'Dark Money' Clouds Contentious Arizona Corporation Commission Race

By Kristena Hansen
Published: Thursday, October 16, 2014 - 5:00am
Updated: Thursday, October 16, 2014 - 5:05am
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The Arizona Corporation Commission and its elections have historically flown under the radar.

But this year’s race between the two Republicans and two Democrats vying for the two open commission seats is one of the most controversial on the November ballot.

The outcome could set the tone for solar and renewable energy in Arizona for years to come, and that’s prompted ‘dark money’ groups to dump an unprecedented amount of cash into the race in an effort to sway it in the GOP’s favor.

The Corporation Commission incorporates new businesses, regulates securities and investments and oversees safety of the state’s railway systems.

It also plays a big role in the everyday lives of Arizona residents. The rates that millions of Arizonans pay for basic utilities such as water, sewer, electricity and gas are determined by the five Corporation Commissioners.

Despite this enormous responsibility, the commission hasn’t received much attention. But with the proliferation of solar, particularly rooftop solar, in Arizona that’s been changing.

“Solar has had a huge upswing and that’s brought a lot of great benefits for customers, but it’s also created a lot of complexity for the grid itself as a physical engine and it’s created real quandaries in who pays for what,” said Paul Walker, a utilities lobbyist at Phoenix-based Insight Consulting LLC.

That dilemma has ignited a turf war between the solar industry and Arizona utilities such as Arizona Public Service Co. in recent years. The nation has been keeping an eye on how the commission, which regulates monopolistic utilities such as APS, referees the debate.

But the current all-Republican commission has earned a pro-utility reputation, which Walker said isn’t deserved.

“The election of the Democrats, I think you would see a lot more debate at the commission about renewable energy’s role,” he said. “I think the Republicans now at the commission, and (Tom) Forese and (Doug) Little, I think all five of them have adopted a sort of all-of-the-above approach to energy in Arizona.”

Democratic candidates Jim Holway and Sandra Kennedy have been coined the “pro-solar" candidates.

GOP candidates Tom Forese and Doug Little support a more diverse group of energy sources, as Walker mentioned, but they’ve been dubbed the “pro-utility” candidates.

(see candidate bios below)

That’s because Forese and Little’s campaign has benefited from more than $3 million in ‘dark money’ spending, according to campaign finance documents with the Arizona Secretary of State’s Office. That’s far more than the roughly half-million dollars the solar industry, through a group called Tell Utilities Solar won’t be Killed, has spent on the race.

The dark money is coming from two groups, Save Our Future Now and the Arizona Free Enterprise Club, who don’t disclose their donors because of their 501(c)4 nonprofit statuses.

But it’s widely assumed that APS is the nonprofits’ primary source of funding for this campaign. APS has neither confirmed nor denied its involvement.

This is by far the largest amount of outside money that’s been spent on a commission race.

It’s also unprecedented for an Arizona utility to fund the election of its own regulator, which raises ethical and conflict of interest issues, said Diane Brown, executive director of the Arizona chapter of the Public Interest Research Group. She said she wonders how Forese and Little, if elected, could maintain their autonomy when making important decisions regarding APS.

“It is symbolic of key decisions that will be made in the upcoming years and special interests wanting to have an influence on who those commissioners may be. While we can never say that just because an entity contributed money, an elected official is going to vote in a certain way, we do know that there tends to be more access and influence when large sums of money are involved,” Brown said.

Walker, on the other hand, said the spending is OK if a company truly feels threatened by the political platforms of certain candidates.

“I think it’s not just acceptable, I think it’s imperative that companies weigh in and let the voters know what’s at stake in that election,” he said.

Forese and Little didn’t respond to multiple requests for an interview. Since the primary, the pair has declined other media interviews and Holway said they’ve cancelled several debates and forums.

“They are effectively squashing a conversation because they think they have a better chance of getting elected if there isn’t a conversation,” Holway said. “And I find that offensive.”

All four candidates are campaigning with Arizona Citizens Clean Elections Commission money, which required them to participate in one debate last month on KAET’s Arizona Horizon.

During that debate, Little denied any knowledge of APS’s involvement and the discussion became heated when Forese addressed the issue.

“The idea that it’s impossible that we have broad support is insulting. The idea that we could be bought is insulting. Ok I’m calling you out on it,” Forese said, looking around the table at his opponents.

The room erupted into a brief yelling match and after host Ted Simons interjected, Forese continued.

“It’s insulting, I think we have broad support,” Forese said. “I don’t have a problem with asking them to show who it is. I look forward to that information more than anybody else does.”

Each commissioner has subpoena power, so any one of them could demand APS disclose its political spending. So far, the commissioners have not done so and both Holway and Kennedy said that’s the first thing they’d do if elected.

“The fact that they don’t do that, to me, is that there’s a party ideology telling them not to do it because it could hurt their candidates in the election,” Holway said.

There are some things all candidates seem to agree on.

For example, they oppose the state Department of Revenue’s decision last year that a property tax exemption on solar should no longer apply to leased solar systems. They've also said that last year’s net metering debate, the controversy over whether solar customers shift more costs onto non-solar customers, should have been conducted through a rate case, which is the rigorous process involved when utilities ask to change the rates it charges customers.

But the candidates differ on other issues, such as whether Arizonans pay too much or not enough for basic utilities.

“There’s no consumer advocate,” Kennedy said. “Everything that they do reflects big corporations and we’ve got to return some civility to the commission and I think I can do that.”

Kennedy also supports deregulation of utilities, another controversial debate that the commission tabled last year. That would've allowed ratepayers to choose from whom they buy their power, similar to how consumers choose their cell phone carriers.

But Holway said he has concerns about deregulation. Overall, he said being a commissioner is a balancing act, which includes protecting utilities too.

“We need them to attract investment capital to build our water systems, to build our energy systems. They have to be successful to do that,” he said. “That’s the difficult balancing act for a commissioner. Your job is to represent the public, represent the ratepayer, but in the long-term interest of Arizona, driving our utilities into bankruptcy would not be the answer.”

Wall Street is also keeping a close eye on this election.

In a note to investors last month, Moody’s analyst Jeffrey Cassella explained how the growth of rooftop solar in APS’s territory, currently about 25,000 customers, was shifting an extra $1,000 annually to each non-solar customer.

Cassella said Forese and Little’s victory in the primary over Lucy Mason and Vernon Parker, the other GOP candidates who were considered to be pro-solar, was “credit positive” for Arizona utilities.

If Mason and Parker had won, he said it “risked giving the solar industry more influence when revisiting rooftop solar rate design in the state at the expense of the utility sector.”

ABOUT THE CANDIDATES (in alphabetical order, by last name)

Tom Forese: Current state Representative and chairs the House Commerce Committee. Forese also works for an educational-software company called Link-Systems International Inc.

Jim Holway: Current board member of the Central Arizona Water Conservation District, which oversees the Central Arizona Project canal system. Holway was most recently director of the Sonoran Institute’s Western Lands and Communities program.

Sandra Kennedy: Served one four-year term on the Arizona Corporation Commission, which ended in 2012 after being defeated as an incumbent in that year’s election. Kennedy previously served several terms in the state Senate and House of Representatives and was also a board member of the Phoenix Union High School District.

Doug Little: Current owner and director of training at Armed Personal Defense, a Scottsdale-based firearms training facility. Little was also formerly vice president of North America sales for Micro Focus International, a software vendor.

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