By Amy Silverman
By Olivia LaVecchia
By Monica Alonzo and Stephen Lemons
By Chris Parker
By Michael Lacey
By Weston Phippen
In November 1998, after former state treasurer Tony West narrowly won the seat soon to be vacated by Jennings (because of term limits), Irvin, Jennings and Rose scrambled to push through a precedent-setting deregulation settlement agreement with Arizona Public Service Company while they still held a majority.
Kunasek opposed the settlement agreement, perhaps hoping to stall until West, an old colleague from the Legislature, came on board. Then West and Kunasek could outvote Irvin and push through different rules. Kunasek and his aide informed the Arizona Attorney General's Office about the mad -- and allegedly illegal -- rush to get the deregulation rules in place by December 31, 1998. The Jennings-Irvin-Rose plan was dashed when Supreme Court Judge Charles Jones ruled that the commission, in its rush, had failed to give interested parties "due process" -- sufficient time to comment on the rules.
Eventually, Kunasek would take the lead in writing a different set of deregulation rules.
In a nutshell, the first deregulation plan gave ratepayers a 4 percent reduction and required that electric companies commit to solar resources and to sell off either their power plants or their transmission systems. The second plan offered consumers a rate break of 7.5 percent but did not require electric companies to sell off power plants or transmission systems.
Although electric company deregulation is only just beginning -- APS won't be fully deregulated for a couple of years -- each side contends today that its rules are/were more "consumer friendly." Since the deregulation process is so painfully slow, we won't know for years whether the commission has set up rules that will provide consumers with a reasonable choice of electric companies.
Not surprisingly, Rose says Kunasek caved in to the utilities and wrote rules that will preserve their monopolies.
"Tony and Carl passed a lame set of rules; they pretended they got more money for people, but in fact they eliminated competition," says Rose. "They totally reversed everything I had worked on and gave utilities exactly what they wanted."
Jack Rose must have wondered what to do when he stepped down as the Corporation Commission's executive secretary/chief executive officer at the end of 1998. As usual, he set his sights high. No single-wides on a dirt road for Jack Rose.
On December 14, 1998, just two weeks before Rose was to resign, Oneok and Southwest Gas announced a proposed merger. The Arizona Corporation Commission and their regulatory counterparts in Nevada and California would have to approve the merger.
That same day, Rose faxed his résumé to Prudential Securities in New York. (Rose used the commission's fax machine.) He had visited Prudential officials earlier in the fall to discuss the possibility of the company floating bonds for deregulated power companies in Arizona. Kunasek suspects that earlier visit included a job hunt, an allegation Rose denies.
One week later, on December 21, 1998, Rose faxed a "business proposal" to Prudential. Once again, he used the commission's fax machine. The proposal detailed Rose's ambitions to become an investment banker after he left the agency on December 31. He explained how his "insider" status as a former commission staffer could help Prudential.
"As a former commission staff director who has networked aggressively over the past few years, I am in an ideal position to get the initial advisory contracts, add value to state proceedings and obtain the resulting underwriting business.... Like any other business, insiders always have an advantage," he wrote.
Among other possible projects, he wrote about the proposed Southwest merger:
"Last week Southwest Gas Corporation announced that it is being bought out in an all cash transaction. Given my relationship with this company and my ability to advise them on important regulatory issues related to the merger, I believe that I am well positioned to get some of the underwriting business."
"I should have a job title that is sufficiently prestigious to enable me to work directly with CEO's and impress state commissions," he wrote.
He even proposed a two-year contract, adding: "If I have not brought in at least one six-figure ... contract within six months, Prudential has the right to cancel the contract."
"The downside is minimal and the upside is dramatic," Rose concluded. "I hope you will reach the conclusion that this proposed relationship has a positive expected value."
Two weeks later, Rose left the commission.
Renz Jennings retreated to his south Phoenix farm, where he tried to put the last bilious months he spent at his beloved commission behind him.
Tony West replaced Jennings. West, a former state treasurer and senator, had narrowly won the election against Paul Newman, a legislator from Bisbee. West's political life had been a progression of acts that, if not technically improper, certainly had the appearance of impropriety. For instance, while a state senator, West also served as a salesman for a controversial syndicator who lost a lot of people's money. West was stung by public reaction to his "double dipping" -- taking advantage of a loophole in the law that allowed him to resign for one day as treasurer, begin collecting retirement from his Legislature days, then step up again as treasurer so he could collect salary andretirement at the same time.