Strings Attached: How utilities use charitable giving to influence politics and increase investor profits

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Arizona Public Service

Arizona Public Service Company sells electricity to 1.2 million customers in Arizona. The company is a wholly-owned subsidiary of Pinnacle West, and provides “essentially all” of Pinnacle West’s revenues and earnings.

Basic Facts:

  1. EPI estimate of APS’ total charitable giving in most recent 5 years (2013-2017): $38,919,576.00
  2. Name of Foundation: APS Foundation, Inc.
  3. APS Foundation Giving (2013-2017): $12,957,625
  4. Corporate Charitable Giving (2013-2017)
    • Sum of total corporate charitable giving in most recent 5-year period 2013-2017: $25,961,951
    • APS’ FERC Form 1 filings to FERC report a total of $11,727,078 in donations from 2013-2017. The reason for the discrepancy is not clear.
  5. APS Foundation Executive Director:
    • Tina Marie Tentori. Also serves as the Director of Community Affairs for APS.
  6. APS Foundation Board of Directors:
    • Donald E. Brandt, APS CEO and Chairman of the Board
    • Lindy R. Fisker, APS Director of Operations Support
    • Daniel T. Froetscher, APS Executive Vice President of Operations
    • Jeffrey B. Guldner, APS President
    • John S. Hatfield, APS Vice President, Communications
    • Mark A. Schiavoni, APS Executive Vice President

Examples of APS using charitable giving to manipulate policy:

APS sought for years to hide its spending on political campaigns. Regulators compelled the utility this year to reveal the groups it has been secretly funding in recent years.

APS and its parent company Pinnacle West have spent tens of millions of dollars in recent years to influence Arizona politics and intervene in the elections of its regulator, the Arizona Corporation Commission. That spending has often been done in secret, by funding organizations to run public relations and political campaigns on APS’ behalf, while hiding the utility’s role in those efforts from voters, policymakers, and regulators.

In 2013, APS denied at first that it was funding conservative groups to run ads attacking rooftop solar companies, but later admitted that it was funding the groups – though it didn’t disclose the amount. But the utility insisted that it wouldn’t intervene in Commission elections, as the Arizona Republic reported in October 2013:

“Getting involved in commissioner elections? Unbelievably high risk,” said Jeff Guldner, senior vice president of customers and regulation at APS. Guldner frequently testifies at the Corporation Commission for APS on regulatory matters. “We don’t tell employees who to vote for or try to influence elections. If you do that and are wrong, you have to live with it for four to eight years.”

But 501(c)(4) organizations like “Save Our Future” and “Arizona Free Enterprise Club” spent millions to influence the 2014 elections for the Arizona Corporation Commission. Those organizations wouldn’t disclose their donors and APS would not confirm nor deny if it was funding them, leading the Secretary of State to question whether those groups were operating illegally. The FBI also launched an investigation of APS, including issuing a subpoena for APS CEO Don Brandt’s communications.

Arizona Corporation Commission Commissioner Bob Burns issued a subpoena in 2016 to APS for information about the utility’s spending to influence the 2014 Commission elections, but APS refused to comply, and the other commissioners wouldn’t enforce the subpoena.

That changed this year, when Commissioners Boyd Dunn joined Bob Burns to request information from APS, while Commissioner Sandra Kennedy issued a subpoena to APS “regarding its spending on political races, lobbying, advertising, and contributions to 501(c)(3) and 501(c)(4) organizations for the calendar years 2013 through 2018.”

In its initial response to the Commissioners’ requests, APS admitted that it had in fact funded “Save Our Future” and “Arizona Free Enterprise Club,” as well as other organizations that intervened in Commission elections, such as the Arizona Cattle Feeders Association. That response also showed that APS had spent more than expected, more than $10 million on organizations that worked to influence the 2014 Commission elections, and over $4 million in the 2016 Commission elections.

Overall, APS’ responses to the Commissioners’ requests show that from 2013-2017, APS itself spent $25,961,951 on “charitable donations” directly from its corporate entities, not including the more than $70 million it spent during those 5 years on groups for explicitly political purposes. That is more than twice the $12,957,625 that the affiliated APS Foundation spent on charitable donations in the same period.

Contributions that APS made directly, instead of through the APS Foundation, were not publicly known until the Commissioners requested the information this year. That means those financial connections were hidden when those groups intervened on APS’ behalf, such as by supporting its rate increases before the Commission, opposing an increase in Arizona’s renewable energy standard, and helping APS public relations efforts.

APS letter supporting its rate increase was signed by 15 organizations that received more than $1.6 million from APS

In May 2016, APS submitted a letter to the Arizona Corporation Commission to support the company’s proposal to increase electricity rates. Several lawmakers and representatives of chambers of commerce and non-profit organizations signed the letter, which stated: “We, the undersigned, respectfully request that the Arizona Corporation Commission thoughtfully consider the proposals for change made by the utilities you regulate.”

When the Arizona Capitol Times reached out to lawmakers that signed the letter, several said they were upset that APS had filed the letter in a way that suggested they supported APS’ rate increase proposal, which they said was not their intention when they signed.

A review of the data that APS disclosed in response to a subpoena by Arizona Corporation Commission Commissioner Sandra Kennedy shows that 15 of the organizations whose representatives signed the letter had received contributions from APS. From 2013-2018, APS contributions to those organizations totaled $1,685,842.

Table 1: APS reported contributions from 2013-2018 to 15 organizations that signed a letter APS used to support a rate increase in 2016

Chicanos Por La Causa$461,739.39
United Way of Yavapai County$159,377
Valley Youth Theatre$103,142.25
Great Phoenix Urban League$125,112.60
MHA Foundation$2,500.00
The Victoria Foundation$123,460.00
Phoenix Indian Center$110,000
Goodwill Industries of Northern Arizona (1)$43,792.85
Leadership West$28,009.35
Phoenix Revitalization Corporation$64,000.00
Friendly House, Inc. $184,602.51
Community Action Human Resources Agency (CAHRA)$24,977.78
Valle del Sol, Inc.$250,628.41
NotMyKid Inc.$4,500.00
Prosper (2)unknown
Total$1,685,842.14

Eight organizations that opposed increasing the renewable energy standard in Arizona received more than $10 million from APS

In 2018, APS spent nearly $40 million funding “Arizonans for Affordable Electricity,” a group focused on opposing a ballot initiative that would have established a 50% renewable portfolio standard in Arizona. As part of Arizonans for Affordable Electricity’s efforts, elected officials and representatives of organizations submitted arguments against the ballot initiative. At least eight of the organizations that submitted arguments against the ballot initiative received funding from APS. From 2013-2018, those eight organizations received more than $10 million from APS.

Table 2: APS reported contributions from 2013-2018 to eight organizations that submitted arguments against a ballot initiative establishing a 50% renewable energy standard in Arizona

Arizona Free Enterprise Club$5,945,000.00
Arizona Cattle Feeders’ Association$2,537,800.00
Arizona Republican Party$1,037,000.00
Goldwater Institute$71,000.00
Greater Phoenix Urban League$125,112.60
Diana Gregory Outreach Services$13,449.93
Chicanos Por La Causa$461,739.39
Prosperunknown
Total$10,191,101.92

Legislator with ties to APS grantee sided with APS on ballot initiative

Sen. Robert Meza, an Arizona legislator, was one of the few Democrats who came out against the renewable energy initiative in 2018. An EPI investigation showed that Meza had received thousands of dollars in personal income for jobs he’d done for multiple organizations that receive charitable funding from APS. Meza’s financial disclosures showed that he received income from Chicanos Por La Causa. Meza also received income from The Armory, a tech startup incubator for veterans which APS lists as a grantee, and the PSA Behavioral Health Agency, a service agency for people with behavioral illnesses. Chad Guzman, one of APS’s top lobbyists, sits on that organization’s board. Meza said that the relationships created “no conflict of interest.”

Cindy McCain defends APS – without mentioning the $500,000 APS gave to her Institute

In July 2019, the Arizona Republic published an op-ed by Cindy McCain to defend APS from criticism of its recent rate increase and of shutting off electricity of people behind on their bills, leading to deaths. The op-ed compared APS CEO Don Brandt to her late husband, Senator John McCain. Cindy McCain is the chair of the board of trustees of the McCain Institute for International Leadership at Arizona State University, which expected to receive $500,000 from APS Foundation in 2018, according to APS Foundation’s 990 tax form for 2017.

Footnotes

(1) Signature on the letter was David Hirsch, President and CEO of Goodwill Industries of Arizona. David Hirsch was the President of Goodwill Industries of Northern Arizona in 2016, before it merged with Goodwill Industries of Central Arizona – which received $95,000

(2) Prosper is not listed in APS disclosures to the ACC of its spending on charitable groups or political spending, but an October 2013 Arizona Republic article reported that APS admitted it gave money to Prosper to run ads supporting APS’ efforts to increase fees on residential solar projects

Read the rest of the report and other utility case studies here.