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Utility regulators grill Arizona Public Service executives

September 5, 2019
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Don Brandt, center, CEO of Arizona Public Service and its parent company, Pinnacle West Capital Corp., appears before the Arizona Corporation Commission in Phoenix, Wednesday, Sept. 4, 2019. (AP Photo/Tom Tingle, Pool)
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Don Brandt, center, CEO of Arizona Public Service and its parent company, Pinnacle West Capital Corp., appears before the Arizona Corporation Commission in Phoenix, Wednesday, Sept. 4, 2019. (AP Photo/Tom Tingle, Pool)

PHOENIX (AP) — State utility regulators lit into top executives from Arizona Public Service on Wednesday, saying they schemed to control electricity regulation and grew wealthier while some of their customers struggled to pay their bills.

The Arizona Corporation Commission demanded Don Brandt, CEO of APS and its parent company, and his lieutenants publicly answer questions about its political spending and power shutoff policies after an elderly woman died in her home when her power was disconnected.

Democratic Commissioner Sandra Kennedy said the Brandt behaved like “a kingpin who operates a company mainly to benefit himself.”

“You have, in essence, created a machine to purchase every and any elected official and defeat anyone in your way,” Kennedy told Brandt.

Earlier this year, APS detailed millions of dollars of political spending to help elect its favored regulators in 2014 and 2016 and to defeat a 2018 renewable-energy ballot measure. The spending was a break from a decades-long practice by the state’s utilities of not meddling in political races involving its regulators.

Brandt said APS’ political and lobbying activity is standard for a company like APS.

APS acknowledged giving money to groups that spent $3.2 million in the 2014 commission races, even though it had refused for four years to confirm or deny its participation in the election.

The utility also spent $4.1 million to influence its regulators’ 2016 election and nearly $40 million to defeat a citizens’ initiative last year that would have required that it get much more of its power from solar and other renewable sources. APS had previously acknowledged those contributions.

In 2017, with a majority of the commission elected with the help of APS funding, commissioners approved a rate increase for the utility. The rate hike has been intensely criticized after many customers saw their bills increase significantly more than the advertised average of 4.5 percent.

Commission Chairman Bob Burns, a Republican, said APS orchestrated a wide-ranging plan to take control of the commission by influencing voters and sowing discord among commissioners and staff. He said the plan was outlined in a “playbook” written before the 2014 election by Jessica Pacheco, who was then a political consultant and is now the utility’s vice president of external affairs overseeing its lobbying, political activities and public image.

Burns said the playbook included undue influence from Republican Gov. Doug Ducey in the affairs of the independently elected commission, through what he called unusual appointments and efforts to control the commission’s top staff member.

A spokesman for Ducey, Patrick Ptak, said the governor’s policy “has been to let the Commission do its job, while we do ours.”

Burns pressed APS’s incoming chief executive to commit to never getting involved in corporation commission campaigns during his tenure. Jeff Guldner will take over when Brandt retires in November.

“To me the root cause of all of this is the high amounts of money that was spent by APS in an attempt, in my belief, to capture the commission,” Burns said.

Guldner demurred, saying he’ll come back to the commission after he takes over the top job.

“I’m not in the role yet, Mr. Chairman, so I’m not in a position today to answer that question,” Guldner told Burns.

APS attorney Bill Maledon revealed that a federal criminal investigation into political spending is still active. Maledon said APS officials expect it will wrap up soon. He did not elaborate, saying the company is prohibited from discussing details of the probe because of grand jury secrecy rules and agreements with investigators.

The FBI and U.S. Attorney’s Office in Phoenix are investigating spending in the 2014 elections for secretary of state and corporation commission, and APS has disclosed that it received subpoenas in connection with the probe.

“The company is cooperating with the US Attorney’s Office with that investigation,” Maledon said. “They’re not stonewalling it in any way.”

The rare public confrontation between APS officials and their elected regulators follows years of growing outcry from critics of APS’ political spending. Voters last year elected Kennedy, the commission’s only Democrat. She was opposed by APS in prior elections, but the company didn’t spend money on the 2018 corporation commission race.

Commissioners asked Brandt and other executives to answer questions under oath after it was revealed that 72-year-old Stephanie Pullman of Sun City West died days after her power was disconnected on a 107-degree day in September 2018. The revelation fanned already simmering frustration with APS’ 2017 rate hike and questions about the utility’s obligations to its vulnerable customers.

The commission, which oversees investor-owned utilities in Arizona, issued a moratorium on power disconnections during the summer while it reviews its policy, which prohibits disconnections in freezing temperatures but not summer heat. APS has said it doesn’t disconnect power when there are excessive heat warnings. The commission has allowed APS to use a door hanger in lieu of a required personal visit to customers facing a disconnection, which APS says is safer for its employees.

In response to written questions last week, Brandt revealed that APS cuts off power only when customers owe at least $50. Pullman owed $51.84.

“How do you feel knowing one of your customers died for just $1?” Kennedy asked Brandt.

Brandt said he’s confident that APS customer service officials would have worked with Ullman to avoid shutting off her power if she had called. APS is not in the business of disconnecting customers, he said.

“It was a tragedy that anyone, including that customer, lost their life,” Brandt said.

APS officials said they’re currently reviewing their disconnection procedures and looking for ways to improve. That might include more aggressive work to ensure customers know their power is at risk of shutoff and additional communication if a partial payment wasn’t sufficient to avoid a disconnection, said Daniel Froetscher, APS executive vice president of operations.

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