from renewable sources by 2025.

This measure, financed by California billionaire Tom Steyer, would not only override the rules of the utility regulators but actually put that 50 percent mandate into the Arizona Constitution. Steyer’s NextGen Climate Action already has spent more than $8.8 million to put the issue to voters in November.

APS contends that a 50 percent renewable mandate would raise utility bills and could even force the closure of the Palo Verde Nuclear Generating Station as its power would not be needed during peak solar hours. Foes have their own economic impact projections and reject the idea that the future of the power plant west of Phoenix will be affected solely by this measure.

Supreme Court upholds ruling to allow energy measure to go to ballot

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Arizonans are going to get a chance to decide whether they want to require utilities in the state to produce more of their power from renewable sources.

The Arizona Supreme Court late Wednesday rejected various claims by attorneys for Arizona Public Service that the initiative sponsored by California billionaire Tom Steyer lacks sufficient valid signatures to go to voters in November. The justices provided no details about what they found wanting in the APS legal briefs, promising an explanation later.

Wednesday’s ruling comes just two days after Maricopa County Superior Court Judge Daniel Kiley said he found no evidence that initiative supporters had somehow tricked people into signing the initiative petitions. And Kiley rebuffed various efforts by APS to have him disqualify other signatures.

The decision drew fire from Matthew Benson, spokesman for Arizonans for Affordable Electricity, the group that has been financed with more than $11 million from Pinnacle West Capital Corp., the parent company of APS. He said both Kiley and the justices got it wrong.

But with the Supreme Court having the last word, Benson said the group now will focus on trying to convince voters that approval of the Proposition 127 will increase their electric bills, a contention disputed by initiative organizers.

Tom Steyer is interviewed on Cheddar on the floor of the New York Stock Exchange, Monday, April 2, 2018. Steyer, the billionaire hedge-fund magnate-turned-liberal activist, has committed at least $31 million this year to what is believed to be the largest youth vote organizing effort in American history. (AP Photo/Richard Drew)
Tom Steyer . (AP Photo/Richard Drew)

Most Arizona utilities already are under orders from the Arizona Corporation Commission to produce 15 percent of their energy from renewable sources by 2025.

This measure would boost that mandate to 50 percent, with a requirement to get there by 2030. And it would put that requirement into the Arizona Constitution.

Proponents of what is known as the Clean Energy for a Healthy Arizona say they want to reduce the state’s dependence on fossil fuels which pump pollutants into the air. There also is a separate concern about the carbon dioxide produced which has been linked to climate change.

One of the arguments made by APS attorneys was that the initiative would mislead voters with its claim that it was promoting “clean” energy.

APS takes the position that nuclear power, which has no smokestack emissions, also is clean energy. But the initiative would not count nuclear power toward that 50 percent goal, something the utility’s lawyers argued is not made clear in the description of the initiative.

In his ruling — the one the Supreme Court upheld Wednesday —  Kiley said it is not up to judges to decide what is “clean” energy. But he rejected the contention that anyone was fooled.

Benson, in reacting to the ruling, said the initiative is not about clean energy.

“Everyone supports clean energy,” he said. “The question is whether Arizona voters are willing to double their electric bills in order to approve Prop 127.”

APS and its supporters have produced studies to back their claim of higher electric rates. But initiative backers and their allies have responded with their own reports insisting that increased use of solar power, abundant in Arizona, would result in smaller bills.

Even if voters approve the constitutional amendment, it is an open question whether utilities will comply.

In anticipation of the initiative, APS got the Republican-controlled Legislature to approve a measure which says that utilities that violate the renewable energy standard would be subject to a penalty of no more than $5,000 — and potentially as little as $100 — potentially making it cheaper to ignore the mandate and pay the fine, even if they have to do it each day.

Rep. Vince Leach, R-Tucson, who sponsored the measure, said during hearings that the intent of the law, which was signed by Gov. Doug Ducey, was to ensure that it would not matter if voters side with initiative organizers. He said it is the responsibility of lawmakers to protect Arizona residents from out-of-state interests, specifically referring to Steyer.

Utility files suit to halt renewable energy ballot measure

The parent company of the state’s largest electric utility filed suit Thursday in a bid to block voters from deciding if they want to impose new renewable energy mandates on power companies.

In a 48-page complaint, attorneys hired by Arizonans for Affordable Energy, funded by Pinnacle West Capital Corp., claim a series of legal flaws with the petitions submitted by Clean Energy for a Healthy Arizona seeking to amend the Arizona Constitution to require 50 percent of electricity generated by most power companies in Arizona come from renewable sources by 2030.

Initiative backers submitted more than 480,000 signatures. They need for 225,963 to be found valid to get the issue on the November ballot.

But attorney Brett Johnson, in the legal papers filed in Maricopa Couny Stuperior Court, claims more than 195,000 of the names are from people who are not registered to vote in Arizona, and that nearly 75,000 signatures were submitted on petitions where there was a missing or improper notarization, something required by law.

Other issues include signatures that do not match and petitions that were circulated before initiative backers got the proper registration number from the Secretary of State’s Office.

Matthew Benson
Matthew Benson

“There are a laundry list of issues,” said Matt Benson, spokesman for the utility-financed effort to quash the initiative. “But the point is, even all of those issues aside, obvious blatant deficiencies account for more than 300,000 signatures and push them well below the minimum threshold.”

Pinnacle West and its wholly owned Arizona Public Service subsidiary, however, are not counting solely on trying to disqualify some signatures in their bid to show that there are not enough valid names left to put the issue to voters. Johnson has a laundry list of reasons that he says would entitle asking Judge Daniel Kiley to void the entire petition drive, arguing that signers did not know what they were supporting.

For example, he noted that the measure is titled the “Clean Energy for a Healthy Arizona Amendment.” But Johnson pointed out that the mandate for 50 percent renewable energy by 2030 specifically excludes nuclear energy, a particular issue for Arizona Public Service, which is the major owner of the Palo Verde Nuclear Generating Station west of Phoenix. He said that fails to acknowledge that nuclear energy generates about 20 percent of power in the United States with zero greenhouse gas emissions.

And Johnson said the wording fails to inform people that the initiative would apply only to investor-owned utilities and cooperatives — and not to Salt River Project which is a “municipal corporation” and the second largest electric company in the state.

Rod McLeod, spokesman for the initiative, acknowledged that not every signature submitted ultimately will be found valid.

“The reason we handed in more than double the required amount is because we understand … that you’re going to have a certain number of them that come up wrong,” he said. “There’s always going to be mistakes,” McLeod continued.

That, he said, is the purpose behind the “cushion.”

“We are confident we have more valid signatures than the law requires and regard this lawsuit as foolish,” McLeod said. He called it “a desperate attempt to deny choice on what kind of energy we want to have in the future.”

McLeod also took a jab at Benson who had issued press releases and posted claims on social media that the campaign had hired “men with felony convictions for kidnapping, domestic violence, aggravated vehicular homicide, burglary, forgery and more” and had these circulators on street corners, in front of public libraries and other places where “violent felons” should not be hanging out.

Despite all that publicity, it turns out that even after the review of petitions by the utility-financed campaign, it was able to identify just 168 signatures on sheets circulated by what the lawsuit claims were 85 felons, or fewer than two signatures gathered per alleged felon.

“The people making this claim have no credibility whatsoever,” McLeod said.

One issue that could ultimately affect whether the initiative gets on the ballot is what Arizona courts rule is the proper standard for determining if they comply with the law.

Until last year courts have interpreted the Arizona Constitution to allow voter-proposed laws and constitutional amendments to proceed if there is “substantial compliance” with the statutes. But the Republican-controlled Legislature, at the behest of business interests, enacted a provision requiring “strict compliance.”

That could prove crucial as some of the errors cited by the utility and its lawyers involve things like the date that the initiative effort, financed by California billionaire Tom Steyer, first hired paid circulators and whether that was too early. There also is a claim of “inconsistent circulator signatures” and petition sheets which had an “incorrect, incomplete, or misplaced serial number.”

In a separate lawsuit, a trial judge threw out a challenge to the strict compliance standard, ruling the plaintiffs in that case did not have standing because they did not have an actual ballot measure whose future was threatened by the new law. This case could provide that legal standing.

On paper, the lawsuit is not being brought in the name of either Pinnacle West nor APS. Instead, the plaintiffs include several supporters of the utility, including Rep. Vince Leach, R-Tucson, and Sen. John Kavanagh, R-Scottsdale, who tried on behalf of the utility earlier this year to put a competing measure on the November ballot.

Also listed as plaintiffs are Gilbert Mayor Jenn Daniels, Buckeye Mayor Jackie Meck and Mesa Mayor John Giles.

Kiley has scheduled a hearing on the issue for this coming week.