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3 Arizona Corporation Commission Candidates Want Utilities To Disclose Election Spending

Three candidates for Arizona Corporation Commission vowed Wednesday to force utilities to disclose the money they spend trying to elect the people who regulate them and the rates they can charge.

Democrat challengers Bill Mundell and Tom Chabin added their support to the proposal that incumbent Republican Bob Burns has been pushing now for months. But Burns has been thwarted by opposition from the four other seated members of the panel who refuse to go along.

"There's a cloud over the commission,'' said Burns, running for a second four-year term, at a debate of candidates.

Chabin, a former state legislator, said adopting a rule to force such disclosure should not be necessary. He said every utility in the state has agreed to stay out of the race — every utility save Arizona Public Service.

"One utility (has) invested millions of dollars from ratepayer funds to corrupt — or at least create the appearance of corruption,'' Chabin said. The result, he said, has been the FBI asking questionsand seeking documents from APS and the commission and interviewing former commission Chairman Gary Pierce.

The FBI, for its part, has confirmed only that it is looking into issues related to the 2014 election, though not necessarily related to the commission race.

But the four other Republicans running for the three seats up for grabs this year were less interested in any sort of disclosure.

Current state Rep. Rick Gray said it's one thing for the commission to ensure that dollars collected from ratepayers are not used for political or charitable purposes.

"But I think that you begin to cross a line when you say, 'We want to check to see what you do with your profits,' '' he said. Anyway, Gray said, the commission regulates only APS, with no oversight over Pinnacle West Capital Corp., its parent company.

Former state Sen. Al Melvin said how utilities spend their money is none of the public's business.

"They have a right to defend their position,'' Melvin said.

The other two Republicans at the forum, incumbent Andy Tobin and former Chandler Mayor Boyd Dunn took a neutral approach to the question. Dunn acknowledged the U.S. Supreme Court has allowed states to compel disclosure of corporate spending, but noted that Arizona lawmakers just this past session moved in the opposite direction, voting to ease rules on "dark money'' anonymous donations.

If Burns keeps his seat and voters elect Mundell and Chabin, that provides the necessary majority to force the issue.

How far the commission would get, however, remains to be seen. And it could result in a lawsuit.

The hot-button issue comes from campaign finance records which show that Save Our Future Now and the Arizona Free Enterprise Club spent more than $3 million on the 2014 campaign in independent expenditures, first to help Republicans Tom Forese and Doug Little win the Republican nominations over a pair of solar advocates and then to ensure they defeated the Democrats in the general election.

Both groups have refused to reveal their donors, saying they are organized under federal tax laws as "social welfare'' organizations exempt from state financial disclosure laws.

John Hatfield, APS' vice president of communications, who was at Wednesday's event, refused to comment on what the candidates said and their contention that his company should disclose its political spending.

"Today is their forum to debate the issues for their campaigns,'' he said "This is not our day to weigh in on that.''

APS and its parent are legally precluded from giving directly to political candidates. But an APS spokesman has repeatedly refused to confirm or deny that it funneled money into either of the two outside groups that influenced the race.

Don Brandt, the company's chief executive officer, has rebuffed Burns' request for disclosure, saying it "would impinge on APS' First Amendment rights.''

Attorney General Mark Brnovich, in a formal legal opinion issued in May, said he reads Arizona law to allow even individual commissioners and their employees to "at any time, inspect the accounts, books, papers and documents'' of any utility.

He also said commissioners may examine utility company officers and employees under oath. And Brnovich said the questions they can ask include political contributions, charitable contributions and lobbying expenses.

But Brnovich said the right of individual commissioners does not extend to affiliates. That is significant if it turns out that any campaign donations were made by Pinnacle West.
Brnovich did say, though, that 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.

That, however, requires a majority vote by the commission.

Even if the election produces a change to give Burns the majority he needs on the issue, that may not result in the production of the records he wants — at least, not without a court fight.
Aside from APS' own opposition, the Arizona Investment Council, a group of utility investors that co-sponsored Wednesday's event, already has retained a lawyer to argue that the political spending of APS and Pinnacle West is none of the commission's business.

In her own written opinion, Attorney Mary O'Grady acknowledged the Arizona Constitution allows the commission to "inspect and investigate the property, books, papers, business methods and affairs'' of any corporation that sell stock in Arizona, as well as any commission-regulated utility. But she said those powers are limited to what the commission 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. O'Grady said the only excuse for commissioners to demand that information would be to determine whether a utility's request for higher rates was designed to help cover the cost of election expenses.

But former Supreme Court Justice Thomas Zlaket, retained by solar manufacturers and installers who have been at odds with APS over its requests for higher charges on customers with rooftop generation, reached a contrary conclusion. He said commissioners have a "compelling interest'' in knowing the role utilities played in an election "because such information reveals the potential bias of commissioners who may have received support from these entities.''

While Forese and Little may have benefited from the independent expenditures there has been no allegation that they know who contributed to either group.