FATAL FLAWS OF PROPOSITION 412, PROPOSED 25-YEAR FRANCHISE AGREEMENT WITH TEP - IS TEP FOLLOWING THE KOCH PLAYBOOK?
Unacceptable presentation of the Proposition to the voters: April 15, 2023
When my partner and I got the City’s pamphlet for Proposition 412 in the mail, we were flabbergasted that a complex, 30-page contract was being presented to us voters with 1) no analysis, 2) no arguments pro or con, 3) no rationales, and 4) no figures for the amounts of money involved. How many voters are going to take the time to wade through the document? And if they do, how successful will they be in picking out the truly significant details from the sea of words?
The title of the pamphlet is, “The Choice…Is Yours.” One asks, “How are the voters going to know what they’re choosing, when finding out is made so difficult?”
The City needs to re-schedule the election and present the Proposition properly, with analysis, arguments pro and con, rationales, and dollar figures for the monies involved. The present situation is absurd.
Entirely inadequate funding of climate measures in the midst of a climate emergency:
The City of Tucson officially declared a “climate emergency” in 2020. An emergency. Not a“problem.” Emergency. One would never know this from reading the proposed contract with its main supplier of electrical power, even though the generation and use of electrical power are absolutely central to both our present predicament and our hopes of solving it.
The emphasis throughout the contract is on undergrounding of TEP power lines and other facilities. So far as the climate emergency is concerned, it makes no difference whether power lines etc. are undergrounded or not. And yet, one finds that the proposed contract specifies that approximately 90% of the “Community Resilience Fee” [CRF] will go to undergrounding for the first decade of the contract, with only about 10% of the CRF left over for the City’s “Climate Action and Adaptation Plan” [CAAP]—the plan that is the City’s response to the climate emergency it has declared. (See Section 10.e, pg 14, starting at line 10. According to this subsection, the CRF would be 0.75% of “applicable [TEP] revenues.” No dollar figures are given, of course, just a percentage. 10% of 0.75%--the bone that gets thrown to CAAP for ten years—is 0.075%, or less than a tenth of a percent of TEP “applicable revenues.”)
In addition, CAAP will have to duke it out with two other “public benefits” for its share of the “Franchise Fee” [FF]--a different fee that amounts to 2.25% of “applicable revenues.” (See subsection 10.b and subsection 10.d—the reader is left to calculate that the “one-ninth” of the 2.25% FF that “shall” be used for “public benefits” would be 0.25%, since the drafters of this contract don’t bother to say so.) The two other public benefits—one of them quite worthy, the other (IMO) not—would be “low income assistance” and “undergrounding.” According to Subsection 10.d(2), the City Council and Mayor will decide how the FF is allocated among these three objectives. We can’t now know what the results of that annual exercise would be, but if each “benefit” got a third of the 0.25% , that would mean about 0.083% of applicable TEP revenues would go to CAAP. Unless, of course, “undergrounding” demanded the whole 0.25%
So, for the first decade of this contract, CAAP would likely end up with a total of about 0.16% of TEP applicable revenues per annum. Would that be a lot of money, or just a little? The proposed contract saith not, and there is no commentary, no proposed budget with dollar figures, to tell the voter how much money we’re talking about. One wonders whether the amounts for CAAP would turn out to be so inadequate that whoever decided to present the contact without analysis, arguments pro and con, rationales, and dollar figures thought it wiser to keep the voters in the dark.
Contract is silent on how TEP will generate its electricity:
There is nothing in the proposed contract about how TEP will move its generation of electricity away from fossil fuels to alternative energy sources. At this point, the majority of TEP’s electricity comes from the burning of fossil fuels, which (as every sane person knows by now, thanks to repeated IPCC reports) is something we need to stop doing ASAP. The City should use whatever leverage it has to hasten TEP’s abandonment of fossil fuels, and certainly the renegotiation of TEP’s franchise is a golden opportunity to apply pressure and get some binding commitments from what is still a major CO2-producer in the State of Arizona. “Electrification” of the economy doesn’t mean much if fossil fuels continue to produce the electricity.
The three problems just described are more than enough to show that the City needs to postpone the current Proposition 412 special election and go back to the negotiating table. Surely it can do better than the proposed contract, and for certain it can do a far better job of presenting (and explaining!) a proposed 25-year contract to the voters! At this point, we’re being asked to accept or reject a pig in a poke—a pig with lipstick, the lipstick being the cosmetic provisions for CAAP and other “public benefits.”
If the reader wants to get even more details about why the proposed contract is not acceptable, they can proceed to read the next (and last) section of this analysis.
Additional problems with Proposition 412:
1) The proposed contract is “non-exclusive” (see Section 3 and also Section 15), but TEP would have veto power over allowing access to its system (see Section 7.a(1)). The exception is for “Electric Service Providers holding a valid certificate of convenience and necessity from the Arizona Corporation Commission” (Section 7(b)). Given that the ACC has become a bought and paid for subsidiary of Arizona Public Services, entities wishing to become a certified “Electric Service Provider” might have a problem getting their certificate.
2) Either the City or TEP “may” ask to renegotiate certain sections of the proposed contract after 10 and after 15 years (Section 5.a). These sections include (no surprise) Sections 10.e and 16.5, both of which pertain to the monies that would flow to CAAP and other “public benefits.” (In addition, if the City or TEP refuses to renegotiate, the other party may give notice of termination of the agreement. This provision means that either party can essentially force renegotiation of the contract, IMO. One can speculate as to why Section 5.a is in here, but wouldn’t it be nice to have a stated rationale for it?
3) Note that “Applicable Revenues” exclude wholesale sales and/or delivery of electricity (see Section 10.a)). I have no idea how substantial these are, and of course the pamphlet does not help.
4) In Section 10.e we have a nine-point summary of CAAP’s objectives. Number two is stated as “promot[ing] distributed energy resources such as rooftop solar.” Given what many of us view as TEP’s “war” on “rooftop solar” (at least in its residential form), it’s interesting to see this claim turning up in a contract…with TEP.
5) The end of Section 10.e asserts that the “Community Resilience Fee” is “not intended to be a payment to the City,” but if the courts determine that it is, the City and Company agree to renegotiate Section 10.e within 90 days of the court ruling. Rationale, please? That is, what is the basis for this concern, and how serious is it? Especially since Section 10.e is the part of the proposed contract that concerns TEP support for “public benefits,” including CAAP. In other words, just how solid is the argument that the voters should support Proposition 412 because of its benefits to CAAP, all of which could apparently disappear at the stroke of some “justice”’s pen?
6) Note that any lien the City might hold for non-payment of the “Franchise Fee” would be “subordinate to any mortgages or deeds of trust securing any bona fide indebtedness” (Section 10.f). So, the City might be one of the last creditors in line in the event of a TEP bankruptcy. (See also Section 25.b.)
7) Section 16.5.a states that the “Community Resilience Coordination Committee” will consist of five members: two from the City, two from TEP, and one from “either the City, the Company or a third party to be approved by the City and Company.” Obviously, if the fifth member were to be from TEP, that would give TEP an absolute majority on this committee, which is supposed (Section 16.5.b(5)) to “pass resolutions…directing [TEP] to use the Community Resilience Fund towards the Community Resilience Fee Purposes except where such purpose is undergrounding required pursuant to Section 21.” Note the exception for undergrounding, which Section 16.5(c) further enlarges upon. Note also that the “third party” might be a TEP surrogate. (Voters who watched what happened to the Arizona “Independent [sic] Redistricting Commission” in 2021, for instance, will share this concern.)
8) Section 16.5.d lists the six factors besides CAAP that the “Community Resilience Coordination Committee” “may” consider when allocating funds. Obviously, CAAP could be facing a lot of obstacles to effective implementation, even if the City has control of the Committee.
9) At last, we come to the issue of “severability,” in Section 29. All of the provisions of the proposed contract are to be “severable”—i.e., if one of the provisions is “adjudged invalid or unconstitutional,” the rest of the provisions still stand. Section 29.b leaves one exception, however: if “any part of Section 10 is adjudged invalid or unconstitutional, this entire Agreement will be deemed to be invalid and without effect.” Since Section 10 is precisely the section that specifies how much money goes to public benefits, including CAAP, the interested voter would like to know the rationale for this “exception.” Clearly, there is concern that Section 10 might be “adjudged invalid or unconstitutional.” What is the basis for that concern, and how serious is it? And (again), just how solid is the argument that the voters should support Proposition 412 because of its benefits to CAAP, all of which could apparently disappear at the stroke of some “justice”’s pen?
--Patrick Diehl, Tucson resident and voter, Ward 3