Steller column: Consumers need Tucsonan on corporation commission to protect them

You can imagine Lea Marquez Peterson going either way.

As a new Arizona Corporation Commission member, she could be an advocate for consumers, especially for small businesses and residents outside the Phoenix metro area.

Or she could become a lackey for the utilities, accepting her big-business friends’ justifications of their ever higher rates and profits.

There are worrying signs.

Marquez Peterson, the only Southern Arizona resident on the commission, has a handful of connections to big electricity that are glaring in retrospect.

But we cannot afford for her to take their side, especially now. Under Gov. Doug Ducey, the agency that we pay for in every bill to protect our interests, the Residential Utility Customer Office, or RUCO, has not been as strong an advocate for consumers as it has been historically, corporation-commission watchers tell me.

“There’s no other way to say it except that this RUCO is a toothless tiger,” said Kris Mayes, a former corporation commissioner who has allied with the solar industry. “It just is not a very aggressive consumer advocate.”

Everyday customers — the residents and small businesses — need Marquez Peterson, appointed by Ducey May 30, to help make up for the customer office’s weakness — a condition, I should say, that its officials dispute.

The signs, as I said, are not necessarily encouraging. Marquez Peterson, who was the unsuccessful GOP candidate for Congress in District 2 last year, has a long, close relationship with Ducey and the Arizona Chamber of Commerce and Industry, both of which are close allies of the big elephant of Arizona politics, Arizona Public Service Co.

In fact, she has served on the Arizona Chamber board along with utility executives Larry Lucero of Tucson Electric Power and Jessica Pacheco of APS.

Back in March 2016, Marquez Peterson co-signed an op-ed that ran in the Arizona Capitol Times. In it, she, as the head of the Tucson Hispanic Chamber of Commerce, and Glenn Hamer, president of the Arizona chamber, argued in favor of demand-based charges then being proposed by Unisource Energy Services, a sister company of Tucson Electric Power.

These rates have long been ballyhooed by the utilities as a way to charge customers for a key factor that can make electricity expensive —peak demand. Under these proposals, consumers may pay a lower rate for typical usage but an additional demand charge for peak usage.

Consumer advocates have long argued regular customers have no way to recognize and control their peak demand, so it ends up hurting most customers. So far opponents, including RUCO, have successfully fought them off.

APS connections

Then in May 2016, Marquez Peterson weighed in again on utility matters, this time taking a stand in lockstep with Arizona Public Service, as part of APS’ rate case. The letter co-signed by her, Hamer, Kerwin Brown of the Black Chamber of Arizona and Todd Sanders of the Greater Phoenix Chamber, argues in favor of APS’ efforts to collect more from rooftop-solar customers.

“We are proud to say Arizona is one of the top states for solar deployment and employment. However, to have safe, secure, and affordable power it is very important that our utility companies are able to properly recover costs for the assets of the grid,” they wrote.

Marquez Peterson has also been a friend of Humberto Lopez, the Tucson businessman and founder of HSL Properties.

Lopez has served on the board of directors of Pinnacle West Capital Corp., the parent company of APS, since 1995.

He and his wife, Czarina Lopez, together gave $10,800 to Marquez Peterson’s congressional campaign last year. Lopez’s nephew, Omar Mireles, the current president of HSL, also gave $5,400.

Marquez Peterson told me her friendship with Lopez has to do with his businesses in Southern Arizona and her work as head of the Tucson Hispanic Chamber.

“I’ve never engaged with Humberto on anything to do with APS and Pinnacle West,” she said.

In two conversations, Marquez Peterson also emphasized that her career has involved advocating for small business, which are of course utility customers similar to homeowners.

“People can feel secure that I want to be sure Arizonans have safe, reliable, affordable utilities,” she said.

RUCO accepts increase

The need for her to be a consumer advocate came clear in that 2016-2017 APS rate case, in which the utility asked for a substantial rate increase.

RUCO is supposed to represent residential ratepayers, and we pay a small amount with every bill to fund it — 7 cents on my last TEP bill.

But in that case, RUCO went from asking for a decrease in net revenue for APS of $25 million in its initial testimony, to accepting a $95 million increase in the settlement a year later. (Rates are designed around how much the commissioners say the regulated utilities should make.)

That prompted commissioner Bob Burns to fire off a sharp letter asking, among other things, “Why did RUCO agree to a net base rate increase of over $119.2 million greater than recommended in its direct testimony?”

In response, RUCO noted that settlement agreements are a result of give and take.

In an email to me, new director Jordy Fuentes said the agency’s changed position resulted from RUCO accommodating the longer period of analysis preferred by the corporation commission. He noted the settlement resulted in a projected average 4.54% rate increase rather than the 7.96% first requested by APS.

Former RUCO director Pat Quinn served under Gov. Jan Brewer, and he told me in his view the agency has not been as aggressive under Ducey as it was under Brewer.

In fact, Quinn weighed in on that rate case as a representative of a new consumer group, the Arizona Utility Ratepayer Alliance, formed by the clean-energy industry in part to be a more assertive advocate. The group helped fight an effort by APS to introduce demand charges as part of the case.

Champion emerges

But it took Stacey Champion to really show RUCO aggressiveness. After the new rates took effect, the Phoenix resident and other APS customers noticed their bills went up more than the projected 4.54%.

She collected more than 400 signatures and formally challenged the rate increase, the first time any citizen has used this tool to do so.

Champion did not ultimately convince the commission to rescind the increase, but her data analyst presented a complicated analysis of millions of records to try to show the APS projections were misleading. RUCO analyzed 5-10 customers’ bills and found no evidence of overcharging, Fuentes told the commission.

Just last month, Champion discovered that the utilities had quietly been allowed to leave off regular reports to the commission on the number of electricity shut-offs it had conducted on residential customers.

APS had shut off the power to about 110,000 customers in 2018, about 1 in 10 of its customers overall, a sharp increase over 2017. RUCO didn’t discover this; a curious citizen did.

More recently, RUCO has embraced a proposal to have utility ratepayers pay for the cost of culling trees and brush from Arizona forests in order to prevent wildfires that might ultimately cut power to customers. The biomass would then go to a power plant to produce electricity.

It happens that David Tenney, who was RUCO director for much of Ducey’s term, is now director of the Department of Forestry and Fire Management.

At the last corporation commission meeting, commissioner Justin Olson helpfully pointed out that taxpayers should probably cover those fire-prevention costs through the state’s general fund, not ratepayers through their electric bills.

Advocacy, not balance

In an email to me, Fuentes defended the agency as accountants and attorneys who specialize in utility rates, not activists.

“In the past, RUCO’s effectiveness was questioned because of what some would consider vigorous consumer advocacy based on out-of-balance positions. RUCO, particularly under Director Tenney’s tenure, worked hard to become more effective by advocating for well thought out and well-balanced positions,” he wrote.

Yes, RUCO must work with the commission of the moment. But let’s be clear: Consumers don’t need “balance” that cedes power to the big utilities such as Pinnacle West, which made about $1 billion in profit from captive APS ratepayers in 2017 and 2018. We pay for them to fight for us, not be balanced toward the monopoly utilities.

Marquez Peterson will have to fight the gravitational pull of the big utilities that has sucked RUCO in their direction if she wants to represent consumers at the corporation commission.

The good news is, there’s plenty of room for her to stand out as an advocate, and voters would notice when she runs for election in 2020 if she dares to stand up for them.

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