Goldwater Institute questions APS political contributions

By Rachel Leingang | Arizona Capitol Times

A libertarian think tank contends that monopoly utilities could be violating the free speech rights of ratepayers by making political contributions without their consent to candidates and causes.

The Goldwater Institute has long defended the rights of people and organizations to spend money on elections without burdensome disclosure requirements, making the group’s position all the more surprising.

The Goldwater Institute wrote a letter to Arizona Corporation Commissioner Bob Burns last week as part of Burns’ workshop on transparency and disclosure of political activities by regulated utilities.

The letter comes amid a battle between Burns and the state’s largest utility, Arizona Public Service. APS, through its parent company, Pinnacle West, spent millions boosting Republicans, including Burns, in the 2016 commission election. Burns wants APS and Pinnacle West to disclose any spending it may have done in the 2014 election, when dark money groups spent heavily on the race. But the utility has refused, and it has not confirmed or denied any involvement in the 2014 election.

The libertarian group said using ratepayers’ money to support political endeavors could constitute compelled speech.

Regulated utilities have a right to participate in political speech without burdensome disclosure rules, it wrote, “but no one has a constitutional right to use the power of law to force people to subsidize speech with which they may disagree.”

The letter cites several U.S. Supreme Court cases that found people couldn’t be forced to pay for political speech without their consent. And, the group wrote, Arizona’s laws go even further than the federal government to protect individual rights.

Regulated utilities in Arizona are given exclusive monopolies to service territories, and the commission sets just and reasonable rates for the regulated monopolies, the letter said. Because of this arrangement, customers in a monopoly utility’s territory have to do business with a particular utility and pay its rates, the Goldwater Institute said.

“A serious constitutional problem arises if the regulated utility diverts any portion of such compelled funds to political spending without the consent of ratepayers. An individual should not be forced by the government to subsidize another’s speech against his will – whether through tax dollars or in the form of a government-created monopoly,” the Goldwater Institute wrote.

APS and Pinnacle West have repeatedly said that money spent on campaigns and other political activities doesn’t come from their ratepayers.

“The letter does not appear to recognize that political contributions by Pinnacle West come from shareholders rather than customers of APS,” APS spokesman Jim McDonald said.

Jon Riches, director of national litigation for the Goldwater Institute, said it’s unknown if any of the money Pinnacle West or APS uses for political activities is compelled. While the public doesn’t know all the details of where the companies’ money comes from, “most of the revenues that Pinnacle West derives are from APS, and APS’s revenues are derived from ratepayers,” Riches said.

The Goldwater Institute wants to see the expenditures of any ratepayer funds for political activities made public, he said. And while the group doesn’t believe private individuals or nonprofits should be subjected to onerous disclosure requirements, Riches said they see a “significant distinction” between those groups and regulated monopolies.

Riches couldn’t say if the Goldwater Institute would get involved further in the issue. But he said Burns’ seeking disclosure of whether ratepayer funds are being used for political speech is the first step toward determining if there is a compelled speech issue.

Burns said it’s “pretty much the case” that Pinnacle West’s money is largely coming from ratepayers.

“It’s my understanding that APS is basically their main source, basically their only source of revenue,” Burns said.

Burns said it’s a “gray line” between what is ratepayer money versus what’s a return on investors’ equity.

Burns said if there is evidence of compelled speech then maybe there is a need to take a new look at the difference between a regulated utility corporation and a non-regulated corporation under Citizens United v. Federal Elections Commission. The 2010 U.S. Supreme Court decision gave unions and corporations the free speech right to spend on political campaigns.

Burns said he agrees with the Goldwater Institute’s assessment that customers of monopoly utilities are much different than customers of non-monopoly businesses, which customers could stop supporting if they didn’t agree with their political spending.

“That’s not an option available for a regulated utility customer,” Burns said. “If the customers disagree with the political position that a regulated utility takes, so what? There’s nothing they can do about it.”

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