Dark Money Is Reshaping Arizona’s Energy Fights

This story was originally published on October 3 at High Country News.

Dark money, by its nature, is hard to detect. But its effects on our nation’s elections and how we’re governed are becoming increasingly visible. Take, for example, a video that circulated recently on social media in Arizona.

It opens with a Republican member of Arizona’s Corporation Commission meeting the head of a GOP environmental group at a coffee shop to talk about “blue-collar solar.” The commissioner, Tom Forese, appears with Paul Walker, executive director of the group, ConservAmerica. Walker tells Forese that “Wall Street sharks” control rooftop solar and that only affluent customers can afford solar panels, while low-income customers pay more than their fair share for the grid. A better approach, he declares, is to install solar panels owned by Arizona Public Service.

When Robert Burns, a fellow Republican on the commission, saw the video this summer, he was astonished. Here was a fellow commissioner advocating a program the commission would likely rule on, since Arizona Public Service, or APS, had proposed raising rates for consumers. “It just didn’t smell right,” Burns told me in August.

ConservAmerica says it paid for the video with money from its usual donors, and not from APS. Yet the fact that Forese was brazen enough to appear in the video despite the appearance of a conflict of interest shows how dark money has altered the atmosphere at the commission.

Burns was outraged, as were local reporters and watchdogs, in part because the commission was already in turmoil over allegations that APS has attempted to influence what is supposed to be an even-handed government commission. Furthermore, Forese was one of two people elected to the commission in 2014, after APS spent $3 million to attack Democratic commissioners who supported rooftop solar.

APS, a monopoly and the state’s largest supplier of electricity, is currently under federal investigation for its alleged role in influencing statewide elections, including the commission seats, as is APS’ parent company, Pinnacle West Capital Corp. But this case and others show just how difficult tracking election spending has become.

These days, it can be impossible to know who is behind a successful advertisement that tarnishes one candidate or praises another. That’s due in large part to the 2010 Supreme Court decision, Citizens United v. Federal Election Commission, which held that corporations can legally hide political donations. Since then, outside spending on elections by corporations and interest groups has skyrocketed. Not only that, but the public seems to have quickly accepted the new reality.

“They accept it as part of the normal process,” says Patrick Murray, director of Monmouth University’s polling institute. “The public’s sense is that it’s going on on both sides of the aisle.”

One of only 13 public utility commissions in the United States whose members are elected, Arizona’s Corporation Commission was set up to protect consumers from unreasonable rate hikes. It’s a separate branch of government, not beholden to the governor or Legislature. It regulates electric companies, tap-water providers, pipelines, telecommunications and other utilities, and oversees the quality of service and the rates provided by utilities, most of which are monopolies

In 2006, amid rising concerns about climate change, the commission approved a standard that requires electric utilities to generate 15 percent of their power from renewable resources by 2025. Since then, rooftop solar has become much more affordable and popular. That has challenged the business model of electric companies, which rely on increases in electricity use to generate profits. “Rooftop solar energy’s emergence creates an unprecedented challenge for electric utilities, which are not generally accustomed to facing competition in their markets,” says Troy Rule, a law professor at Arizona State University.

Rule recently presented an analysis to the commission called “Buying Power: Utility Dark Money and the Battle Over Rooftop Solar.” In it, he wrote: “State (public utility commissions) have vigorously protected most electric utilities from competition for more than half a century, actively preventing rival utilities from distributing retail electricity within clearly drawn exclusive service territories.” So it’s no surprise that commissions in Arizona, Nevada and elsewhere are being asked to protect electric companies from the kind of competition rooftop solar represents.

While there’s nothing new about utilities trying to influence their regulators, Citizens United opened the door for utilities to play a big role in funding elections. In Arizona, APS is alleged to have bankrolled TV ads that aired thousands of times attacking a pro-solar energy commissioner who was seeking re-election. One accused Democratic commissioner Sandra Kennedy of voting to “hurt” Arizona families by supporting an increase in sales taxes.

Burns believes that APS, through its alleged spending, had “undue influence” over the 2014 election, and potentially over his commission. Even before the election, APS had spent millions on a public relations campaign to stymie a study on alternative energy. After the 2014 elections, the new commission — without its two former Democratic members — killed the study.

So when Burns learned about how much dark money had been injected into the race, he first asked and then ordered APS to disclose its campaign spending. The company refused. APS spokeswoman Anna Haberlein refused to comment on its reasons, saying, “We don’t discuss active litigation.”

Burns, who is 78 and running for re-election, requested that all utilities stay out of the 2016 election. All the major ones except APS agreed. Burns then wanted to hire a lawyer to go to the company’s headquarters, dig through its files and pry out documents showing exactly how much money APS spent in the 2014 election cycle, how it was spent and what APS was attempting to achieve.

In mid-August, the commissioners — all five are Republicans — met to consider hiring the attorney. Forese joined by telephone. Led by Chairman Tom Little, also elected in 2014, the commission rejected the idea, but not before Little accused Burns of impugning its integrity through a public campaign against APS.

Burns urged his colleagues to reconsider, arguing that big, undisclosed campaign spending influences elections and “has the potential of corrupting the commission.” His opponents countered that hiring a lawyer would waste taxpayer money, and they reminded him that Citizens United allowed a company to hide its campaign spending. Little bitterly chastised Burns for his requests that utilities not put money into the election, saying it was shocking behavior for a Republican. “Your letter basically asked those companies to abandon their First Amendment rights,” Little said.

Burns, whose long, distinguished career as a Republican politician includes a stint as president of the state Senate, was undaunted. He subpoenaed APS to disclose its spending in the 2014 election. In September, APS filed a lawsuit asking a state superior court to invalidate the subpoenas. APS and Pinnacle West said they would release some documents by Burns’ deadline. However, citing Citizens United, they also threatened to take the case to the U.S. Supreme Court, to defend their right not to disclose spending. It’s impossible to say now whether the case would get that far.

Still, this legal battle could test the limits of the Citizens United decision. If it does eventually get to the Supreme Court, the outcome could depend on who wins the presidential election and chooses a new justice to replace the conservative Antonin Scalia, who died in February.

Some legal scholars argue that APS is mistaken in asserting that Citizens United gives it license to secretly sway elections. “Particularly as the popularity of rooftop solar energy increases, legal uncertainty regarding the extent to which utilities can indirectly fund their own regulators’ election campaigns is becoming a growing problem,” Rule wrote. “Restrictions on such campaign contributions are crucial to preserving the integrity and effectiveness of utility regulatory systems. Unfortunately, as a legal matter, this no-brainer question appears to be open for debate.”

Until the courts untangle the mess, elections for public utility commissions remain ripe for influence from electric companies.

“Every additional kilowatt-hour of electricity that a customer-owned rooftop solar system generates is one less kilowatt-hour that the system’s owner must purchase from its utility through the grid,” Rule wrote.

Of course, corporation commissions aren’t the only races impacted by Citizens United. Outside spending has escalated dramatically this election cycle because corporations and interest groups see the Supreme Court’s ruling as a green light. As of early September, total outside spending for the 2016 election had exceeded $660 million, more than twice the $289 million spent by this point in the 2012 election, according to the Center for Responsive Politics.

This time around, the only transparent evidence of big outside spending is on Burns’ behalf: SolarCity Corp. has been advertising in his support. Unlike the alleged APS spending, SolarCity discloses its spending, and the commission does not directly regulate solar installers.

Burns got the most votes in the Aug. 30 Republican primary. The two Democrats in the race, Bill Mundell and Tom Chabin — both advocates of rooftop solar and renewable energy — are running under the state’s clean election law. After raising 2,000 $5 donations, their campaigns each received about $250,000 in public money, and they aren’t allowed to raise other funds.

Burns believes the controversy over APS’ dark money could help him, Mundell and Chabin fill three commission seats. “When I’m out campaigning, people come up and say, ‘You guys are bought and paid for,’ ” Burns told his fellow commissioners in August. He believes voters are beginning to understand the utility’s dark-money efforts to influence regulators. The question is whether enough of them will see the light by Election Day.