The Arizona Midterm Will Have a Big Impact on Climate Change

The races for Arizona’s energy commission and an anti–dark money ballot initiative will decide whether Arizonans themselves oversee the state’s energy utility or the company can regulate itself according to the dictates of profit-making.

The Arizona Public Service, the state's largest utility, has flooded elections with dark money, prompting a push for campaign finance transparency. (Tony Webster / Flickr)

Nearly all national media discussion of Arizona this cycle has focused on its competitive US Senate and governor races. But the race for two spots on a little-known commission that regulates utilities in the state and a ballot initiative that would crack down on untraceable political spending could have huge ramifications across the country — especially for candidates and ballot initiatives that run up against corporate interests with oil and gas ties.

All of these developments revolve around Sandra Kennedy, a member of the Arizona Corporation Commission (usually shortened to CorpCom), which regulates state utilities. During her time in office, Kennedy, a Democrat, consistently voted against the interests of utility companies, notorious for pushing rate increases on consumers and blocking solar energy in the sunniest state in the nation, and was on the receiving end of millions of dollars in spending against her from the state’s largest utility, Arizona Public Service (APS), in 2014.

That money was only revealed once Kennedy returned to the commission in 2019 and a bipartisan coalition forced the utility to disclose the full extent of its political activity. Kennedy is now up for reelection in a tough race, joined with her running mate Lauren Kuby. They are facing opposition from climate skeptics and utility-industry allies as they run against Republicans for statewide seats.

The 2014 dark-money revelations — as well as disclosures about major utility spending in the 2016 and 2018 elections — prompted a push for greater campaign finance transparency in the state. Those efforts resulted in Proposition 211, an initiative on Tuesday’s ballot that would mandate disclosure of the original sources of outside funds in Arizona. The proposition mirrors efforts in Montana and Tennessee, and Alaskans are voting on a similar ballot measure this cycle.

Combined, these Arizona races and ballot issues mean voters in the state can play a critical role in determining the scope of utility and corporate influence in politics in 2022. While the utilities appear to have been temporarily cowed from dropping millions of dollars into the political process, this is only because there is a pro-transparency majority on the CorpCom that forced them to stop doing so. Failure of Prop 211 and loss of the Democratic seats would almost certainly result in a return to large untracked sums of utility money sloshing around in Arizona politics, with the aim of pushing rate increases on consumers and blocking solar energy.

A Sunny State With No Solar

Arizona, with its voluminous supply of sunlight, is uniquely positioned to transition quickly to renewable energy. It’s of no small importance, as its capital Phoenix is the second-fastest warming city in the country, and the Phoenix metro area has ten times the population of the fastest-warming city, Reno, Nevada. Seventy percent of Arizona’s population lives in the Phoenix metro area.

Arizona is currently facing its worst drought in over a thousand years, and precious limited water supply is being allocated to coal, nuclear, and natural gas plants as opposed to solar, which uses barely any water in production.

Just 8 percent of the state’s electricity is from solar — because utilities are disincentivized to support it. Utility companies make their biggest profits from major infrastructure investments like large and costly new power plants. This means that low-cost renewable infrastructure like solar will be less profitable for them.

This is a core problem with investor-owned utilities. When new power plants are built, they are allowed to pass on the cost, plus a profit, to ratepayers. Otherwise, utilities are typically not allowed to raise rates on consumers.

It’s exactly this type of problem that the CorpCom was set up to mitigate. Established in 1912, during the progressive era of state governments, the commission was given sweeping judicial, legislative, and executive authority to reign in the powers of the railroad monopolies.

Kennedy, who had spent fourteen years in the state legislature, took those powers seriously when she was elected to the commission in 2008. Refusing to do the bidding of the utility industry, she championed renewable energy and voted against rate hikes.

After Kennedy lost reelection in 2012, the new commission members eliminated solar incentives within a few weeks of taking office. When Kennedy ran again for a commission seat in 2014, fear of those solar subsidies coming back likely motivated APS to spend big against her race — to the tune of millions of dollars in dark money.

Kennedy did not respond to a request for an interview by press time.

Dark Money Results in Reform Push

During her 2014 campaign, Kennedy, who is black, was besieged with racially charged ads that darkened her appearance and inaccurately implied that she had failed to pay taxes.

When Kennedy returned to the commission in 2019, she was able to successfully pressure APS to disclose that it had bankrolled the ads as part of $10 million in spending it had funneled into the CorpCom races.

The revelations provided the impetus for a more serious campaign finance reform push, said former two-term Arizona attorney general Terry Goddard, a Democrat.

“This proliferation of anonymous cash buying political airtime, created by Citizens United, is totally wrong,” said Goddard. “It has left voters completely in the cold, not knowing who it was who was trying to twist their arms. The Corporation Commission / APS scandal was the most important precipitating event for us here.”

Of the 2014 election, Goddard said: “It was unprecedented. Just blew us out of the water. Nobody had ever spent anything like $10 million on a Corporation Commission race. Sandra Kennedy has been one of our champions. It’s because of her that we know how much they spent.”

That prompted Goddard to lead a push to rein in dark money, resulting in Prop 211 on the ballot this year. The initiative mandates that organizations spending more than $50,000 on statewide races disclose the original source of all donations they receive that exceed $5,000.

Opposition to the initiative is being led by the Arizona Free Enterprise Club, a right-wing advocacy group that was one of the main organizations that laundered contributions from APS in 2014. According to the organization, Prop 211 will result in conservative donors being “canceled.”

Billionaire oil and gas magnate Charles Koch’s political advocacy network, Americans for Prosperity, has spent $66,000 on ads opposing the measure, according to data from AdImpact.

Big Climate Impacts

The broad authority delegated to CorpCom allowed it, in 2005, to implement a target of acquiring 15 percent of the state’s power from renewable energy sources, one of the country’s strictest renewable energy standards at the time, and a standard that has now been met.

But since the commission now has a three-to-two Republican majority, with strong ties to utility interests, additional bold moves have been few and far between. A proposal in January that would have mandated that the state move to 100 percent renewable energy by 2070 failed on a party-line vote.

“Seventy-four percent of Arizonans want to see a clean energy transition,” said Lauren Kuby, a former member of the Tempe City Council who is running for her first term on the commission. “But it’s not matched with action. Utilities have much stronger lobbyists.”

If Kennedy and Kuby win their races, Democrats would gain a majority on the commission — and a stronger renewable standard would likely be possible.

Kennedy and Kuby’s opponents, on the other hand, are certain to be more deferential to industry. The Democrats are facing off against Republican former utility industry lobbyist Kevin Thompson and Nick Myers, an aide to Commissioner Justin Olson, a longtime ally of utilities.

Myers told PBS in October that renewable energy is “amazingly expensive to do” and “not feasible at this time,” despite the fact that the International Energy Agency found in June that solar was “the cheapest energy in history.”

Thompson, for his part, told utility industry representatives at a recent event that “it’s not our job to tell you what to do,” according to a recording of the event we obtained.