Arizona Public Utility Acts Like For-Profit Peers — Episode 174 of Local Energy Rules

Autumn Johnson:

This might sound kind of unusual to people who aren’t like really interacting with a lot of utilities, but you cannot understate the influence that utilities have in states with policymakers a lot. I mean they’re, they have many, many lobbyists. They do lots of campaign contributions and so there is some concern there about willingness to push back or reform, you know, at the legislative level.

John Farrell:

The promise of public power is an alluring one: a chance to align democratic governance with public interests. In many cases, public ownership means electricity service with lower costs, better reliability and high-quality customer service. Every once in a while, however, a public entity goes astray of its public mission. Joining me in October, 2022, Autumn Johnson of Tierra Strategy explains how Arizona’s Salt River Project, a public agency, has been making costly choices against renewable energy and in favor of expensive methane gas power generation. Parts of this interview originally appeared in episode five of our 2022 series on Public Power. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance and this is Local Energy Rules, a biweekly podcast sharing powerful stories about local renewable energy. Autumn, welcome to Local Energy Rules. We’ll dive in.

Autumn Johnson:

Hi, yes, thanks for having me.

John Farrell:

The Salt River Project is an agricultural Improvement and Power District. It’s an agency of the state of Arizona. It’s a public entity. I think a lot of people have ideas about when things are publicly owned and controlled that they’ll be very participatory and democratic, but there’s been some interesting stuff happening with the board of Salt River Power recently about, if I remember correctly, about a power plant proposal. Could you fill in a little bit about what’s been going on with the Salt River Project and how it’s been intermingling with this idea of a board being able to exercise its freedom to express their opinion about this project?

Autumn Johnson:

Sure, I’m happy to. There’s kind of a lot of history there with Salt River Project generally, but certainly even with the proposal you’re talking about goes back a little bit over a year and so I’ll definitely stick to the Cliff Notes version. But I guess I’ll also just point out that while SRP very much calls itself public power, which sort of laws that apply to other state agencies, they kind of pick and choose which ones they think apply to them. So for instance, they don’t think that public record laws apply to them for example. And there’s a separate lawsuit going on right now for the state equivalent of the Freedom of Information Act as applicable to Salt River Project. You know, and like while we were there for a press conference last week, we’re not allowed to be on in their parking lot or on their property, which is pretty different than government agencies and whatnot. It is a little bit nuanced about when they are and when they are not a public agency.

But as far as the specific question regarding the action that happened at the board meeting last week, so I guess I’ll just mention briefly that the Salt River Project is the only major utility in Arizona that’s not regulated by our utility commission called Arizona Corporation Commissioner or ACC. And so their only regulatory oversight by and large is their board, which is elected by land owning rate payers based on acreage. The only exception to that is for line siting. So that’s gonna be transmission and that’s gonna be building new power plants that are thermal power plants. It doesn’t apply to solar or wind or other kind of renewables facilities.

So essentially a year ago Salt River Project announced that it was going to be doing a massive gas expansion in Coolidge next to historical black community and their board voted to approve that. They took that to the line sighting committee, which it passed and then it lost twice at the utility commission. And so that’s currently on appeal. During the process of that, a number of board members submitted a letter to the docket of the public utility commission, kind of in the public process of soliciting public comment for board members and they put in the letter that they were writing in in their personal capacities and not as representatives of the board wrote in to again voice their opposition to the project. That letter was submitted to the docket publicly after the vote deny the permit had already taken place but before the reconsideration. That was back in June and there’s been quite a bit of behind the scenes kind of curfuffle since then. This week’s board meeting was sort of the first real public of behind the curtain look at what’s going on and they decided to not only censure the board members for filing that letter to the corporation commission but also revoked their committee assignments for the remainder of the year.

John Farrell:

Wow. There’s so many just like intersecting and interesting things about this. I mean first of all, I really appreciate the overview about kind of how they act. They are a state agency but they don’t always act like a state agency. I mean fascinating to hear how they sort of feel like they can pick and choose. Then the question about the gas plant, maybe my first question would just be, I presume that the board members who were filing these comments before the Arizona Corporation Commission in opposition to the gas plant probably were also ones that voted against it when it was before the board but were in the minority when it passed.

Autumn Johnson:

Ooh, that’s a good question John. So sort of, so I guess I’ll say the original vote by the board with SRP was last fall, so it’s been a year, I believe it was in September of last year. So 2021 that barely passed. It passed by one vote, it was an eight to six and so if it had been seven to seven it would’ve failed to move forward at all. So it was an eight to six vote. In April of 2022 there was a new SRP election and so there’s been some change in board members from that time. So four of the board members signed that joint letter. Two of them were new board members who were not on the SRP board when the original decision was made back in September of 21.

John Farrell:

Interesting. I had been thinking, oh well maybe part of their complaint essentially was they thought these folks already had their say, but in this case you have board members who really didn’t have a say necessarily because they had been potentially like running for election or something like that at the time when that decision was made. That’s interesting.

Autumn Johnson:

This is another kind of, I think example of sort of cherry picking when you are or are not a public agency. So for instance, if you are in the legislature or you are at the corporation commission and you are in the minority, there definitely is no prohibition on you being able to speak on any issues. It happens all of the time. So obviously members of the legislature often speak out for or against policies even if they’re in the voting minority. Members of the legislature indeed also wrote to the docket regarding the Coolidge expansion project, just like members of the board did, members of the commission often are in the minority and then they’ll go down to the legislature and talk about issues. So there isn’t that I’m aware of any other kind of elected role in which if you’re in the minority the argument is therefore that you’re no longer allowed to talk about it. At the board meeting the board said that it was because it undermined the credibility of the board. That was kind of the line that they used. And so apparently minority board members, even speaking in their own personal capacities, if it’s not in alignment with the decision of the utility and or the board is the problem there. Which obviously has some free speech implications I think.

John Farrell:

And also I would imagine some implications just for the sort of like ongoing operation and the ability to show a dissenting opinion period, right? If you are going to disagree with the board in other ways and ever want to be able to talk about it publicly, but you know that there are consequences like you said about committee assignments or censure, I guess I don’t know if there’s a actual like penalty tied to that maybe with regard to like their salary or their ability to be reelected or anything. But that seems like a definite way to chill dissent of board members by doing this.

Autumn Johnson:

Well what an interesting observation John. You might even suggest that that is the entire point of doing this is to chill the dissent. It’s very unusual for SRP as I mentioned. You know previously SRP is not really regulated by anyone. The board is really their only check. The board are kind of just elected members of the public. They are not paid unless they’re the president or vice president. And so they’re kind of just regular people. Most of them don’t work in the energy sector because it’s voting by acreage. Most of ’em actually have historical agricultural kind of families and so they are for all intents and purposes lay people. And so it is very unusual for there to be a close vote of the board or for the board to tell management no on anything. And so onlookers think that SRP is just shocked that the corporation commission or its own board or any board members would sort of dare say no. And that this sort of campaign to punish and or attempt to silence or silence in the future, not just board members but also people, stakeholders and people in the advocacy community is an attempt to chill dissent for future issues.

John Farrell:

Back to the topic of the actual vote. So one of the things I find fascinating about this is, so this is a new gas-fired power plant that SRP wants to construct. I guess one of the questions I have is when the corporation commission was reviewing the transmission component of this, the one area they have oversight, why did they reject it? Part of the reason I ask this I guess is we’ve seen, gosh it was like three years ago that Rocky Mountain Institute put out a pretty good study essentially saying that solar and energy storage were probably gonna be cheaper than most new gas plants even then. And Arizona is basically ground zero for awesome solar resource. So is it possible <laugh>, I say with a lot of expectation in my voice that maybe this isn’t actually a very good deal for SRP members to be building a gas plan?

Autumn Johnson:

Oh gosh. So many great questions there and many of those arguments were made over the course of, it wasn’t an entire litigated hearing at line siting and then there was multiple sort of rounds of voting at the Corporation Commission about this. And so I guess I’ll just clarify one thing. It’s not really a transmission issue. It’s actually building the new turbines. It’s at an existing site. It was 16 new turbines, two kilowatt generating station which already exists and is already on sort of the transmission system. And so it was the increase in turbines that they were voting on as opposed to the transmission line. Just for clarity there. I think that the reasons for voting no were multifaceted.

So the original vote was actually four to one as a no. And so two of those votes are Democrat and they often explained their votes and so I didn’t re-watch the recording by any means right before this, but the two Democrats I think were concerned about the increased investment in fossil kind of at a time where I think most people see that we’re transitioning. Obviously it’s also an extremely expensive time <laugh> for gas, so, so it doesn’t look that great economically.

Another major problem was that it’s in a historical Black community. The community doesn’t want it. The community is not an SRP rate payer so they don’t benefit from the power and there was a lot of both testimony in the hearing and public comment about environmental racism. And so that was a big component. Now there were two Republican members that also voted against it, one of them the chairwoman Leah Marquez Peterson. She specifically cited the fact that she did not think that SRPs application was complete and she had concerns of the fact that they never issued an all source request for proposals or RFP to even determine what the most economic way to meet the increasing demand would be. So it was unclear whether or not the project was the most economical project to build up 820 megawatts.

It was also unclear what that project was actually even going to cost to rate payers because that analysis had also not been done. Commissioner O’Connor was the other, No vote, also Republican and he had put forward an amendment that was gonna require SRP to essentially, I don’t remember if it was to buy or to help sell. Like if community members wanted to leave they would be able to sell their property and leave. And so there was an amendment that kind of would work that out and SRP had to do certain concessions to make sure that people could sell their properties and leave the community if they didn’t wanna stay. And SRP was the immensely opposed to that and I think that was a huge contributing factor in him deciding to vote no on the reconsideration vote. Leah Marquez Peterson did change her vote and it became three to two, but the original reasons cited were those that I just articulated.

John Farrell:

We’re going to take a short break. When we come back, we discuss the role of state regulators in overseeing a public utility like the Salt River Project, how the utility has been the subject of an antitrust lawsuit and how public utilities can use public money to lobby against their own customers. You are listening to a Local Energy Rules podcast with Autumn Johnson of Tierra Strategy about the many problems with public power utility, Salt River Project in Arizona.

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John Farrell:

Okay, that’s interesting. Well I don’t wanna get too much into the weeds here about this, but I could nerd out on this all day long, but when you kind of outlined it the beginning that the Corporation commission doesn’t have jurisdiction other than in the siting issue, it’s interesting that they would’ve talked about things like project costs. While I think it’s great that they were interested in that, it sounds like that’s not necessarily their purview is it when it comes to SRP building a gas plant even if it is a bad deal?

Autumn Johnson:

Oh John, so many good questions. So that is an argument that SRP has made on appeal to the superior court that the commission exceeded its authority. We and many other stakeholders argued that that was not the case. There’s a statute that specifically outlines the different things the Corporation Commission is allowed to look at in in reviewing the line siting decision. And one of them is total cost of the project total environment is another consideration. And so we argued that many of the things that we were raising fell within the statute, but certainly within those two provisions cause we had to look at whether or not it, it fits within – the public interest is served by the project and so cost and environment are components of the public interest.

John Farrell:

So another thing I thought that was fascinating for me in as I encountered this issue reading your tweet thread about it, which by the way follow Autumn Johnson on Twitter and get a lot more about what’s going on in Arizona with energy and SRP, was that this is not the first time I’ve heard of SRP doing things that seemed out of step with their role as a public entity or in terms of like benefits for their customers. I know in the past that they have also created some hostility toward rooftop or customer owned solar. Can you talk a little bit about that or are there other things that you’ve encountered in your work on energy or your, to your knowledge of working in Arizona and environmental and energy issues that where SRP  has also kind of run afoul of its own customers and members?

Autumn Johnson:

Oh well yes. I can think of some other examples before I dig your solar example. I’ll, I’ll just circle back to the fact that SRP, though it argues that it’s public power in a number of forums, it does not abide with public records laws or the state equivalent of FOIA for instance. And they do have a lawsuit that’s underway regarding that right now. Yet a third lawsuit that we haven’t mentioned yet that does pertain to solar, SRP is in the middle of antitrust litigation regarding its change in rooftop solar rates circa about 2013. They changed those raid and then there was a big drop after that time. And if you even look at today, APS rooftop solar saturation versus SRP is dramatically different because the rates are so significantly different and it takes so many more years of having solar on your roof for, it depends out in SRP service territory than it does in APS territory. There was actually a ninth circuit decision at the end of January of 2022 that actually found against SRP and remanded back to our lower court that they were engaging in anti-competitive behavior in regards to rooftop solar. They actually relied on a statute that simultaneously SRP was successful in eliminating during our legislative session. So yes, they are busy in a lot of forums doing things to benefit themselves that don’t necessarily benefit either the rate payers or the community.

John Farrell:

I should mention for listeners that we have a great interview with Jean Su from the Center for Biological Diversity about that antitrust decision which they were involved in, which is fascinating to find. There are lots of ways in which utility companies exercise a lot of power in the market, in fact because most of them operate as these def facto monopolies through state law. But then a lot of examples of how they abuse that monopoly power, things that ILSR and others have covered. So fascinating to me that the first one that really seems to run afoul of antitrust law in a court decision is in fact a supposedly public entity.

Autumn Johnson:

Well that’s what was so interesting about the decision was specifically because they were public power, that they were actually subject to this anti-competitive sort of determination. And so it was interesting because it was specifically because they were public power that the anti-competitive issues applied to them. The decision presumably under the ninth circuit based on the analysis that probably Jean talked about, would not have applied to public service corporations or investor owned utilities. It would not have applied to them. And so it was specific to public power. And so I just do think it ties it all back together that SRP is very much public power sometimes and then they don’t do things that’re consistent with public power other times.

John Farrell:

Is there anything I haven’t asked you though, while I’m noodling another question, that you feel like folks should know about SRP in this sort of like sometimes public, sometimes not.

Autumn Johnson:

Two other things that come to mind is I think people, to the extent you’re tracking energy policy at al. and Arizona, is it all on your radar? I think people are pretty familiar with a lot of the negative media and some of the bad behavior that APS, Arizona Public Service is engaged in. Historically, I think what people miss a lot is that I actually think that today SRP is a much worse actor than APS. I think SRP has sort of been in APS shadow as far as some of the shenanigans that have gone on historically. But today, and I think this is speaks to the need for the dramatic impact that leadership change can have really has to do with SRPs current behavior. And so for everybody who thinks, oh, like if we’re worried about Arizona, we’re worried about APS and really think you need to take another look at SRP.

Autumn Johnson:

The other thing I would just say is that we mentioned the fact that SRP is not really beholden to the utility commission for most of its things, procurement resource planning, disconnection policies for failure to pay, any kind of clean energy kind of standards or renewable energy standards. None of that applies to SRP. SRP basically exists completely outside of the rulemaking sort of process. They don’t do rate cases. All of that stuff is just completely done internally at SRP. And the only check on that is the board. And I will say we had pretty dramatic success getting new folks elected to the board this year. But if the utility is just able to either intimidate the board members <laugh> into silence and or actually revoke their positions on committees and kind of things like that, it, it even I think draws an even larger question about is there really any oversight of this public power utility? If even the board is not a check on them, what is actually controlling any of their behavior? Are we just trusting them to do the right thing?

John Farrell:

Yeah, boy that just puts a really fine point on it. <laugh>, is it just sort of self-regulating at this point? It’s fascinating to see that connection too between your experience in Arizona and some of the folks that I talked to in Omaha were talking about, they similarly had fairly significant turnover in the board. I think the way they put it was actually that there was only one person on the board who was really opposed still to some of the like clean energy, affordability, and equity kind of concerns that had, you know, were brought up by community members and had been part of like the community campaign for change, but that they’ve really still been stymied in a lot of ways getting that change either by the culture of the organization to defer to staff to do things or the inability of the board to figure out like how to make changes. Or I guess one of the other things that came up that was fascinating me was that the Southwest Power Pool had rules about accreditation of capacity or about the need for like firm re space load resources that were preventing them from closing down a coal plant for example. So they, in some ways the flip side of your example here in North Omaha, which is a traditionally Black community, they wanted to close a coal plant that they’re having trouble closing because of the Southwest Power Pool. Even though the board has been elected and is given guidance that they want to close it. So kind of a fascinating flip side of what’s happening with SRP trying to build a power plant or expand a power plant in an environmental justice community.

Autumn Johnson:

Yeah, that’s interesting. And I guess in the course of what you were saying too, it also just made me think of the fact that this might sound kind of unusual to people who aren’t like really interacting with a lot of utilities, but you cannot understate the influence that utilities have in states with policymakers a lot. I mean they’re, they have many, many lobbyists. They do lots of campaign contributions and so there is some concern there about willingness to push back or reform, you know, at the legislative level. But I will also say that I think people are actually afraid of utilities and certainly specific examples of being afraid of SRP. I am personally aware of advocates that they have helped to get fired. I am personally aware of advocates that they have sent, you know, threatening legal letters to like threatening them with potential depositions or subpoenas if they’re participating in activities against them, they have subpoenaed members of their own board. There are examples just of late of board members recusing themselves, abstaining or changing votes after certain activities by SRP that I think by any kind of layperson would be well-characterized as intimidation. So I think the people are legitimately afraid and when that’s the case, there’s even less oversight and it really is not public power because it’s not representative of the people.

John Farrell:

I’m fascinated, just for a second I have to ask you about this, about the idea, having heard about APS, which you mentioned earlier, the investor-owned utility has been in the news regularly around like campaign contributions, dark money lobbyists, that kind of thing. Salt River Project also has lobbyists and does campaign contributions as a public agency?

Autumn Johnson:

They sure do John, only, the difference is if you’re an investor owned utility, they are not allowed to use rate payer funds for that. So they have to use shareholder funds and if you’re public power, you’re using everybody’s bills, they’re paying their bills and that’s the money that you’re using for all of your activities. And so yeah, I mean for instance with HB 2101, which is the legislation I was talking about earlier, that was written by SRP by some counts, it was written by SRP but all the utilities were supporting it. We had at one point counted over a hundred different lobbyists that were working to get that bill passed. They had hired a lobbyist for almost every member of the legislature as well as for the governor’s office. So that’s one example. And yeah, even in, there was just an article that was out criticizing utilities for supporting some of these more extreme candidates. Arizona has, I think, made national news for some of the extreme views of the candidates that are now in the general that had won the primary and there was an article that was criticizing the APS because of how much money they’d contributed and if you scrolled down you would’ve seen that SRP contributed $50,000 to the same candidate. So yes, they are there and it’s less money, you know, than APS has to put towards things. But yes, they’re very much participating in the political process.

John Farrell:

That blows my mind. <laugh> that any public utility really… I mean I guess there are in other states you certainly have these like networks of municipal utilities and they have like a lobbyist who comes to represent them and you know, they often get a really good hearing from local officials cuz they may know the municipal utility is operating in one of the cities and their district and so they’re very responsive to them. But the idea of making campaign contributions just, I mean, boy that seems crazy that that is even legal. But I guess you’ve already been covering pretty well how even if it wasn’t legal or there was some debate about it, SRP kind of makes its own decisions with regard to legality.

Autumn Johnson:

I think you could characterize a lot of what’s going on as crazy John and yet, and yet it’s the reality, sadly enough.

John Farrell:

Well, Autumn, thanks so much for taking the time on a random response to a tweet thread to join me to talk about this. I’m absolutely fascinated by what’s happening with SRP, my condolences to you to have to deal with them in trying to do advocacy for good things around clean energy in Arizona. But hopefully out of this, whether it’s out of the dissent and then publicity from it or the attention people get to it, that some change might come about as well.

Autumn Johnson:

Well, I appreciate you spending the time covering this and certainly covering how public power can sometimes go wrong because it’s not always a panacea. I can see why that might be sort of tempting to assume that because they’re for-profit, the utilities are bad actors, but I think there’s plenty of examples of things going wrong even when there isn’t a profit motive. So thanks so much for telling folks about SRP.

John Farrell:

Thank you so much for listening to this episode of Local Energy Rules with Autumn Johnson of Tierra Strategy discussing the perils of public power embodied in the Salt River Project in Arizona. On the show page, look for links to the entire public power podcast series, as well as an interview with Jean Su about the antitrust case against the Salt River Project. On the website of the Institute for Local Self-Reliance, you can also find our interactive community power map showing every publicly owned utility in the United States. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear more powerful stories of communities taking on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.