Susan Bitter Smith resigns from Arizona Corporation Commission

• Susan Bitter Smith is resigning as Arizona's top utility regulator
• She faces a petition at the Supreme Court filed by the Attorney General seeking her ouster
• The governor will appoint a replacement, though no timeline has been given

Susan Bitter Smith resigned Thursday from her elected office at the Arizona Corporation Commission, saying the controversy surrounding her multiple jobs was becoming a distraction to her work.

Gov. Doug Ducey will appoint a replacement for Bitter Smith, and that person will fill the seat until after the next scheduled election in November.

The Attorney General's Office filed a petition with the Arizona Supreme Court on Nov. 30 seeking to remove Bitter Smith, the state's top utility regulator. The action argues that because Bitter Smith works as the head of the Southwest Cable Communications Association, the state's conflict-of-interest law prohibits her from serving as a Corporation Commission member.

Her resignation is effective Jan. 4, a day before the Supreme Court was scheduled to review the case.

"I feel that this distraction will continue," she said. "The public deserves the full attention of the commission and its staff to the upcoming body of work facing the commission. Despite my great love for this job and pride in our successes, my overriding goal is to insure that the work of the people gets done with the appropriate attention it deserves."

The five elected members of the Corporation Commission oversee electric, water and telecommunications companies, among other duties such as regulating securities and overseeing railroad crossings.

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On Wednesday, Bitter Smith's attorney filed a response to the attorney general's petition, stating that she had no conflict of interest as a regulator with her other job at the cable group. Bitter Smith also runs a public-relations firm called Technical Solutions.

Bitter Smith said at a news conference Thursday afternoon that she still wants the case to be heard by the court. She spent several minutes disputing Attorney General Mark Brnovich's petition before announcing her resignation.

Tom Ryan, the Chandler attorney who filed the complaint with the Attorney General's Office that prompted its petition to remove Bitter Smith, said the court is unlikely to hear the case.

"Courts do not take on things that are moot," he said. "Brnovich will file a motion or stipulation to dismiss this as moot or the Supreme Court will deny everything as moot."

The Attorney General's Office did not immediately have a response to Bitter Smith's resignation or to whether the office would drop the petition.

Brnovich said at a news conference Nov. 30 that a criminal investigation into Bitter Smith's work outside the commission was ongoing.

By law, Ducey's replacement for Bitter Smith must come from her political party. Like Ducey, she is a Republican.

Daniel Scarpinato, the governor's spokesman, could not provide a timeline as to when Ducey would appoint a replacement.

"This is an important position and Governor Ducey will take a thoughtful approach to filling this vacancy,” Scarpinato said.

Next year, voters will elect three commissioners to the five-member organization. In addition to Bitter Smith's seat, Commissioner Bob Stump is terming out and Commissioner Robert Burns is up for re-election.

Robert Graham, chairman of the state Republican Party, has talked with Bitter Smith recently about her political future. He said he did not know the announcement was coming Thursday.

“In the past, as you know, we had conversations and just talked about the pros and cons … not just of resigning, but if she’s going to dig in and fight it,” Graham said. “Susan’s always been real thoughtful about the whole thing.

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"She was going to talk to her family, her attorney and the different advisers in her life to figure out what to do, which obviously leads us up to today.”

Graham said “there’s a lot of talent” in GOP circles and many potential  good replacements. Names Graham has heard include that of former state Sen. Al Melvin, who unsuccessfully ran for governor in 2014.

Bitter Smith is a former Scottsdale councilwoman and ran four times unsuccessfully for Congress before being elected in 2012 to the Corporation Commission. She was elected with Burns, defeating two incumbent Democrats. Stump, another Republican, was re-elected to the panel in 2012.

Bitter Smith, Stump and Burns had the support of the Arizona Chamber of Commerce and Industry in their election, and an Arizona Republic investigation later found that money from Arizona Public Service Co. and Southwest Gas Corp., both regulated by the Corporation Commission, went through the chamber to an independent political group supporting the candidates called the Taxpayers' Voice Fund.

The group sent a mailer that opposed the Democrats running for re-election that year.

At the commission, Bitter Smith worked to reform rates for small water companies, saying those entities needed better ways to recover their costs to insure they ran efficiently for the benefit of mostly rural customers.

But the issue that has dominated the Corporation Commission since 2013 is solar net metering, the system through which customers with rooftop-solar panels get full retail credit for most of the excess energy they send to the power grid. If they send a kilowatt-hour of energy to the grid, they get a kilowatt-hour credit to offset what they draw from the utility at night or when their panels aren't supplying enough for their appliances.

When APS in 2013 sought to reduce the financial benefits of net metering for solar customers, the commission became a flash point for protests from solar advocates and those opposed to subsidies for renewable energy.

Bitter Smith put forth the most favorable proposal for solar during those hearings.

APS proposed fees of $50 to $100 a month for solar customers.

Three commissioners, Stump, Gary Pierce and Brenda Burns, proposed fees of $20-$50 a month. Burns proposed a fee of about $7 a month. Bitter Smith proposed no fees, but an amendment that would declare that there is a cost shift from solar to non-solar customers, and called for workshops to evaluate the value of solar to the grid.

In the end, Bitter Smith, Stump and Burns voted in favor of a fee that averages about $5 a month for APS customers who install solar. The $5 fee was a compromise offered by the rooftop-solar industry and the state consumer advocate, the Residential Utility Consumer Office.

But because the fee made Arizona among the first states in the country to begin peeling back the net metering program, it drew attention to the regulators.

A Washington, D.C.-area based organization called the Checks and Balances Project began filing public-records requests with the Corporation Commission. The project gets most of its funding from the non-profit Renew American Prosperity, which in turn has been funded by rooftop solar company SolarCity Corp., among other donors.

Checks and Balances Executive Director Scott Peterson said the group targeted Arizona regulators because of the 2013 APS rooftop solar fee. In addition to a high-profile fight to access deleted text messages from Stump's cellphones, Checks and Balances began highlighting Bitter Smith's work with the cable group.

When Ryan, the Chandler attorney, learned that Bitter Smith served as a regulator and as head of the cable group, he filed a petition with the Attorney General's Office seeking her removal. That led to the Attorney General's Office court action and her eventual resignation.

Bitter Smith addressed the Checks and Balances Project campaign in her remarks Thursday, calling it a "dark-money group's continued attack on the entire commission."

Peterson said he did not believe it was a mistake to target Bitter Smith despite her voting record being more favorable than other regulators with regard to solar.

"No. While we receive some funding through Renew American Progress from SolarCity, we are not SolarCity," he said. "For us, it’s about ethics, not issues. That’s why it’s now Bob Stump’s turn for the attorney general’s scrutiny, and for the governor to appoint someone who is above reproach in both ethics and issue neutrality."

Peterson said Ryan deserves credit for Bitter Smith's resignation.

"As I’ve said before, I can’t take ownership of Tom Ryan’s complaint, which seems to have triggered the AG’s ethics focus," he said. "We hope that the attorney general’s drive to clean up corruption in government will continue to cover pro-APS public officials."

Ryan said he is hopeful the governor appoints someone objective to the post.

"I’m calling upon Gov. Ducey to appoint a former retired judge from either the Supreme or appellate court, who has no connection to any of industries regulated at the ACC, and who will agree not to run for re-election in 2016," Ryan said. "We need to reestablish trust in the ACC and re-establish integrity at the ACC, and appointing a partisan to fill this position will undermine that process."

Republic reporter Yvonne Wingett Sanchez contributed to this story.