Page 6 - The Noise August 2017

Pinnacle West earns most of its revenue through APS, whose only income is the sale of “regulated electricity.” In 2016, it reported a net profit of $442 million. CEO Don Brandt, at left, was paid $19 million last year.
APS funnels “donations” to political action groups, like the Free Enterprise Club, who then seek candidates who will be favorable to APS’ bottom line.
APS then budgets expenses related to the election of “r
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ACC VOTE FOR APS RATE CASE PUT O
AMID ELECTRIC COMPANY’S INVOLVEMENT IN ITS REGULATORY BOARD’S ELECTIONS
Ever since a whistleblower accused commissioners from the Arizona Corporation >Commission (ACC) of improper communications with officials from Arizona Public Service (APS), the state’s largest electric utility, in early 2015, the two organizations have been embroiled in controversy. Accusations, law suits, and an FBI probe have ensued even as APS is attempting to raise consumer rates — a process that includes approval by the ACC.
The whistleblower’s complaint resulted in revelations of “dark money” flowing from APS and its parent company Pinnacle West through 3rd party campaign organizations to the 2014 elections of several Arizona political figures, including those of current Commissioners Doug Little and Tom Forese, now chairman of the ACC. It’s illegal for either company to directly contribute to a political candidate but they can donate to other organizations that support their aims. These 3rd parties then subsidize candidates but often have the ability to conceal the identities of original contributors — thus the term “dark money.”
Allegations that more than $3 million was indirectly contributed to the campaigns of Messrs. Little and Forese in order to guarantee favorable results for APS at the commission have been raised. Two of the organizations implicated in the dark money charges, the Ari- zona Free Enterprise Club and Save Our State Now, have claimed they are exempt from laws that would otherwise compel them to reveal their donors.
In other races that year, Governor Doug Ducey received at least $55,000 and Arizona Attor- ney General (AG) Mark Brnovich $450,000 from Pinnacle West toward their successful bids. The Arizona Free Enterprise Club also contributed money to the failed Secretary of State bid of Justin Pierce, the son of then-commissioner Gary Pierce.
Following the whistleblower charges, Commissioner Bob Burns requested a look in- side the financial records of APS and Pinnacle West to see just what might have been going on in 2014. The Arizona Constitution states that the ACC “shall 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, and of any public service corporation doing business within the state.” And additionally state law says that commissioners “may, at any time, inspect the accounts, books, papers and documents of any public service corporation.”
After several requests were rebuked by APS and Pinnacle West President and CEO Don Brandt, Commissioner Burns asked AG Brnovich to intervene. In spite of opposition from his fellow commissioners, Mr. Burns continued to be steadfast in his requests for transpar- ency. Mr. Brnovich confirmed that the ACC and its commissioners have “broad constitu- tional authority related to reporting requirements and inspection of any public service cor- poration and its affiliates.” This includes requests from a single commissioner as well as from the ACC as a whole, according to the attorney general’s findings.
Mr. Burns, without the support of other commissioners, then subpoenaed APS to provide campaign contribution information dating back to 2011 for examination. The other ACC members called his efforts a waste of money and even took away funding for outside legal help. “This is just a disguised action to deny me the opportunity to do my constitutional duty of protecting the ratepayers in this case from undue influence by utility overspending and over participating, if you will, in the election of corporation commissioners,” said Mr. Burns.
APS pushed back by filing a lawsuit against Mr. Burns, claiming harassment among other things. In March, the suit was quietly dropped when it was clear that Mr. Burns did not have support from the rest of the commission. In May, a judge put Mr. Burns’ subpoena request on hold. And in June, the ACC voted to again block Mr. Burns’ efforts.
In the meantime, APS’ rate case has turned into an extended legal battle. After months of negotiations, APS reached a “settlement agreement” with a group of stakeholders in the case. Of the 40 interveners on the rate hike bid, 10 have not signed the settlement, includ- ing local activist Warren Woodward.
The City of Sedona is also an intervener. While agreeing to the settlement, the city filed a letter expressing particular concern regarding mandatory smart meter requirements and opposing fees for ratepayers with analog meters.
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The concerns of the opposing interveners were recently heard before a
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e law judge. But the ACC’s ability to vote on the APS rate case has now been further delayed. On July 19, Maricopa County Superior Court Judge Daniel Kiley told APS that he would not allow the ACC to vote on the current rate case until he can consider Mr. Burns’ request to question utility executives about campaign financing and the company’s influence over other sitting commissioners. Judge Kiley said the only reason he delayed Mr. Burns’ sub- poena request in May was to give the commission a chance to handle the issue internally. But once the ACC voted to block the investigation, the judge said there was no reason to
further delay Mr. Burns’ lawsuit.
APS’ attorney argued the rate case vote should occur before any requests by Mr. Burns
could be given consideration. But the judge logically concluded that an investigation regarding possible bias of commissioners needs to come first. There isn’t much point to arguing about undue influence if the ACC has already passed the rate hike requested by the influencer.
Originally, Mr. Burns was seeking only to question officials from APS and Pinnacle West. He wants those companies to provide financial documents and answer questions under oath about spending on political campaigns, lobbying and charitable contributions. While any contributions the companies made might be technically legal, Mr. Burns wants to pro- vide transparency as to where and to whom money was funneled. He has also questioned whether any of the money came from ratepayers, which would be illegal.
Mr. Brandt has denied any wrongdoing and, as such, has rejected Mr. Burns’ requests repeatedly. When the company finally provided some documentation, it was only already public records that revealed nothing specific to Mr. Burns’ concerns.
With the judge’s decision to delay the ACC’s vote on the utility’s rate case, Mr. Burns is now attempting to expand his lawsuit to include his four fellow commissioners as defendants. He would like Judge Kiley to give him the right to call and question witnesses of his choos- ing in the rate case. He wants the judge to rule that he has the right to do so, even over the objections of the other commission members.
Accusations of corruption at the ACC took another dark turn in May when former com- missioner Gary Pierce was indicted in federal court on charges of fraud, bribery and con- spiracy. His wife, Sherry Ann Pierce was also charged along with George Johnson, owner of Johnson Utilities, a Pinal County water company, and lobbyist Jim Norton.
The indictment was the result of an FBI investigation that became public just over a year ago. Allegations are that Mr. Johnson gave $31,000 to Mr. Pierce to get higher rates approved for his water company in 2011. The money was allegedly siphoned through Mrs. Pierce. Mr. Norton is accused of acting as a go-between for contact between Messrs. Pierce and Johnson.
Other charges involve a plan for Mr. Johnson to purchase a $350,000 property for Mr. Pierce though it appears that deal was never completed. In 2013, Mr. Pierce also helped get approval for a controversial measure that allowed the utility to raise customer rates in order to pay the owner’s personal income taxes. Other water companies quickly filed for rate in- creases following that decision. Twenty-seven of them have benefitted from the provision.
Also in 2013, then-Commissioner Sandra Kennedy asked Mr. Pierce to recuse himself from a vote involving APS. She expressed concern that Mr. Pierce might be inclined to unduly favor the utility company in exchange for help on his son’s campaign for Secretary of State. Mr. Pierce denied any ties between himself and APS or any link to the younger Pierce’s election bid. In 2014, more than $1 million in dark money was spent to defeat Ms. Kennedy’s bid for re-election.
Remember the whistleblower who went public with accusations about unethical con- duct of ACC commissioners in early 2015? He was eventually identified as Antonio Gill, the former assistant to Mr. Pierce at the ACC. Mr. Gill wrote a letter to the Arizona AG detailing accounts of unscrupulous, and possibly illegal, contacts between Messrs. Pierce and Brandt of APS. Mr. Gill alleged that Mr. Pierce and Mr. Brandt had at least a dozen one-on-one
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6 • AUGUST 2017 | the NOISE arts & news | www.thenoise.us