ALEC's Next Attack on Clean Energy Surfaces in Arizona

-- by Gabe Elsner, Energy & Policy Institute

APS logoOn November 14, the Arizona Corporate Commission (ACC), the state entity responsible for regulating utilities, voted to charge ratepayers a monthly fee of 70 cents per kilowatt of solar energy installed on their roof. Arizona Public Service (APS) had proposed charging customers who install rooftop solar panels an additional $50-100 on their monthly bills. APS is an investor-owned utility that serves over 1 million customers and generates the majority of its electricity from coal, nuclear, gas and oil. Ultimately, the ACC's accepted a compromise struck between the solar industry and the Residential Utility Consumers Office (RUCO) to charge solar system owners a much smaller fee per month.

According to solar companies operating in the state, APS was attempting to "tax the sun," and APS's proposed changes would have "erase[d] the financial incentive for using solar." The ACC decision was a blow to APS, and while the fee will slightly impact the Arizona solar industry, it will not be the deathblow APS had proposed. The newly adopted fee would translate into approximately $5 for the average homeowner with a solar power installation.

APS appears to be leading the first assault of a national campaign by the utility industry trade association, Edison Electric Institute (EEI), and fossil fuel interests like APS, to weaken net metering policies. This year, ALEC failed to eliminate Renewable Portfolio Standards in 16 states across the country, and now, this new attack on clean energy policies could benefit members of ALEC who have an interest in coal and other fossil fuels. In the latest attempt to rollback pro-clean energy policies, fossil fuel and utility interests operating through the American Legislative Exchange Council (ALEC) are proposing new model legislation to slow the rise of the clean energy industry by weakening net metering policies. ALEC released the new model language on their website prior to the group's "States and Nation Policy Summit" scheduled for early December. If passed, the "Updating Net Metering Policies Resolution" would be sent to nearly 2,000 state legislator members of ALEC around the country.

ALEC's new model bill targeting net metering (and distributed energy) may also be the first assault of EEI's long-term strategy to address business competition from distributed energy generation like solar. The Energy & Policy Institute's Gabe Elsner asked Edison Electric Institute's Rick Tempchin if EEI was involved in ALEC's new model bill. Tempchin said that Brian McCormick, EEI's Vice President for Political and External Affairs, "worked with them on the resolution" attacking net metering. EEI is a member of ALEC and sponsored the 2012 States and Policy Summit, with sponsorships for ALEC conferences range from $7,000 -25,000.

See the video above on Elsner's exchance with Rick Tempchin, confirming that EEI was working with APS in Arizona and worked with ALEC on the new model bill.

APS and ALEC's Assault on Arizona Net Metering

APS appears to be part of a larger national campaign from EEI being implemented, in part, through ALEC's new net metering model language bill that favors the utility industry over distributed solar energy.

APS claimed to have left ALEC in April 2012 due to "economic" reasons, but rejoined the organization in November 2012 by paying $10,000 for membership and fees to join the Energy, Environment and Agriculture (EEA) Task Force. And now, APS' proposed changes to Arizona's net metering policies closely resemble language in ALEC's new model legislation that was crafted, at least in part, by EEI.

ALEC's new model bill calls for updates to net metering policies to create a fixed grid charge designed to "recover grid costs from [Distributed Generation] systems." In other words, at the December meeting, ALEC's utility and fossil fuel corporate members will discuss model legislation to change net metering policies such that solar customers would be charged extra for their connection to the grid and not be compensated fully for the power they produce. EEI and the utility industry want permission to "pay rates below market value and to charge customers who feed electricity back to the grid a monthly fee for maintenance costs" according to the Washington Post. Furthermore, fossil fuel and utility interests that have a stake in coal or natural gas plants simply want to slow the growth of their competition: for every solar installation on a home, means approximately one less customer paying for the electricity produced from fossil fuel plants.

The proposed changes to net metering would protect utility industry profits by eliminating incentives for homeowners and others to install solar power. According to SolarCity CEO Lyndon Rive, "If you look at the rate of adoption of customers, over next 20 years, that would roughly equal $2 billion in lost profits [for APS]. That is why they are so passionate about this. They just don't want somebody else to service their customer."

APS Spent Millions on Anti-Net Metering Campaign

APS spent millions to attack its competition in the solar industry, weaken net metering and protect its bottom line. According to recent financial disclosures from Pinnacle West Capital Corporation (APS' parent company), APS has spent more than $9 million on public relations related to net metering and deregulation - or about $9 for every APS ratepayer.

In response to an inquiry from ACC Commissioner Bob Burns, APS stated that "in connection with [Net Energy Metering] public relations work, Pinnacle West spent approximately $3.7 million" in the third quarter of 2013. APS denied that ratepayer funds were used to support the anti-net metering campaign, but The Alliance for Solar Choice (TASC) is challenging those claims. Bryan Miller, co-chair of TASC and Vice President of Public Policy & Power Markets at Sunrun, told Chris Meenan at Renewable Energy World, "Arizonans deserve to know whether ratepayer money is being used by APS to kill rooftop solar..."

APS Funding Front Groups to Attack Solar

APS coordinated a multi-pronged campaign on net metering campaign by laundering part of the $3.7 million through two non-profit groups that then attacked net metering and supported the utility's advocacy efforts. APS likely outsourced the lobbying and PR campaign to outside groups in an attempt to distance the utility's financial interest from the voices campaigning against net metering. Special interests like APS use front groups to boost the impact of their advocacy campaigns by having "independent, unbiased" voices appear as part of the public debate.

APS initially denied it was providing funding to the two outside groups, Prosper and 60 Plus Association, whose attack ads appeared on YouTube in July and generated over 145,000 views in just two weeks. At the time, an APS spokesman insisted that the company didn't pay for the ads and didn't contribute to 60 Plus. But the spokesperson was unable to confirm whether or not Pinnacle West contributed to the organization or paid for the ad according to the Phoenix New Times. In October, APS finally admitted that it funded the 60 Plus Association and Prosper to run a campaign against net metering and in favor of the utility's position.

The 60 Plus Association along with Prosper, a non-profit led by former Arizona House Speaker Kirk Adams (who is also the president of Americans for Responsible Leadership), spearheaded the campaign on behalf of APS. Sean Noble, a paid lobbyist and consultant for Pinnacle West and a Koch-network operative, provided the pass-through for APS to launder money to the two non-profit organizations through his Center to Protect Patient Rights. The Koch Brothers spend hundreds of millions of dollars on their political network (and used the Center to Protect Patient Rights as a pass through for political contributions to numerous organizations). The Koch Brothers' supposed "free market" political activities often line up with the financial interests of Koch Industries, the 2nd largest privately held corporation in the United States and a major fossil fuel conglomerate (invested in coal, oil, and natural gas among many other sectors).

Last month, Noble's Center to Protect Patient Rights and Kirk's Americans for Responsible Leadership, were fined a record $1 million by the State of California for failing to comply with California law. The groups funneled $15 million into California's ballot proposition fights in 2012. A spokesman for Koch Industries said regarding the California fines, "We had no involvement whatsoever..." but Ann Ravel, the head of the California Fair Political Practices Commission, countered that Charles and David Koch were behind a complex network of groups transferring money to influence the outcome of ballot propositions in the State of California.

The bottom line is that APS, in its attempt to rollback net metering, partnered with two individuals whose organizations have been formerly fined $500,000 each for failing to comply with California campaign contribution disclosure laws.

Controversial APS Lobbyist Involved in Anti-Net Metering Campaign

APS' Director of Government Affairs, Jessica Pacheco is very likely the individual spearheading the utility's anti-net metering campaign. Pacheco previously pitched APS on a controversial campaign plan to influence the ACC by funding independent non-profits to advocate for APS' position.

Pacheco has a controversial past, including partnering with an influential political consultant, Nathan Sproul, who's had a checkered history of voter fraud claims. Pacheco and Sproul formed the Lincoln Strategy Group (LSG) in 2007 to "leave the biggest public policy footprint of any firm in the Southwest." A recent article published by the Arizona Republic, detailed that Lincoln Strategy group presented the controversial campaign plan in 2009 to APS' CEO, calling for the funding of two non-profit groups, whose mission would be to show that the ACC's "decisions cost ratepayers money and hurt families." And, the newspaper reported the plan "called for making the non-profits appear as grass-roots efforts rather than as well-funded operations directed by industry insiders with clear corporate goals." Sproul insists that the proposal was drafted by Pacheco and Barry Murray, another LSG employee, at the utility's request, though the authors and APS dispute that claim.

Pacheco admitted that "it was a bad idea then, it is a bad idea now," and officials from APS said the strategy being deployed today is not connected to the 2009 plan from Pacheco and LSG. But Cleantechnica reported, "The pair left Lincoln almost immediately after this proposal and went to work for APS. Jessica Pacheo is now APS's head lobbyist and Barry Murray is a consultant." Bryan Miller, the Vice President at Sunrun told Cleantechnica, "APS is clearly executing the plan that Pacheco and Murray brought forward in 2009."

Furthermore, as Connor Gibson from Greenpeace highlighted, Pacheco also told the Arizona Capital Times that it left ALEC in April last year. Gibson spotted Pacheco at ALEC's conference in August. While there may have been a gap in APS' membership, Gibson contended, "It's possible APS' holding company Pinnacle West never left ALEC, or it's possible that APS lied to the Capital Times just like APS lied to Huffington Post about funding the anti-solar ads."

Regardless, APS's new anti-net metering campaign appears all too similar to the plan leaked to the Arizona Republic. Pacheco, now serving as APS' Director of Government Affairs, has spearheaded an effort that uses outside groups to paint the ACC's actions as negatively impacting ratepayers. This "astroturf" campaign (a fake grassroots effort) is almost exactly the same framework as Pacheco's plan outlined in 2009.

APS Campaign: The Launch of a National Effort Against Net Metering

APS is not alone in lobbying against net metering policy, their proposed changes mimic ALEC's new model legislation that was crafted, at least in part, by EEI.

EEI has also joined the fight locally in Arizona, teaming up with APS, 60 Plus, and Prosper, in a campaign to rollback the state's net metering policy. That's not a surprise considering that Don Brandt, the president of APS and the chairman, president and CEO of Pinnacle West Capital Corp., APS' parent company, serves on the EEI board.

EEI identified distributed generation such as residential solar power as the biggest near-term threat to the utility industry's business model in a January report entitled "Disruptive Challenges." [.PDF] The report illustrates that "threats posed to the electric utility industry from disruptive forces, particularly distributed resources, have serious long-term implications for the traditional electric utility business model and investor." The report concludes that, "the industry and its stakeholders must begin to seriously address these challenges, in order to mitigate the potential impact of disruptive forces..."

EEI spent $520,000 in a 10-day television advertising campaign against net metering and in support of APS. EEI is also spending significant funds on a broader public relations campaign, including ads on "both broadcast and cable television, radio and online" according to an EEI spokesman. As part of this effort, the "Global Strategy Group, a D.C.-based crisis management public relations firm working on behalf of Edison Electric Institute, APS's trade association, tried to secretly shop stories to local media outlets aimed at smearing a local solar panel company's employee, who lashed out at APS in an email to his customers" reported the Arizona Capitol Times.

Miller, the Vice President at SunRun said, "At the same time that APS lied about funding attacks against residential solar customers, its national trade association was secretly shopping articles that attacked the local Arizona solar industry. APS is executing on EEI's national playbook."

The Arizona campaign appears to be the first assault on net metering policies from the utility industry, which is desperately seeking to maintain its dominance as distributed generation erodes the utility's traditional business monopoly. Given that EEI worked with ALEC on their new model bill, the APS-led Arizona assault will likely be a model for other anti-net metering campaigns across the country.

This article was originally published by the Energy & Policy Institute.


The author listed as "PRwatch Editors" is for reports attributable to CMD's editors or guest authors.