Tucson Electric Power draws scrutiny over ties to pro-coal advocacy group

Tucson Electric Power Co. has drawn scrutiny from state regulators over its involvement with a utility group that has lobbied against stiffer federal clean-air rules and is under investigation by Congress for alleged ethics violations.

Arizona Corporation Commission member Sandra Kennedy filed a letter to TEP on Tuesday, asking the utility to explain its involvement in the Utility Air Regulatory Group (UARG).

In early April, Democratic leaders of the House Committee on Energy and Commerce launched an investigation of major utilities’ involvement in the UARG and whether two former UARG attorneys appointed to the Environmental Protection Agency by President Trump are improperly pushing utility interests in rolling back clean-air regulations.

Formed in the late 1970s, the UARG has represented more than 40 utilities and utility-related groups, with donor members in Arizona including TEP, Arizona Public Service Co. and the Salt River Project.

The congressional probe followed a February report by the media outlet Politico that found some of the nation’s biggest coal-burning utilities are funding UARG activities, including lobbying to reverse Obama-era clean-air rules.

Since Politico published its report and the House leaders launched their probe into the UARG, at least 10 major utilities, including APS, have announced they are leaving the group.

“As APS continues implementing an even cleaner generation mix, we have made the decision to end our membership with Utility Air Regulatory Group,” the company said in an emailed statement.

But TEP has no intention of dropping out of the UARG at this time, company spokesman Joe Barrios said. The company used ratepayer funds for dues of more than $170,000 to the UARG in 2017 and nearly $157,000 to the group in 2018.

“It offers value to the company and our customers because so many utilities have been members in the past. That ultimately reduces the costs for us to have access to experts in federal air regulation, with which we are required to comply,” Barrios said.

None of the dues TEP pays to the UARG is for “lobbying,” though the group provides “advocacy” before administrative and regulatory bodies, he said.

Barrios said TEP plans to fully respond to Commissioner Kennedy’s information request and is in the process of compiling the requested data, which includes all of TEP’s communications with the UARG since 2012.

The commission already has some of that information in TEP’s most recent rate filing, he added. On April 1, TEP filed a rate case that would increase revenue about 8 percent and raise the average home customer’s bill by about $8 a month.

SRP, the Phoenix-area water and power utility, also has no immediate plans to drop its membership in the UARG, which it paid more than $215,000 in 2017, a spokesman said.

“SRP is currently a member of UARG and is committed to thoughtful, bipartisan discussion to provide a solid foundation for decision-making in the public-policy arena,” the self-governed SRP said.

SRP — a quasi-governmental agency not regulated by the ACC — said it has long belonged to a number of industry groups that provide a forum for regulatory issues, noting that its association with UARG goes back three decades.

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“SRP will evaluate its relationship with UARG, like any other organization that it is engaged with, and evaluate as to whether such participation is appropriately beneficial for SRP and its customers,” the utility said.

Electric utilities routinely win approval from state regulators to include in their rates at least part of their dues payments to industry associations, the Energy & Policy Institute, a research and watchdog group, found in a 2017 report.

The Corporation Commission has historically disallowed some industry group dues to be paid through customer rates, particularly for lobbying activities.

During APS’ last rate case in 2016, the state Residential Utility Consumers Office successfully moved to cut the utility’s expenses for industry group dues roughly in half.

RUCO said utility donations to UARG and another group, the Utilities Solid Waste Activities Group, are “purely voluntary ... political in nature, and may not be necessary for the provision of utility services.”

A former commission member said the utility panel should stop all such expenses — along with any political campaign spending — from being passed on to customers.

“I think its high past time for the commission to deny any cost recovery of dues to these groups,” said Kris Mayes, a professor in Arizona State University’s School for the Future of Innovation in Society and a former member of the Arizona Corporation Commission from 2003 to 2010.

“At this point, this group is doing nothing but engaging in actions that are anti-ratepayer, and to have ratepayers paying the cost is ridiculous,” she said.

Mayes, a staunch supporter of renewable energy, said most coal plants in the U.S. have or will soon become uneconomical to operate, as they can’t compete with lower-cost power from natural gas and renewable energy plants.

Barrios said coal has dropped from 85 percent of TEP’s power generation mix in 2013 to about 70 percent in 2017 and is expected to fall to 48 percent by 2023, as TEP works toward a goal of at least 30 percent renewable power by 2030.

“It’s important to remember that for us, coal is going to remain an important part of our generation portfolio, though we’re moving away from that to more renewables,” he said.

Meanwhile, House Energy and Commerce Committee Chairman Rep. Frank Pallone Jr., D-New Jersey, is leading a probe into how the UARG operates and whether EPA officials William Wehrum and David Harlow — who formerly represented the UARG as attorneys with the law firm Hunton Andrews Kurth — “continue to illicitly serve their old client in their new capacities at EPA.”

Pellone and Environment and Climate Change Subcommittee Chair Paul Tonko, D-New York, and Oversight and Investigations Subcommittee Chair Diana DeGette, D-Colorado, wrote letters to eight utility companies, not including any in Arizona, and the Hunton law firm, requesting information and documents related to their relationship with the UARG.

The committee leaders said they are concerned that Wehrum and Harlow “may have violated federal ethics rules by helping reverse EPA’s position in ongoing litigation,” noting that the agenda of the EPA’s Office of Air and Radiation, where the pair work, “appears remarkably similar” to the UARG’s policy agenda.