An inquiry by Arizona Corporation Commissioner Sandra Kennedy has revealed new details about the political spending of the state’s largest electric utility, Arizona Public Service Company.
Kennedy’s inquiry provides an additional three years of data about the amount of money Arizona Public Service Company (APS) spent on outside lobbying firms, marketing, nonprofit groups, and the lobbying efforts of trade associations like the Edison Electric Institute. Along with the details that APS provided to Commissioner Kennedy in 2019, the response expands the public record of the utility’s political spending over the last nine years.
The APS response to Kennedy’s latest inquiry also reveals new details about other issues, such as the percentage of certain APS employees’ salaries that are charged to ratepayers, how many APS staff used to work for the Arizona Corporation Commission, and which marketing expenses the utility charged to ratepayers.
The inquiry shows one way that state utility regulators can shed more light on monopoly utilities’ political spending, as the Federal Energy Regulatory Commission considers new rules that would make it harder for utilities to charge ratepayers for their trade associations’ political activities.
APS spent $4.8 million on outside lobbying expenses over nine years
The inquiry is the latest in a years-long effort by Kennedy and other regulators to reveal details about APS’ political spending, in response to the utility’s expansive efforts over the last decade to influence the elections of its own regulators, defeat a clean energy ballot measure, lobby state legislators, and fund charitable groups to help achieve its political goals.
In February, Kennedy requested details about APS’ spending in 2019, 2020, and 2021 on outside lobbying expenses, advertising and marketing, political groups, trade associations, and 501(c)(3) and 501(c)(4) nonprofit groups. Those questions are similar to the questions Commissioner Kennedy asked in 2019, requesting details about APS’ political spending between 2013 and 2018.
Kennedy’s 2019 request followed high-profile controversies in which APS secretly spent millions of dollars on political campaigns to influence Arizona Corporation Commission elections in 2014 and 2016, and later spent tens of millions of dollars to defeat a clean energy ballot measure in 2018. Prior to Kennedy’s 2019 request, former Commissioner Bob Burns issued a subpoena in 2016 to compel APS to provide details about its spending to influence the 2014 Commission elections, but APS refused to comply, and a majority of commissioners at the time would not enforce the subpoena. After Kennedy was elected to the Commission in 2018, her 2019 request for details about APS political spending was reinforced by a letter from two other Commissioners, making clear that a majority of the five-member Commission was willing to support a subpoena.
The APS response to Kennedy’s latest inquiry shows that APS spent $1,187,333 on outside lobbying expenses during the three year period of 2019, 2020, and 2021, which are detailed in attachment A. Along with the $3,678,162 it spent between 2013 and 2018, the two sets of disclosures show that APS spent $4,865,495 on outside lobbying expenses over the last nine years. That figure does not represent all of APS’ spending on lobbying, since “outside lobbying expenses” refers to lobbying firms that APS hires, but does not include the salaries of APS employees involved in lobbying efforts.
APS and Pinnacle West spent $93.2 million on advertising and marketing over nine years
In its latest disclosure, APS said its parent company Pinnacle West spent $12,568,678 on advertising and marketing expenses during 2019, 2020, and 2021, but did not provide details about that spending, stating: “Many of Pinnacle West’s agreements with its advertising partners are bound by commercial terms of confidentiality that Pinnacle West must uphold.” In its 2019 disclosure, APS said Pinnacle West spent $24,421,150 on advertising and marketing expenses between 2013 and 2018. Over the last nine years, Pinnacle West spent $36,989,828 on advertising and marketing expenses.
APS said it also spent $21,677,646 on “customer education and outreach” advertising and marketing during 2019, 2020, and 2021, detailed in attachment C. Along with the $34,605,226 APS spent on advertising and marketing between 2013 and 2018, the regulated utility spent $56,282,872 over the last nine years.
Between Pinnacle West and APS, the company spent $93,272,700 on advertising and marketing between 2013 and 2021.
APS and APS Foundation spent $72.3 million on charitable groups over nine years
APS said it spent $22,711,037 on “corporate giving” to 501(c)(3) and 501(c)(4) charities during 2019, 2020, and 2021, detailed in attachment G. APS noted in its response that this figure is not the total amount of APS’ charitable contributions, because APS also spends money on organizations that are not 501(c)(3) and 501(c)(4) charities, but the utility did not provide the full amount of its “corporate giving” to all types of organizations. Along with the $30,865,142 APS spent between 2013 and 2018, the company spent $53,576,179 on “corporate giving” over the last nine years.
APS said it also provided $2,885,350 to charities through its APS Foundation during 2019, 2020, and 2021, detailed in attachment F. Along with the $15,904,120 the APS Foundation spent between 2013 and 2018, the company spent $18,789,470 on charitable groups over the last nine years.
Between APS and its APS Foundation, the company spent $72,365,649 on “corporate giving” to 501(c)(3) and 501(c)(4) charities between 2013 and 2021, not including charitable spending to other types of nonprofit groups that APS did not include in its disclosure.
An EPI report published in 2019, “Strings Attached: How utilities use charitable giving to influence politics and increase investor profits,” investigated how charities that receive money from investor-owned utilities sometimes then support the utilities’ political priorities, often without disclosing the funding. For example, some charities that received money from APS signed a letter supporting an APS rate increase, and others signed on to arguments opposing the 2018 clean energy ballot measure.
A key recommendation of the EPI report is that state utility regulators should “Require utilities to disclose all charitable contributions that they make from their corporate coffers in an itemized fashion. Mandatory disclosure can be a key tool for regulators and the public to know when organizations attempting to influence decisions are being paid by utilities with an interest in a proceeding’s outcome.”
APS spent $73.6 million on political groups over nine years
APS said it spent $1,447,344 on political groups during 2019, 2020, and 2021, which included “contributions to political parties, payments to trade associations that may have been used for lobbying or other political activities as reported to APS and Pinnacle West, and independent political expenditures directly or in support of an independent political action committee.”
That number showed a marked drop from the $72,182,150 that APS spent on political groups between 2013 and 2018, more than half of which went to defeat a clean energy ballot measure in 2018. In total, the company spent $73,629,494 on political groups over the last nine years.
The spending on political groups is detailed in attachment E, including $57,053.54 to the American Legislative Exchange Council (ALEC), the controversial corporate lobbying group that connects companies with conservative lawmakers to develop model state legislation.
During the three year period, APS disclosed spending $440,004 on the Edison Electric Institute, the trade association for investor-owned utilities. However, that figure is not the entire amount that APS paid to EEI, just the portion of its annual dues “that may have been used for lobbying or other political activities as reported to APS and Pinnacle West” – in other words, the amount EEI itself determined was used for political purposes. Utilities’ spending on trade associations are no longer independently audited; EEI uses a definition of lobbying that does not count the full suite of activities it performs to influence policy, politics and regulation, as EPI and others have noted . The Federal Energy Regulatory Commission is considering a rule change that would make it harder for utilities to charge ratepayers to subsidize trade associations’ political work.
APS says some marketing expenses are included in customer rates, but outside lobbying expenses, corporate giving, and political groups are not
Kennedy’s latest inquiry also requested that APS provide details about whether any of its political spending is included in customer rates. In its response, APS said that it does not include any of its spending on outside lobbying expenses, corporate giving, and political groups in customer rates.
But APS said some of its marketing and advertising spending can be included in customer rates, such as advertising “focused on customer education and outreach including energy efficiency, customer programs, billing and payment options, rate plan education, limited-income assistance, disconnect hold period education, wildfire and monsoon safety, outage management, and other similar communications to help our customers understand and manage energy use.” APS said “general advertising or marketing about APS and its energy goals is not included.”
The disclosure did not state how much of APS’ total advertising and marketing spending could be charged to ratepayers, but a review of APS marketing and advertising expenses detailed in attachment C shows that fewer than 300 expenses could not be included in customer rates, out of 2400 total expenses.
During the last 5 years, APS employed nine people that used to work for its regulator
Kennedy requested that APS “provide the Commission with the total number of former Commission Staff and Commissioners that APS has retained in any capacity, including consultants or contractors in the past five years.”
APS responded that it “is aware of nine individuals the company has employed or retained as of January 2017 that were at one time employed by the Commission,” and that seven remain employed by APS today.
The APS response doesn’t specify which former Arizona Corporation Commission staff now work for a utility that they once helped regulate.
APS charges customers for salaries of employees involved in communications and lobbying
Kennedy also requested that APS provide information about the percentage of certain employees’ salaries that are charged to ratepayers, for “employees or consultants with a job description related to the following: Corporate Giving, Economic/Community Development, Public/Government Policy/Regulatory Affairs, Communications, Strategic Partnerships.”
APS said it “compiled a list of employees in positions within the Public Policy and Communications business units, encompassing the job descriptions included in Question 6.”
The APS response shows that the salaries of several employees focused on communications are entirely charged to ratepayers, including “Communications Consultants,” “Communications Representatives,” “Manager Media Relations,” “Director External Communications,” “Principal Strategist Corporate Communications,” and “Manager Strategic Stakeholder Communications.”
APS charges 100% of the salaries of several employees focused on public policy and regulatory compliance to ratepayers, including “Senior Vice President Public Policy,” “GM Regulatory Affairs & Compliance,” “Director State Affairs and Compliance,” and “Director Federal Affairs & Compliance.”
Several other employees’ salaries are mostly charged to ratepayers, including several focused on lobbying like “Federal Affairs Representative,” “Vice President Federal Affairs,” and “Public Affairs Managers.”
Out of the 56 job titles APS listed, 50% or more of the salaries for 43 job titles are included in customer rates. The salaries for only seven job titles that APS listed are not charged to ratepayers at all.
Notably, the APS response does not necessarily include details about every employee involved in public affairs, policy, partnerships, corporate giving, and communications, as Kennedy requested – just those employees in the Public Policy and Communications business units.
For example, APS CEO Jeff Guldner is also involved in the company’s communications and public affairs efforts, but APS did not include a breakdown of his salary. APS paid Guldner $8.1 million in 2021, according to the company’s latest 14A filing with the Securities and Exchange Commission.
APS did not respond to questions from EPI regarding its political spending.