PHOENIX — When newly elected Arizona Corporation Commissioner Kevin Thompson traveled to New York to meet with Wall Street investors in January, Thompson discussed several topics related to Arizona’s utility regulatory environment. He tweeted about the trip after he returned.
What Thompson likely did not realize at the time was the cascade of events that would follow, including a renewed call by one of Thompson’s fellow commissioners in October to revamp the commission’s code of ethics.
One commissioner recused himself, Thompson did not
Among the topics Thompson discussed with one of the financial firms were electricity bills, interest rates, renewable energy, utilities’ access to capital, and the balance between grid reliability and affordability. That’s according to notes taken by the financial services company Credit Suisse.
Thompson was with a small group of commissioners from around the country who were attending a two-day series of meet and greets with investment executives and the American Gas Association (AGA).
Thompson, a former natural gas lobbyist, would later tell 12News his purpose for the trip was to assure the financial community there is regulatory stability in Arizona and to tell them the state is a great place to invest in. He denied violating any ethical rules. Thompson also noted the trip was sponsored by a national association of utility regulators (NARUC), which on its face lent credibility to the trip.
However, after 12News questioned that association’s affiliation with the trip, the association disavowed any partnership with AGA.
According to a Jan. 20 Credit Suisse Research Bulletin, when the subject of pension recovery came up among the visiting commissioners, Credit Suisse wrote “most commissioners are in favor of some type of pension recovery” for utilities, a position that was favorable to the shareholder’s point of view. On that topic, a commissioner from another state who was also in attendance recused himself from engaging in that particular conversation, according to the bulletin.
He was Connecticut Commissioner Michael Caron, the president of NARUC.
“Due to there being two relevant cases pending in the state, Commissioner Caron (of CT) did not comment on this topic,” the bulletin states.
Caron wasn’t the only commissioner overseeing open rate cases of utilities. Thompson was as well. But there was no mention of Thompson recusing himself of any discussions with Credit Suisse.
A prominent consumer advocate for Arizona utility customers says the fact Caron recused himself and Thompson did not - as the Credit Suisse bulletin recounts - highlights the compromised position Thompson was in by attending the meetings in the first place.
The bulletin noted that PNW (Pinnacle West, parent company of APS) had a pending rate decision in Arizona.
“Our read on the commissioner comments suggests a more constructive prospect for pension recovery, which could be a positive…” the bulletin states.
“Based on this, I have no doubt that unauthorized communication took place,” said Padgaonkar by email to 12News, who filed an ethics complaint against Thompson in February over the New York trip.
Commissioners held closed-door meetings over complaint
Padgaonkar filed an ethics complaint in February and called on the Commission to launch an investigation into Thompson’s trip.
Instead, Thompson and his four colleagues on the Commission held a closed door meeting in March with commission attorneys to discuss the complaint. Then, three commissioners voted to dismiss the complaint without launching an official investigation. Chair Jim O’Connor said there was no evidence of wrongdoing and even accused Padgaonkar of “weaponizing” the code of ethics by filing the complaint. Thompson recused himself from voting. Anna Tovar abstained.
12News later learned of three additional meetings Thompson had with investors to discuss issues relevant to Arizona energy policy. Thompson’s fellow commissioner, Nick Myers, also attended at least one private meeting. Thompson said through a spokesperson none of those meetings violated ex parte rules or the code of ethics because specific matters related to pending rate cases were not discussed.
Tovar wants Commission to revamp ethics code
During the March meeting, Commissioner Tovar said she abstained from voting because the code of ethics was not clear about how to handle complaints.
“It is my opinion that the current code of ethics does not in any way, shape or form detail the process clearly,” Tovar said. “I fully support us moving forward in wanting to revamp the code of ethics.”
On October 30th, Tovar wrote a letter to Chairman O’Connor that re-iterated her call for the commission to clarify its ethics code.
Tovar raised concerns about commissioners’ duties related to open meeting law and ex parte communications.
“I wrote a letter to Chairman O’Connor requesting that the Code of Ethics be put on an upcoming agenda for consideration and a possible vote to adopt a procedure for handling Code of Ethics complaints,” Tovar told 12News in an email. “The Commission tasked staff with drafting a proposed procedure, Staff completed that task, and the Commission should consider the proposal.”
Tovar also said she has concerns about “several involuntary staff departures and reassignments,” questionable social media posts and statements made outside of open meetings.
O’Connor said there is no urgency to address ethics code
12News asked O’Connor two weeks ago if he planned to put the item on a future agenda.
“There is no plan to do any action on anything,” O’Connor said. “January would be the earliest we would get to it. It’s not like there’s this urgency. We’re not going to cancel Christmas.”
A former chair of the commission disagrees about the sense of urgency.
Republican Bob Burns was part of the commission when the code of ethics was first adopted and has been outspoken about ethics and transparency.
Burns said Commissioner Tovar’s request is legitimate because Burns is concerned the current commission appears to be improperly influenced by the utilities.
“The Commissioners are constitutionally charged with looking out for the welfare of the ratepayers and their interactions with monopolies. And if you have unethical commissioners, one of the most serious things that can happen is you end up with a captured commission, captured by the utility and the protection of the ratepayer goes out of window.”
Burns said several recent decisions by the commission reflect “a practice that reflects being captured by a utility.”
12News asked O’Connor about Burns’ criticism. O’Connor has not responded.
O’Connor also told 12News he was unaware of the other meetings Thompson and Myers had with financial firms, as reported by 12News through public records requests.
“If you can come back to me and say ‘Jim, they met with Bank of America or X,Y, or Z, I don’t know, who they would even meet with, and what they spoke about such and such’, I’ll know it when I see it,” O’Connor said. “If it’s inappropriate, whatever they engaged in, I’ll call a spade a spade.”