Arizona Corporation Commission: An Agency Captured by Dark Money

Corey Goldstone
Jun 12, 2017
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In May, CLC submitted written testimony to the Arizona Corporation Commission (ACC) to support the adoption of ACC rules that would bring some much needed transparency to the political spending of entities regulated by the Commission. The testimony supports the efforts of ACC Commissioner Bob Burns to strengthen the Commission’s disclosure and conflict of interest rules.

Enshrined in the Arizona Constitution, and often referred to as the state’s “fourth branch of government,” the ACC has broad authority and is vested with legislative, executive and judicial functions. The Commission regulates the state’s public utilities and, as stated in its mission statement, will “Exercise exclusive state regulatory authority over public service corporations (public utilities) in the public interest.”  The Commission’s five elected commissioners are charged with setting rates for regulated companies and resolving contested disputes.

As with many elections across the country, dark money spending in Arizona has surged since the Supreme Court’s Citizen United v. FEC decision in 2010. ACC elections stand out, however, in the dramatic escalation of dark money spending to influence their results. According to a report by the Brennan Center, in 2012, there was $67,000 in dark money spending on Commission races; this surged to $3.2 million in dark money in the 2014 race. It is widely believed that much of this money was spent by political groups funded by the Arizona Public Service Company (APS), Arizona’s largest electric company – which is regulated by the ACC. But Arizona citizens cannot be certain that the ACC commissioners were elected with the financial support of APS because the groups ultimately buying the ads, Free Enterprise Club and Save Our State Now, do not have to disclose their donors. Unfortunately, this appears to be yet another example of how the transfer of money between allied groups—sometimes dubbed “daisy chains”—keep the true source of political spending hidden from voters.

Some charge that this dark money spending has created potential conflicts of interest on the Commission and, at the least, the appearance of corruption—even if no Commissioners have in fact acted corruptly as a result of electoral support from APS or other donors. But recent APS policies—including requests for rate hikes—have led to public demonstrations and concerns that “dark-money billionaires” are influencing the Commissions’ policy decisions on rates in ways that disadvantage the average consumer. At the least, secrecy around the spending in the 2014 elections has clearly shaken public confidence about the impartiality and integrity of the Commission.

Troubled by the lack of transparency and the potential conflicts of interest that arise from undisclosed campaigning in Commission elections, Commissioner Burns has made efforts to shed light on the true sources of funding behind the dark money spending in the 2014 elections. In 2016, Commissioner Burns subpoenaed APS and its parent, Pinnacle West, for records related to their 2014 political spending. APS refused to comply and filed suit seeking a declaration that the subpoena was unlawful. APS recently dropped the suit, prompting Commissioner Burns to bring new legal action, this time to enforce his subpoenas.

The perspective of the other commissioners on the value of disclosure remains unclear: in a potentially troubling move, the majority of the commissioners voted to cut off funding for the outside attorney who had been previously authorized to represent Commissioner Burns in the legal proceedings related to his APS subpoena. But this is exactly the wrong approach. 

By shielding the spending of regulated utilities in Commission elections from disclosure, these commissioners create the appearance of improper influence—even if it isn’t there in practice.  Their reluctance to support transparency lends credence to charges—regardless of their merit—that the Commission has been captured by the companies it is meant to regulate. Dark money makes it difficult for the public to know whether Commission actions are based on the merits of various policies or the wishes of those special interests that spend heavily to influence Commission actions.

In order to properly regulate the state’s public utilities—and to retain the public trust in the impartial decision-making of the Commission—the Commission needs to ensure that its elections are transparent.  Only then can citizens have confidence that the Commission is indeed acting with their interests in mind rather than those of the regulated utilities.  Everyone will benefit if Arizona’s fourth branch of government operates in the Arizona sunshine than under the shroud of dark money.

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