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Utility Provider Keeps Customers and Shareholders in the Dark on Disclosure

The Arizona Public Service (APS) Company provides electricity to more than 1.2 million customers, and is regulated by the Arizona Corporation Commission. The Commission is such an ingrained public/private partnership in the state that it, and its five elected commissioners, is accounted for in the Arizona state constitution.

The Commission is tasked with setting rates and regulating the utilities industry – but that probably proves difficult when utility providers get involved in influencing the political process.

In 2014, two nonprofit groups spent $2.3 million on ads and mailings to oppose Commission candidates who would have favored renewable resources like solar energy over traditional, fossil fuel power sources.

By funneling campaign money through nonprofits, corporations and special interests are able to stack the deck in their own favor – they’re lining the pockets of candidates perceived to work in their interests, while hiding the action from their customers and shareholders that are footing the bill.

The two nonprofits involved in the 2014 Arizona Corporation Commission election, Arizona Free Enterprise Club and Save Our Future Now, can spend unhindered amounts of money in campaigns, while never disclosing the anonymous donors that have contributed to the cause.

It was revealed by the Arizona Republic that donations given to nonprofit entities by APS, and its parent company, Pinnacle West Capital, were used in a 2012 election to support Republicans candidates to the Corporation Commission. And in 2013, APS reported spending $3.7 million on a “public relations campaign” to influence commissioners to change rules associated with the solar power grid –a measure that raised rates on customers by $5 a month.

This raises the question of whether the utility company is spending ratepayer and shareholder money to fund nonprofits pushing initiatives that will end up costing customers more each month. And, if the utility is spending millions on politics in order to make millions more in profits, who is the Arizona Public Service Company really serving?

When political spending is not disclosed, it’s a betrayal to both ratepayers and shareholders who aren’t given the opportunity to see how their money is being used to influence politics. It also creates an impression of corruption when utilities are funding the election of members of the Commission that governs them.

After initially denying political activity in 2012, APS will now admit spending political money, but the company will not open its books to disclose the extent of their political spending to “dark money” nonprofits or which candidates are receiving its support.

Pinnacle West maintains that, “APS is politically active because it is our responsibility to advocate for sound energy policies that benefit our 1.2 million customers and our shareholders.”

But, shareholders want to know exactly how the company is being politically active.

In 2015, two socially conscious investment funds that own or advise shareholders of Pinnacle West – Calvert Investment Management and First Affirmative Financial Network – came together to demand that the corporation disclose their political activity. They presented Proposal 4 at the yearly Pinnacle West shareholder meeting held in May, demanding that APS disclose all political spending, including donations to tax-exempt organizations that work to write and pass legislation or influence elections (such as ALEC and the U.S. Chamber of Commerce). And over 30 percent of Pinnacle West shareholders voted in favor of the measure for disclosure.

But instead of supporting the shareholder measure, the Pinnacle West board of directors released a statement before the meeting that outlined its opposition, and encouraged shareholders not to support the proposal:

“While the proponent claims that lobbying exposes our Company to risks, we believe that the failure to engage in critical public policy developments that impact our business would represent a far greater risk to shareholders’ interests.”

And that mistaken sentiment has been reinforced time and again, even after some of the Commissioners took independent action and demanded disclosure of the utility’s political spending.

The Commission first called for APS to disclose its political spending in November, but has been continuously rebuffed.

APS’s President and CEO, Don Brandt called the demand for disclosure an infringement on the company’s First Amendment rights.

But it’s APS that is hiding its political spending from its customers and investors who are being forced to bankroll lobbying for utility-friendly regulations that are making the corporations more money at the expense of customers.

There is good news; there is a renewed effort for a 2016 shareholder resolution demanding that Pinnacle West disclose its political spending.

State Rep. Ken Clark hopes that the shareholder resolution will reduce the influence of the utility industry on the government in Arizona – something he experienced first-hand when attempting to bring the argument for disclosure to the state legislature. And, he argues the way to do that is to make the voices of the shareholders heard over the influence of the company’s board. As he stated:

“Unfortunately, the only way to convince the current leadership of APS is to speak with their bosses, the shareholders. Even if you don’t own shares, we need your support. After all, shareholders make money from your monthly payments.”

These types of political spending shareholder resolutions are getting increasing support around the country, and with the attention on this one, this year it could have a shot.

Keira Thompson is the online advocacy organizer for Public Citizen’s Congress Watch division.