PHOENIX — Following through on an earlier threat, state utility regulator Bob Burns on Thursday subpoenaed the records of Arizona Public Service and its parent company, Pinnacle West Capital Corp.
Burns wants the two companies to disclose all of the political spending they have made going back to 2011. That includes not only direct contributions but also any money paid to “independent expenditure” groups that seek to influence elections.
That latter provision is critical to Burns’ efforts to determine if the state’s largest electric company and any related companies put money into the 2014 race that resulted in the election of Republicans Tom Forese and Doug Little to the commission that regulates the rates that APS can charge its captive customers.
Two outside groups spent more than $3.2 million on that race. But both claim they are “social welfare” organizations exempt from having to disclose their donors.
And APS, for its part, will not deny having provided at least some of that cash.
In the subpoena, Burns told Don Brandt, the chief executive officer of both APS and Pinnacle West, to bring the documents to the commission’s office at 10 a.m. Sept. 15.
Whether Burns can legally enforce those subpoenas remains an open legal question.
In a formal legal opinion earlier this year, Attorney General Mark Brnovich said state utility regulators have a legal right to question APS — and any other investor-owned utility — about whether they secretly funneled money into political campaigns.
Brnovich said he reads Arizona law to allow individual commissioners and their employees to “at any time, inspect the accounts, books, papers and documents” of any regulated utility. He said that includes political contributions, charitable donations and lobbying expenses.
He also said that commissioners may examine utility company officers and employees under oath.
And the other four commissioners have never questioned Burns’ right to issue the subpoenas. In fact, Andy Tobin has told Burns publicly to go ahead with the idea even though he personally does not support it.
But Brnovich said the right of individual commissioners to pore through APS books does not extend to affiliates. And it is possible that any campaign donations were made not by APS but by Pinnacle West Capital Corp.
The attorney general did say the commission, as a whole, does have some right to review the records of affiliates as long as that review is necessary for the panel to do its job of setting rates.
But Brnovich said that requires a decision by the full commission. And so far Burns is the lone regulator who has shown an interest in pursuing the information, with the other Republicans on the panel in outright opposition to all of this.
Burns, however, is undeterred.
“We interpret what Brnovich said a little differently, I guess,” he said. “I think it was a little gray in his opinion.”
APS already has staked out the position that neither Burns nor the commission are entitled to any of that information, no matter from which company the political donations — if any — were made.
In a letter to Burns earlier this year, Brandt said any money spent on political races come not from what the company charges its customers but instead out of “shareholder profits.” What that means, he said, is that the commission, which regulates the rates, has no right to the information.
And if statutory arguments do not work, Brandt is prepared with a constitutional one.
“Compelled disclosure about political contributions that APS or its affiliates may have made out of shareholder profits would go beyond what is required of corporations under Arizona campaign finance law and would impinge on APS’ First Amendment rights,” he wrote.
But by Thursday, after Burns actually issued the subpoena, APS and its parent company were taking a more measured approach to the issue.
“We have received the subpoena from Commissioner Burns and we are reviewing it,” said company spokesman James McDonald.
If there’s a court fight, the company already has a legal ally in the form of the Arizona Investment Council. It is composed of shareholders of investor-owned utilities like APS.
Attorney Mary O’Grady, writing on behalf of the council, wrote that the state constitution does allow the commission to “inspect and investigate the property, books, papers, business methods and affairs” of any corporation that sells stock in Arizona, as well as any commission-regulated utility.
But O’Grady said those powers are limited to what the commission needs to do its job.
“There is no basis to allow the commission to use its investigative power to inquire into the political speech of a particular entity,” she said in her memo.
O’Grady said the only excuse for commissioners to demand the information would be to determine whether a utility’s request for higher rates was designed to help cover the cost of election expenses. But O’Grady said there was no such request before the panel.
But former Supreme Court Chief Justice Thomas Zlaket, retained by the Alliance for Solar Choice, came to a contrary conclusion.
Zlaket said commissioners have a “compelling interest” in knowing the roles utilities played in an election “because such information reveals the potential bias of commissioners who may have received support from these entities.”
Alliance members are manufacturers and installers who have been at odds with APS and other utilities over their efforts to force homeowners with solar panels to pay more to utilities for the fixed costs of maintaining the electrical grid.
There is no evidence that either Forese or Little know whether any of the independent expenditures that helped get them elected came indirectly through APS. Nor have there been allegations that their votes have been influenced by such outside funds.