PHOENIX — Two state utility regulators want the Arizona Corporation Commission to adopt a formal policy urging utilities to stay out of future races for the panel.
And if the request doesn’t stop the money, they may seek an audit of affected companies to find out exactly how they’re spending their money on politics.
In pushing the plan, Chairwoman Susan Bitter Smith and member Bob Burns cited media reports of the apparent involvement of Arizona Public Service and Pinnacle West Capital Corp., its parent, in trying to elect two specific Republicans in the 2014 race by funneling money through outside groups.
APS officials have refused to confirm or deny donations to Save Our Future Now or the Free Enterprise Club, which together spent more than $3 million for commission candidates they supported and against those they oppose. Those groups, in turn, have refused to reveal donors, contending they are “social welfare” groups exempt from state disclosure laws.
But company spokesman Alan Bunnell has said APS has been the subject of a “nonstop propaganda war” by pro-solar advocates, saying they have “misrepresented important Arizona energy issues” to further their own interests.
“It would be irresponsible for us not to defend our company,” Bunnell said, adding that “no one disputes our right to participate in the political process.”
Bitter Smith and Burns have a definite interest in the issue. They are up for re-election next year. And two other Republicans already have announced they intend to run.
But in the draft letter, which they want the full commission to adopt as policy, they said that the “right to participate” that APS claims is not the issue. It’s more about appearance.
“We want to make it clear that we view it as unacceptable and inappropriate for public service corporations and unregulated entities to make campaign contributions in support of or in opposition to any candidate for the Corporation Commission,” they said in the proposed letter that they want the full commission to essentially adopt as policy and send to utilities. “This behavior has the strong potential to diminish the integrity of the commission and to engender public doubt as to the commission’s ability to discharge its regulatory responsibilities in a fair and unbiased way.”
Those questions already have been raised with the 3-2 vote earlier this month allowing APS to seek higher charges from customers who also have solar cells on their roofs, with Burns and Bitter Smith opposed. But it carried with support from Tom Forese and Doug Little, both elected last year with large outside donations from the two “dark money” groups, and Bob Stump, whose cellphone texts around the time of the GOP primary to the pair and APS executives are being probed.
Forese said his vote had nothing to do with any campaign contributions.
But Forese says there is a problem with utilities spending money to elect or defeat candidates for the commission that regulates them. The question, he said, is what can be done legally, given court rulings saying that corporations have a constitutional right to try to affect political races so long as they don’t give directly to candidates.
“It’s come down from the highest court that spending money on a campaign is free speech,” Forese said.
“But it ought to be crystal clear you ought to have transparency in knowing who did what, and who was behind what,” he continued. “I think that is what the public deserves.”
Bitter Smith said she and Burns believe the first step is getting the issue discussed by fellow regulators.
“It would just be a productive opportunity for the commission to collectively articulate what we think the role of entities that appear in front of the commission should have in upcoming elections,” she told Capitol Media Services. Bitter Smith said that has to be done formally, as any three of the five commissioners chatting together about such issues would be a violation of the Open Meetings Law.
She agreed with Forese that curbing political donations could prove legally tricky.
That’s also the assessment of Gov. Doug Ducey when asked about limits on utilities’ financial participation in electing regulators.
“I believe in free speech,” he said. “I believe that people should be able to participate in the political process.”
But Ducey said that does not preclude disclosure of the source of funds that influence campaigns, though he was less clear about how to force such information out of groups that claim exemptions from state election laws.
Acknowledging those constitutional issues, nothing in what Bitter Smith and Burns are proposing at this time would actually bar a utility from pouring money into campaigns through outside groups. But the commission has other ways of getting the attention of utilities if they don’t back off — or at least shining some light on “dark money” groups that don’t voluntarily list donors.
“At a future time, we will consider whether and to what extent an audit of any public service corporation would be warranted,” the proposed letter to the companies states. That’s because while the commission has no purview over the groups that get the money, they do have broad authority to demand financial records, as utilities get to set their rates based on factors including capital investment and rate of return.
Forese said one question the commission will have to decide is whether to apply the same standards to unregulated entities that also appear before the panel.
For example, the fight over fees on solar customers brought out members of the industry that installs such units. One group, Tell Utilities Solar Won’t be Killed, spent more than $200,000 against Forese and Little in its own unsuccessful bid to get the two other Republicans in that race — Lucy Mason and Vernon Parker — nominated.
Bitter Smith and Burns concede that providing equal treatment is an issue. But it’s an open legal question whether the agency has any authority over such nonregulated companies.
A commission vote on whether to adopt the letter as policy is set for discussion this coming month.
Little declined to discuss the proposal, saying through a spokesman he wants more time to study it. Stump did not respond to messages seeking comment.