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Issue: Pinnacle West Capital Corp.

Commissioners to review 2017 APS rate hike

Electricity Pylon against clear sky

Two utility regulators are questioning whether some customers of Arizona Public Services are paying too much and the company is earning more than it is legally entitled.

Boyd Dunn and Bob Burns point out that the Arizona Corporation Commission voted in 2017 to let the state’s largest electric utility collect another $95 million a year from customers.

More significant, commissioners agreed to permit APS to change its rate plans to charge customers more during periods of high demand and less when demand is low. And the 4-1 vote, with Burns in opposition, also increased rates for those customers who didn’t want to go on time-of-day rates.

All totaled, APS was allowed to set up six different rates plans.

But the regulators, fearing customer confusion over those changes, also ordered the utility to conduct an extensive education program to help customers figure out which plan makes sense to them.

On Monday, Dunn and Burns filed a document with the commission citing what they say have been a  “substantial” number of complaints from customers that their bills have gone up far more than the average $6 a month the company claimed.

And they said there’s also some question of whether those higher bills are resulting in APS taking in more than that additional $95 million that the company was given permission to collect from customers.

“Under the constitution, a utility has a right to receive a reasonable profit,” Dunn said. He said the review will make certain that APS is getting that and not more.

There is no question but that some APS customers are paying more than that extra $6 a month. But APS spokeswoman Suzanne Trevino said that’s not a surprise.

“Our customers are seeing an average 4.54 percent increase. “That means some of our customers are paying less and some of them are paying more.”

And Trevino said 23 percent of customers now have smaller bills than they would have under the old rate plans.

That, however, still leaves the question Dunn and Burns are asking about whether some customers could be paying less – if only APS had done a better job of explaining the choice of new rate plans that replaced the ones that customers used to have.

What makes that important, Dunn said, is that if customers did not get – and understand – the information APS promised to provide they may be paying more than they should had they been able to choose the best rate plan for them. And that, in turn, may be generating more money for APS than that $95 million in new revenues the commission said they could earn.

Trevino said the company had multiple education efforts, including advertising, open houses and messages in customers’ bills.

“We continue to do that,” she said. “We want to make sure that customers are on the best plan for them.”

And Trevino said if some customers are paying more than they should, it’s not her company’s fault.

“Some customers are not going to choose the best plan for them,” she said. “Some customers would rather set it and forget it and they don’t worry about their bill,” Trevino said, not bothering to worry about things like whether to adjust thermostats, water heaters and pool timers to take advantage of lower-cost off-peak rates.

“Some customers, obviously, want to manage their energy use and manage their bill,” she said. “And so we have to figure out as a company how we can give all of those different options to all of our different customers.”

Dunn said he wants to be sure that APS really did all it could — and all it promised.

“If you remember the original hearing we had, I had a great concern about setting out enough information, enough lead time for ratepayers to be able to understand their choices and be able to make the best choice for the plan that works most effectively for them,” he said.

He acknowledged, though, that what the commission approved in changes in rate structure is complicated.

“It’s more detail than customers are used to in the past,” he said.

Trevino also said the audit will prove that APS revenues from the rate hike are matching that $95 million the commission approved.

She acknowledged that Pinnacle West Capital Corp., the utility’s parent, has listed revenue increases above that benchmark.

But Trevino said this includes things like purchased power which has nothing to do with the rate hike. And she said the audit will bear that out.

“We think it’s a good opportunity to confirm that we implemented the new rates and service plans as they were approved,” she said.

Corp Comm takes new stab at disclosing APS political spending

APS battery storage unit/Photo from APS
APS battery storage unit/Photo from APS

State utility regulators are making another bid to find out how much money the state’s largest electric utility is spending on political campaigns and lobbying.

But this time the outcome could be different.

The proposal by Sandra Kennedy to subpoena the records of Arizona Public Services comes a year after Maricopa County Superior Court Judge Daniel Kiley rejected an effort by Bob Burns, another member of the Arizona Corporation Commission, to find out how the utility was using its money and influence to elect regulators to its liking. Kiley said that Burns, as an individual commissioner, did not have the power to enforce subpoenas.

But now Burns has an ally in Kennedy.

More significant, Justin Olson, who was not on the commission when the legal fight first began, told Capitol Media Services Tuesday he is willing to support enforcing a subpoena if Kennedy and Burns pursue it.

“I’m very supportive of transparency,” Olson said.

Company officials fought an extended battle over the last attempt, making various legal arguments about why its political spending was off limits to commissioners. But, for the moment, the utility is taking a less confrontational approach.

“We will review Commissioner Kennedy’s letter and may have further comment after we fully assess it,” said spokeswoman Jenna Rowell.

Kennedy is particularly interested in the donations that APS and Pinnacle West, the utility’s parent company, have given to certain tax-exempt organizations. That’s because federal tax laws allow these organizations to influence elections with campaigns mounted on behalf of or against candidates.

More significant, Arizona law exempts those organizations from having to disclose their donors. That makes it impossible to find out who is truly providing that cash.

What makes all that important is that two “dark money” groups that fall into that category spent $3.2 million in 2014 to help elect Republicans Tom Forese and Doug Little to the commission.

APS will neither confirm nor deny it was the source of those dollars.

Two years ago the company spent $4 million in the open to help keep the commission an all-Republican affair. And this past year the utility pretty much stayed out of the commission race, deciding to put $32 million into fighting an initiative that would have required utilities to generate half their power from renewable sources by 2030.

Kennedy told Capitol Media Services finding out where all that cash is going is crucial to the role of the commission in regulating rates.

“I think the ratepayers in the APS territory are paying an awful lot in fees,” she said. “And I think they have a right to where the monopoly that they have to get their services is spending their money.”

Kennedy’s subpoena is going after more than just political donations.

She wants to know what money APS and Pinnacle West spent advertising expenses, including”the nature of the expenditure, the amount, the date and the purpose.” And the subpoena she is crafting wants to know about foundations and other entities that are related to the company, including any “arrangement governing the foundation’s use of APS name or brand.”

Burns said he will fight any effort by Pinnacle West to claim that its books are off limits to commissioners and that firm is not itself a regulated utility. He called that a distinction without a difference.

“They’re actually APS,” he told Capitol Media Services. “APS is their only source of income.”

In fighting the Burns subpoenas, APS accused him of an improper and illegal power grab.

Attorney Mary O’Grady argued that the Legislature has exclusive power to set campaign finance rules. And she said Burns is powerless to require APS to divulge anything more.

But Kiley rejected those arguments. He said just because the state has its own disclosure rules does not strip the commission of its own constitutional powers.

O’Grady also argued that forcing APS and Pinnacle West to reveal their political spending would discourage them from making future political donations. Kiley didn’t buy those arguments either.

“Nothing in that case suggests the First Amendment offers blanket protection against the mandatory disclosure of political spending,” the judge wrote. He noted the justices in that ruling said transparency “enables the electorate to make informed decisions and give proper weight to different speakers and messages.”

But what tripped up Burns, at least until now, was the fact he was acting on his own.

On one hand, Kiley concluded that Burns, as a commission member, has an individual right to look at the books of not only APS but Pinnacle West Capital Corp., its parent company. He said Burns does not need the backing of the majority of the regulatory panel to do that.

And the judge also said that individual right of commissioners extends to the ability to subpoena corporate executives to testify.

Kiley said, though, none of that matters because the other four members of the commission have refused to enforce the subpoenas. And the judge said he lacks the legal authority to overrule that.

But all that changes if there are three votes backing the subpoenas.

Private donations fund inaugural

The crowd at the 2019 inauguration of statewide elected officers applauds. (Photo by Gage Skidmore/Flickr)
The crowd at the 2019 inauguration of statewide elected officers applauds. (Photo by Gage Skidmore/Flickr)

A Tucson auto dealer gave more money than anyone else for some seats at Monday’s inaugural.

Records obtained Wednesday by Capitol Media Services show Jim Click at the top of the donor list at $25,000. That made him $10,000 more generous to finance the ceremony to swear in Gov. Doug Ducey and five other state officials.

Click did not immediately respond to messages left with his assistant.

But what inaugural organizers said that size donation entitled recipients to six seats up near the front of the event in the courtyard between the House and Senate and six tickets to the reception afterwards.

Also in the package were three parking passes, the right to have three photos taken at the reception, and six inaugural pins.

That donation — along with any of at least $10,000 — also entitled the donor to put a corporate logo in the program handed out and on the inaugural web site. But Click’s name and his dealerships were nowhere on the program which had to be printed before he made his pledge.

Pinnacle West Capital Corp., parent company of Arizona Public Service, the state’s largest electric utility, kicked in $15,000. That level netted three prime seats and VIP reception invitations.

That was far more generous than other state utilities, including Tucson Electric, Southwest Gas, Salt River Project and Cox Communications who each kicked in $5,000 — enough to get their names on the program.

Other $15,000 donors include Well Care Health Plans, Honeywell Aerospace, Southern Glazers Wine & Spirits, Freeport McMoRan and United Health Group, though gubernatorial press aide Patrick Ptak said the cash from the last three is so far just pledged and had not yet been received.

All totaled the cash received and pledged totals $272,500.

Some other companies got their names on the program with in-kind contributions.

For example, the Arizona Food Marketing Alliance, the lobbying arm of the grocery store industry, put on a lunch for volunteers, separate from the VIP event. Mission Linen Supply provided the linens for that more formal event for the major donors. And AFR Furniture Rental provided the cushioned chairs on the stage for those being sworn in and their spouses.

Ptak said the idea was to fund the event with private dollars, saying there was no state cash involved. But the governor’s office has yet to produce a formal list of where and how the money was spent.

And not all of that went to the production itself: Volunteers from the governor’s office who worked on the inaugural on their own time doing everything from setting up and parking lot duty to being ushers, got new sweatshirts emblazoned with the event name, the state seal and Ducey’s name.

Sentiment towards APS could affect various political races

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The outcome of several key races on next week’s ballot could turn on how Arizonans feel about their utility company — especially if it’s Arizona Public Service.

Officially, the only race in which APS is directly involved, at least to date, is its high-dollar effort to quash an initiative that would force it and other utilities to generate half of their power from renewable sources by 2030. At last count the utility had spent more than $30 million against Proposition 127.

Recent polls suggest all that spending may be paying off, even with Prop 127 proponents pretty much matching the utility dollar for dollar.

But the fact that Arizonans aren’t willing to back a proposal by a California billionaire to amend the state constitution does not mean people are happy with APS. And that has implications in both the race for Arizona Corporation Commission and the attorney general.

Political consultant Chuck Coughlin of HighGround said he saw that first hand recently at a meeting of East Valley women who are active in politics when the subject of Proposition 127 came up.

“The vitriol about APS in the room was more than palpable,” he said.

Coughlin said many of the women agreed that the initiative was a bad idea.

“But APS has been screwing us for a long time, they’re bad people,” he recalled of the comments. “It was pretty remarkable to watch this.”

Coughlin said the differentiation that the people were making there is reflected in data his firm has collected statewide which, as he puts it, shows “127 is getting its ass kicked.”

But that anti-APS feeling is spilling into other races, including the bid by Attorney General Mark Brnovich, a Republican, for another four-year term.

“Brnovich was taking some heat,” Coughlin said. And he said anyone perceived to be a friend of the utility “is vulnerable.”

Brnovich, for his part, has sought to distance himself from the money that APS parent Pinnacle West Capital Corp. has given to the Republican Attorneys General Association which, in turn, spent big four years ago and again this year to get him elected. Brnovich said he does not control what RAGA solicits nor how it spends its cash.

But ads taken out by the Prop 127 organizers have sought to tie Brnovich to the utility after his office reworded the description of the measure that voters will see on the ballot with words that could arguably be considered designed to sway sentiment against it. It did not help Brnovich that, within days, the APS-financed anti-127 campaign was using his added language in its commercials.

So intent are Prop 127 organizers to taint Brnovich with APS that one of its commercials even overlays NASCAR-style APS logos all over the attorney general’s suit.

The other key campaign where feelings about APS could have some impact is in the race for two seats on the Arizona Corporation Commission.

It already played a role in the defeat of incumbent Tom Forese in the Republican primary.

Part of that is public anger over rate hikes approved last year by the commission and complaints by customers, forced into new rate plans that they were lied to about the extent of the increases. Those complaints have forced the commission to reopen the issue.

Forese also had the taint of APS from his 2014 election when the utility would neither confirm nor deny it was the source of $3.2 million spent by “dark money” organizations to elect him and fellow Republican Doug Little.

Little has since quit, with Gov. Doug Ducey appointing Justin Olson to the post.

Olson now is making it a point to tell voters that he was not on the commission when the rate hike was approved. And he has taken an active role in the current hearings about whether to alter the controversial rate structure.

He and fellow Republican Rodney Glassman, who defeated Forese in the GOP primary, also have vowed to do something else: support a bid by Commissioner Bob Burns to force APS to open up its books to divulge all of the company’s political spending.

But Olson has taken heat for using talking points prepared by APS in his conversation with Wall Street investors. And that creates an opportunity for at least one of the two Democrats to get elected to the utility regulatory panel, Sandra Kennedy and Kiana Sears.

Glassman also has taken pains to insulate himself against anti-APS sentiment.

He has promised not to take money from any regulated utility. And Glassman wants the commission to adopt the same code of conduct that applies to judges, a code that would keep regulators from deciding on issues involving those who have contributed to their campaigns.

Glassman said he, too, has seen the anger at APS on the campaign trail.

“The number one question I get is, ‘Are you taking money from APS?’ ” he said. In fact Glassman, running as a team with Olson, said he is considering putting disclaimers on his campaign signs saying it is not funded by any utility — or “any out-of-state billionaire,” a reference to the money that Tom Steyer, the financier of Proposition 127, has put into electing Kennedy and Sears.

Pollster Mike Noble of OH Predictive Insights said his company did some market research about five months ago about Salt River Project, the other electric utility in the Phoenix area — and one that has lower rates. He said his firm used APS as a comparison.

In both cases, Noble said, he found the positive numbers in the 80-plus percent range.

He acknowledged the questions, asked before the political campaigns got into full swing, were not about politics but instead more “brand awareness.” But Noble said it’s not surprising that customers generally have good feelings for the people who supply their electrons.

“It’s power,” he said. “They like it unless it’s not on.”

Noble acknowledged that the results may not reflect the views of the “politically active” who tend to show up at meetings like the one Coughlin attended. But he said the survey got a broad enough cross section to reflect the views of people who will be going to the polls.

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.