Indictment could lead to appointment vs. election for corporate commission

Tom Forese

Tom Forese

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Bob Burns

PHOENIX – The head of the Arizona Corporation Commission says the indictment of a former member on bribery charges may make the case for appointing utility regulators instead of electing them.

Tom Forese noted that Gary Pierce is charged with accepting money through his wife from a utility executive in exchange for supporting two separate financial matters to benefit that family-owned company. Pierce, through an attorney, has said the indictment represents selected use of facts by the government.

Forese is not commenting about the charges which also have ensnared Pierce’s wife, Sherry, lobbyist Jim Norton, and George H. Johnson, manager of Johnson Utilities.

But he said the fact that prosecutors believe they have a case says something.

“I even think that this could be the strongest argument for having an appointed commission,’’ Forese said.

Any such change would require voter approval. And the earliest the Arizona Constitution could be amended is 2018.

Forese, however, said he’s not just going to wait around.

“These allegations that are before us demand immediate action,’’ he said. “And that’s where our focus should be right now.’’

Most immediately, Forese wants fellow Commissioner Andy Tobin to begin “an audit and review’’ of the policies that, according to the indictment, were enacted because Pierce had been given money to support them.

One of those is a 2011 vote by the commission, on a 3-1 margin, with one abstention, to include another $18.2 million into the rate base for Johnson Utilities, reversing an earlier commission decision. More money in the rate base translates to the ability of a utility to increase what it charges customers to cover the costs.

The issue with broader implications -- and one that the current commission might reexamine -- is the 2012 proposal by Pierce to allow firms like Johnson Utilities to charge customers for the income tax payments owned by the company’s owners. That proposal was approved a year later on a 4-1 vote.

Forese, in a letter to fellow commissioners obtained by Capitol Media Services, said a review is necessary.

“The current commission must determine if those decisions were made in the public interest,’’ he wrote. At the very least, Forese said there needs to be a “code of ethics’’ for commissioners.

He pointed out that staffers are governed by certain policies. For example, Forese said, staffers can’t have meals with utility officials.

“This same restriction should be considered for application to commissioners as well,’’ he said. And Forese said that those who lobby the commission should be required to register.

Potentially the most far-reaching, Forese said other government bodies, including the legislature, have the ability to censure or remove members for certain conduct.

“I ask that all such possibilities be explored,’’ he wrote.

Boyd Dunn, newly elected to the commission, said he agrees with Forese there needs to be a conversation on how future regulators are chosen

“We are in the minority,’’ he said. “There are only 12 states that deal with elected commissioners. The rest are appointed.’’

And Dunn said having elected commissioners means candidates have to raise money -- often from the very people who have an interest in the panel’s decisions.

But he said there’s also a downside to having appointed commissioners.

“There seems to be less of an opportunity for citizens to participate,’’ Dunn explained. “Whenever you have elective positions you make a point of going out and listening to the voters and the ratepayers, who are also voters.’’

The idea of an appointed commission does not sit well with Bob Burns, a former legislator first elected to the panel in 2012 and reelected last year.

“The idea is how do you prevent corruption,’’ he said. Burns said the way you don’t do that is “put the appointment in the hands of one person: the governor.’’

But Andy Tobin said an appointed system could work if properly structured, such as the way state Supreme Court justices are chosen.

They are named by the governor. But the choice has to be from those who have been screened and nominated by a special review commission. And Tobin said there could be fixed terms of office.

Tobin said an appointive system could provide something else that the current system does not guarantee: geographic diversity on the commission. For the moment, he is the sole commissioner from outside Maricopa County.

But Tobin said there have to be changes at the panel to make that work -- and make the commission a largely judicial body where it makes sense to have members appointed just as are judges.

For example, Tobin said there’s no reason for the commission to regulate railroads, saying that could just as easily be handled by the Arizona Department of Transportation. Corporate filings, he said, could be done by the secretary of state’s office, with securities regulation handled by the attorney general.

That, he said, would leave the commission in a judicial role to determine how much utilities, as regulated monopolies, should be able to charge their customers.

In that letter to colleagues following the indictment, Forese wants Dunn, who chairs the panel’s Ethics Committee, to review what role the commission itself should take when such allegations arise. Forese said there are some laws and regulations on the books.

“However, it is necessary the commission shore up any gaps that remain which could aid the current law.’’

Forese also wants regulators to decide whether the commission should appoint an interim manager for Johnson Utilities while the indictment is pending.

An attorney for Johnson filed a legal notice with commission last week saying he “has removed himself from all management of the utility effective immediately in order to devote his time to defending himself until he is cleared of the recent charges.’’ But that notice does not say who is in charge in the interim.