How Democrat might affect Corp. Comm.
Election of Kennedy as regulator could cause some headaches for APS
Arizona Public Service Co. successfully fought a renewable-energy ballot measure, but another outcome of the election — a Democratic regulator on the Arizona Corporation Commission — could create headaches for the electric company.
APS spent at least $30 million opposing Proposition 127, and while voters strongly opposed that measure, they also gave more than 1 million votes to Democrat Sandra Kennedy to rejoin the Corporation Commission, where she will be one of five regulators setting rates and policies for utilities.
Kennedy, who backed Prop. 127 to require increases renewable energy, previously served a term on the commission after running on a platform to increase the use of solar energy in Arizona. She lost a re-election bid in 2012 and another in 2014.
The second seat up for grabs in this month’s election went to Republican Justin Olson, whom Gov. Doug Ducey appointed to the commission last year to fill a vacancy.
He has also taken positions on the campaign trail that are at odds with the state’s biggest utility.
Kennedy and Olson’s seats on the commission could set up the three votes required to impose a variety of hardships upon APS, which did not support or oppose any of the candidates this year.
APS’ $95 million rate hike approved last year could be at stake under the new commission.
Activist and public relations company owner Stacey Champion gathered thousands of signatures from APS customers to launch a challenge to last year’s hike. Many customers say their increase was far more than the 4.5 percent average APS and the commission described.
Working with donations from customers, Champion hired an attorney to present her complaint to the commission. Eventually, an administrative law judge will issue a recommendation and the commissioners will vote on whether the rate hike needs to be rescinded or reconsidered.
APS officials responding to the complaint say the rate hike was implemented as planned and can’t be reconsidered through Champion’s challenge.
Kennedy says the rate hike needs to be reconsidered, based on the reports she has heard from customers and the evidence in Champion’s complaint.
“I think there are some huge issues we need to address in that rate case,” Kennedy said recently to The Arizona Republic.
It’s unclear where the rest of the commissioners will land on this issue. Olson was not on the commission when the rate hike was passed, but he has said he is eager to dig into the issue.
Commissioner Robert Burns already sought his own rehearing of the rate hike and could be a likely ally in forcing a rehearing.
Commissioners Boyd Dunn and Andy Tobin both voted for the rate hike last year but have indicated during hearings on Champion’s case that they are troubled by how it was explained to customers and how APS is addressing those who have seen larger-than-average increases.
Kennedy’s election is likely to add contention to the issue. She is seeking an investigation from the Attorney General’s Office into text messages between Tobin and APS.
She said texts to an APS official earlier this year about a television news report featuring APS customer complaints about bills means he has prejudged the case and can’t give an impartial vote.
At the time of his texts, Champion’s complaint was before the commission.
“When you violate the ex-parte rules (which prohibit private conversations with parties to a case), due process comes into play and it is not in favor of the ratepayer,” Kennedy said.
Commissioners also will address an additional $67 million increase the company has asked for to cover expenses for environmental controls added to the Four Corners Power Plant in New Mexico.
Under normal circumstances, ap-
proval would almost be a foregone conclusion. APS has already spent the money, and usually, such an investment would be included in the expenses a regulated utility can include in the calculations used to set rates and profits.
But with the challenge over the initial rate hike, it’s likely to get more scrutiny, especially from Kennedy and Olson.
Already, the commission staff has proposed a smaller increase than APS requested.
Tobin has a proposal for increasing the state renewable-energy standard to 80 percent by 2050 and including nuclear in the definition of what is considered renewable.
Tobin has been trying to round up votes for his plan.
Assuming he and Kennedy can move beyond the debate over his texts with APS, Tobin is not likely to get a vote for his energy plan from her without speeding up the timeline for more renewables.
Kennedy will be expected to advocate for more renewable energy. The League of Conservation Voters spent $4.2 million supporting her and her fellow Democrat in the election.
She described Tobin’s plan during the campaign as “kicking the can down the road” and said she wants more renewables on the grid sooner.
Other commissioners, including Dunn, are on record favoring at least elements of the Tobin plan. Dunn has advocated for more energy from biomass power plants fueled by wood from overgrown Arizona forests.
Thinning those forests and using the wood chips to make electricity reduces the risk of wildfires.
When asked about renewable energy on the campaign trial, Olson said his concerns were with the costs customers pay.
Both Kennedy and Olson pledged to assist Burns in his quest to force APS’ parent company, Pinnacle West Capital Corp., to disclose what it spent in 2014 to defeat Kennedy and help elect Republicans Tom Forese and Doug Little to the commission.
In 2014, political groups that wouldn’t disclose their donors spent $3.2 million on the commission races. APS and/or Pinnacle West are widely believed to be the source of that money, and company officials don’t deny their involvement.
But APS has fought Burns’ efforts to force disclosure of the spending, going as far as suing the commissioner, though that case later was dropped.
“I would definitely, after being sworn in, sign the subpoena,” Kennedy said during one debate. On Wednesday, she said she maintains that position.
Olson also said on the campaign trail and again Wednesday he would support Burns’ efforts to force disclosure from APS and Pinnacle West.
But it’s unclear whether Burns will ask for a vote at the commission on the subpoenas. He said he wants to resolve the issue through the courts and win a decision stating that only one commissioner is required to subpoena such information.
That question is one of multiple issues brought up in Burns’ lawsuit.
One wild card issue will be the commission’s recent vote to investigate whether companies such as APS should face competition. Commissioners call this deregulation, or the more politically correct “reregulation.”
An Arizona Supreme Courtdecision in 2004 found that the state Constitution prohibits competition for electricity service because it requires the Corporation Commissioners to set rates that are fair.
But independent power plant operators that want to be able to sell electricity directly to large customers, such as mines and big-box stores, have lobbied the commission for years to reconsider the issue.
The last such reconsideration ended abruptly in 2013 when the commissioners decided that the 2004 court decision would not allow such a proposal to advance. APS fought hard against the proposal at the time and was lining up supporters around the state to fight the measure.
APS officials said that deregulation threatened to harm customers by forcing higher costs on a smaller customer base.
But Burns, Dunn and Olson all recently said they are interested in considering the issue. And on Nov. 7, the commission voted 5-0 to restart the conversation on deregulation.
“I think there are some huge issues we need to address in that rate case.” Sandra Kennedy
Recently elected to the Arizona Corporation Commission