Embattled Arizona utility regulator decides to quit

PHOENIX — Saying the allegations against her have become a “distraction,” state utility regulator Susan Bitter Smith said Thursday that she is stepping down.

Bitter Smith continued to insist she has not violated conflict-of-interest laws. With her attorneys near her side at a news conference, she said that Attorney General Mark Brnovich is off base in his bid to have the Arizona Supreme Court remove her from the Arizona Corporation Commission, of which she is chairwoman.

Bitter Smith said the controversy, coupled with questions raised about the conduct of other regulators, “continues to create distractions from the important work of the commission.”

“The public deserves the full attention of the commission,” she said, citing upcoming issues. Bitter Smith said she is resigning, effective Jan. 4, with the delay meant to give Gov. Doug Ducey time to name a replacement.

Being one of five commissioners is an important position and Ducey “will take a thoughtful approach to filling this vacancy,” said gubernatorial press aide Daniel Scarpinato.

By law, the replacement must be a Republican like Bitter Smith. The Ducey appointee would have to decide whether to seek a full four-year term when Bitter Smith’s term ends just over a year from now.

Thursday’s action may not end Bitter Smith’s legal problems. In filing the lawsuit to have her removed from office, Brnovich said there also is an ongoing criminal investigation.

Even with her resignation, Bitter Smith said she wants the high court to continue to hear the legal arguments it is set to consider on Jan. 5.

Ed Novak, one of her lawyers, acknowledged that judges usually don’t like to spend time on academic issues like this, where their decision won’t affect Bitter Smith one way or the other.

But, he said, “There’s precedent for the court to continue to hear a case like this where these questions will arise in the future and provide guidance to future commissioners.”

The underlying facts are not in dispute.

Bitter Smith has a $156,000-a-year job with the Southwest Cable Communications Association, some of whose members offer telephone service. She also lobbies for CoxCom and Cox Communications.

The dispute is whether those associations are illegal for a utility regulator.

Brnovich, who is also a Republican, said her job with the cable association means she has a “pecuniary interest” in entities regulated by the commission. Bitter Smith said that’s a stretch.

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“Our Supreme Court has definitely stated that ‘pecuniary interest’ means an ‘equity or ownership interest in an entity regulated by the commission,’” she said.

“I receive a salary from an association whose members are cable companies not regulated by the commission, period,” Bitter Smith continued. “How much clearer can that be?”

As to lobbying activities, Novak said she does not have an illegal “official relation” to Cox Arizona Telecom, an affiliate that offers telephone services regulated by the commission. He said the conflict-of-interest laws do not extend to sister companies.

Bitter Smith made the same point, using the example of Berkshire Hathaway, the parent company of various interests. One of its companies is Burlington Northern Santa Fe Railway. It falls under the commission’s jurisdiction because the panel regulates railroad crossings.

Bitter Smith said using Brnovich’s theory, it would be a conflict for a regulator to work for sister companies like Dairy Queen or Fruit of the Loom.

Brnovich said what Bitter Smith does for Cox and its affiliates is different.

“I don’t think this is a situation where someone skated or got too close to a line,” Brnovich said. “She went all-in.”

“Either the statute is meant to prevent these types of conflicts, where someone has not only a financial interest but they’re a registered lobbyist for a parent company, or really our conflict of interest statutes are pretty hollow,” he said.

Bitter Smith, elected in 2012, insisted she is not quitting her $79,500-a-year post at the commission so she can preserve her higher-paying gig with the cable association. She said she has been able to do both jobs.

“My work here at the commission has been consistent and tireless, having not missed one open meeting or staff meeting and having led numerous initiatives to benefit the ratepayers of Arizona,” she said. Bitter Smith said she has worked for the cable association for 35 years as its sole employee.

The other issue cited by Novak and Bitter Smith is that voters knew about her other jobs when they elected her in 2012. She said it was only when a “dark money” group began raising questions that anyone questioned whether she was legally elected.

That’s a reference to the Checks and Balances Project, which has been raising questions about ties between commissioners and utilities. One of the contributors is SolarCity, which builds and installs solar electric units on businesses and homes.

The complaint that spurred Brnovich to look into Bitter Smith came instead from attorney Tom Ryan, who said he has no association with the industry.