Can Arizona’s utility securitization law make financing charges irrevocable and limit court review?
Apply this to your situation
This page answers the general question as of 2026. Ezel answers yours: what it means for your facts, under current Arizona law, with citations.
Plain-English summary
Arizona Attorney General Kris Mayes concluded that most of H.B. 2679’s special court-review rules are constitutional, but the law cannot permanently place utility financing charges beyond the Arizona Corporation Commission’s control.
H.B. 2679 lets electric utilities finance certain costs by issuing transition bonds and collecting mandatory customer surcharges called financing charges. The opinion describes those charges as “nonbypassable,” payable by all customers, and applied before other amounts on a utility bill. Although the law labels the resulting revenue as property of a utility-owned special purpose entity, the AG concluded that the financing charge is still a charge for electric service that is collected by a public service corporation.
That conclusion matters because article 15, section 3 of the Arizona Constitution gives the Corporation Commission “full power” to prescribe just and reasonable rates and charges. The AG therefore found A.R.S. §§ 40-608(D) and 40-610(A) unconstitutional to the extent they prevent the Commission from changing financing charges after transition bonds have been issued.
The opinion reached a different result on the law’s court-review provisions. It treated the limits on jurisdiction, available remedies, filing deadlines, appeal routes, and burdens of proof as substantive law within the Legislature’s authority. It also concluded that the limits do not violate Arizona’s anti-abrogation clause because they restrict forms of equitable relief and do not eliminate a damages action that existed at statehood.
What this means for you
Arizona utility customers
The opinion treats a financing charge as part of the price of receiving electric service, even when the statute directs the revenue to a utility-owned special purpose entity. It relies on the charge being mandatory for all customers, appearing through the utility billing process, and receiving payment priority under A.R.S. § 40-609(B). On that reasoning, the Corporation Commission must retain authority to decide whether the charge remains just and reasonable.
Arizona Corporation Commission members and staff
The Commission may approve, reject, or condition a proposed financing order under A.R.S. § 40-603(B). The AG concluded that the Commission’s constitutional responsibility continues after bond issuance and that the Legislature cannot make the financing charge permanently immune from Commission modification.
Electric utilities and transition-bond participants
The opinion did not reject utility securitization as a financing method or invalidate H.B. 2679 as a whole. It upheld the statutory structure for narrow and expedited court review, but rejected the provisions that remove financing charges and the true-up mechanism from later Commission regulation.
Parties challenging a financing order or charge
The AG concluded that the special judicial-review provisions are substantive and constitutional. The opinion specifically addresses the statutes’ limits on the issues a court may hear, restrictions on injunctions and stays, 10-day filing periods, direct appeals to the Arizona Supreme Court, and the “clear and satisfactory evidence” burden for specified challenges.
Common questions
Q: Did the Arizona AG find all of H.B. 2679 unconstitutional?
A: No. The opinion upheld the judicial-review provisions but found A.R.S. §§ 40-608(D) and 40-610(A) unconstitutional only to the extent they bar the Corporation Commission from modifying financing charges after bonds issue.
Q: Why did the AG treat a financing charge as a utility charge?
A: The opinion gave three reasons. The underlying cost arises from providing electric service, only electric customers must pay it, and payment is required to continue receiving service. It also noted that the utility ordinarily bills and collects the charge as servicer for its wholly owned special purpose entity.
Q: Can H.B. 2679 limit lawsuits challenging financing orders and charges?
A: According to the opinion, yes. The Legislature may define the available claims, remedies, deadlines, appeal path, and burden of proof because those matters create or regulate substantive rights and do not conflict with the judiciary’s procedural rules.
Q: Do the limits on injunctions violate Arizona’s anti-abrogation clause?
A: The AG said no. Ariz. Const. art. 18, § 6 protects actions to recover damages for injuries, while the challenged provisions restrict equitable remedies such as injunctions, stays, and delays. The opinion also found no protected pre-statehood damages claim that the provisions abolished.
Q: What costs can utility securitization cover under the law discussed in the opinion?
A: The opinion identifies transition asset retirement costs, such as unrecovered value when a generation or transmission asset is retired, and significant-event recovery costs arising from events such as severe weather, wildfire, or other natural disasters.
Background and statutory framework
H.B. 2679 created parallel securitization systems in Titles 30 and 40 of the Arizona Revised Statutes. Title 30 addresses public power entities. Title 40 addresses public service corporations regulated by the Arizona Corporation Commission, which was the focus of the constitutional question.
Under the Title 40 system, a public service corporation applies to the Commission for a financing order. The application identifies the costs to be financed, describes the proposed transition bonds, estimates financing charges, explains the true-up mechanism, and proposes a billing-services tariff when the utility will serve as bill collector. The Commission must approve, reject, or approve the application with conditions. Approval requires findings that the transaction will produce lower net-present-value customer costs than available alternatives and that the transaction and billing terms are just, reasonable, and in the public interest.
The utility’s wholly owned qualified special purpose entity holds the transition property and issues the bonds. Transition property includes the right to impose and collect financing charges. The true-up mechanism adjusts the charge for overcollection or undercollection, while H.B. 2679 attempted to make the charge and mechanism irrevocable after bond issuance.
The judicial-review provisions create a separate review path for financing orders and later charge calculations. The opinion describes rehearing requirements, narrow grounds for review, short filing and appeal periods, limits on injunctions, and direct Arizona Supreme Court review. The AG found those restrictions constitutional because they define the rights and remedies created by the securitization statutes.
The ratemaking provisions failed for a different reason. The opinion concluded that calling financing charges the property of a separate entity does not change their function. Customers pay them because they receive electric service, utilities normally collect them, and partial bill payments go to those charges first. That made the charges subject to the Commission’s constitutional duty to keep rates and charges just and reasonable.
Citations and references
Constitutional and statutory provisions:
- H.B. 2679, 57th Leg., 1st Reg. Sess. (2025)
- Ariz. Const. art. 15, § 3
- Ariz. Const. art. 15, § 6
- Ariz. Const. art. 18, § 6
- Ariz. Const. art. 6, § 5(5)
- Ariz. Const. art. 4, Pt. 1 § 1(1)
- A.R.S. §§ 40-608(D) and 40-610(A)
- A.R.S. §§ 30-1007, 30-1010, 40-608, and 40-611
- A.R.S. § 40-603(B)
- A.R.S. § 40-609(B)
Cases:
- State ex rel. Woods v. Block, 189 Ariz. 269, 276 (1997)
- Seisinger v. Siebel, 220 Ariz. 85, 92 ¶ 26 (2009)
- State ex rel. Collins v. Seidel, 142 Ariz. 587, 591 (1984)
- Boswell v. Phoenix Newspapers, Inc., 152 Ariz. 9, 17 (1986)
- Torres v. JAI Dining Servs. (Phoenix), Inc., 256 Ariz. 212 (2023)
- Sun City Home Owners Ass’n v. Arizona Corp. Comm’n, 252 Ariz. 1, 5 (2021)
- Johnson Utils., LLC v. Ariz. Corp. Comm’n, 249 Ariz. 215, 222 ¶ 25 (2020)
- Phelps Dodge Corp. v. Arizona Elec. Power Co-op., Inc., 207 Ariz. 95, 107 ¶ 31 (App. 2004)
Source
- Landing page: https://www.azag.gov/opinions/i26-001-r25-010
- Original PDF: https://www.azag.gov/sites/default/files/2026-02/I26-001.pdf
Original opinion text
STATE OF ARIZONA
OFFICE OF THE ATTORNEY GENERAL
ATTORNEY GENERAL OPINION No. I26-001
(R25-010)
By
Re: Constitutionality of Arizona’s Utility
KRIS MAYES Securitization Bill H.B. 2679 (2025)
ATTORNEY GENERAL
February 4, 2026
To: The Honorable Christopher Mathis
State Representative
1700 West Washington Street, Suite H
Phoenix, Arizona 85007
Questions Presented
On May 13, 2025, Governor Hobbs signed Arizona’s new utility securitization bill into
law. H.B. 2679, 57th Leg., 1st Reg. Sess. (2025). Arizona’s electric utilities can now “securitize”
certain operational costs and assets, issue bonds, and pass the cost to service those bonds on to
their customers through a bill surcharge or “Financing Charge.” See A.R.S. §§ 30-1001 et seq;
A.R.S. §§ 40-601 et seq.
Your Request presents three constitutional questions:
1. Do the provisions of H.B. 2679 that limit judicial review of an approved securitization
transaction violate constitutional separation of powers requirements?
2. Do the provisions of H.B. 2679 that identify the exclusive judicial remedies available
to customers violate Ariz. Const. art. 18, § 6, the “anti-abrogation clause”?
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3. Do the provisions of H.B. 2679 that restrict the Arizona Corporation Commission’s
review and modification of Financing Charges unconstitutionally intrude on the
Commission’s exclusive ratemaking authority under Ariz. Const. art. 15, § 3?
Summary Answers
When called upon to address the constitutionality of a statute, the Attorney General
presumes a statute is constitutional and will find otherwise only when the statute is clearly or
patently unconstitutional. Ariz. Att’y Gen. Op. I83-069 (“Because the Attorney General has the
duty to uphold and defend state laws, we will not opine that a statute is unconstitutional unless it
is patently so.”).
1. No. The legislature has the power to originate substantive law. Ariz. Const. art. 4, Pt.
1 § 1(1). The judiciary has the “[p]ower to make rules relative to all procedural matters
in any court.” Ariz. Const. art. 6, § 5(5). Sections 30-1007, 30-1010, 40-608, and 40-
611 (the “Judicial Review Provisions”) are substantive law because they create, define,
and regulate rights, and do not implicate any procedural matters within the courts’
exclusive constitutional purview.
2. No. The Judicial Review Provisions do not abrogate any right of action for damages
which existed at statehood.
3. Yes. The Commission has the constitutional authority and duty to prescribe “just and
reasonable rates and charges to be made and collected, by public service corporations
within the state for service rendered therein[.]” Ariz. Const. art 15, § 3. The Financing
Charges are “charges” for electric service because customers are required to pay the
Financing Charges to continue receiving electric service from their utility. Sections 40-
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608(D) and 40-610(A) are unconstitutional to the extent that they prohibit the
Commission from modifying the Financing Charges after a utility has issued its bonds.
Background
“Securitization” is a financing tool through which utilities can recover certain types of
costs, typically costs incurred because of unanticipated weather events, abnormally high fuel costs,
or uneconomical generating assets. In broad strokes, securitization allows utilities to more quickly
recover sizable costs by issuing bonds that are secured by a dedicated income stream. An essential
component of the securitization process is that the dedicated income stream used to repay the bond
purchaser (the Financing Charges) must be irrevocable and nonbypassable (i.e., paid first). The
more certain the income stream, the higher the creditworthiness, and the cheaper the bonds.
The Arizona Legislature determined that Arizona should “gain the benefits of
securitization.” A.R.S. § 30-1002(A); § 40-602(A). To accomplish this purpose, the Legislature
amended the Arizona Revised Statutes to add new chapters to Title 30, which governs the Arizona
Power Authority and other “public power entities,” and to Title 40, which governs the “public
service corporations” regulated by the Commission. 1 Both statutory schemes follow the same
general structure: they describe how the utility can issue and fund bonds to achieve a securitization
transaction, establish the process through which a utility can obtain permission to undertake a
1
A public power entity is “any municipal corporation or political subdivision that owns and
operates facilities for the generation, transmission or distribution of electric energy for sale to retail
customers in this state.” A.R.S. § 30-1001(10). Public power entities are not regulated by the
Commission, which only regulates the “rates and charges” of “public service corporations.” Ariz.
Const. art. 15, § 3.
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securitization transaction, and impose a series of limitations that prohibit nearly all review or
modification of the resulting Financing Charges. 2
I. The Securitization Transaction
A utility can use securitization to recover “transition costs.” A.R.S. § 40-601(22). 3 There
are two types of “transition costs:” (1) “transition asset retirement costs” and (2) “significant event
recovery costs.” Id.
Transition asset retirement costs refer to the “undepreciated value [or] unrecovered
balance” of an electric power generation, transmission, or distribution facility, which was part of
the utility’s existing “rate base” but which will be “permanently reduced” once the utility “retire[s],
abandon[s],” or otherwise reduces the book value of the underlying asset. A.R.S. § 40-601(17)
(defining transition asset), (18) (defining transition asset retirement costs). Significant event
recovery costs are those that arise from damages to utility facilities caused by unexpected events
like severe weather, wildfire, or other natural disasters. A.R.S. § 40-601(15).
By selling “transition bonds,” the utility can access an immediate influx of cash, use it to
cover substantial costs already incurred, and pay the bonds back over a set period by charging the
utility’s customers. A.R.S. § 40-601(21) (“transition bonds” are “bonds, notes, or other evidence
of indebtedness that are issued by a qualified special purpose entity. . . the proceeds of which are
used . . . to recover, finance, refinance or refund transition costs”). “The use of low-cost securitized
borrowing . . . is intended to enable [utilities] to achieve the benefits of securitization for customers
2
H.B. 2679 also amended A.R.S. § 47-9109 to clarify that the portions of Arizona’s Uniform
Commercial Code which govern secured transactions do not apply to security interests created
under A.R.S. § 30-1006 or § 40-607.
3
For simplicity, all citations in this section are to the relevant provisions in Title 40, A.R.S. §§ 40-
601 et seq. Title 30, A.R.S. §§ 30-1001 et seq., sets forth a nearly identical scheme for
securitization transactions involving Public Power Entities.
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by reinvesting capital now committed to paying the costs related to the production and delivery of
energy from new facilities, resources or other assets.” A.R.S. § 40-602(B).
The securitization transaction is a complex process.
A. Mechanics of the Transaction
A key component of the securitization transaction is the creation of the “Qualified Special
Purpose Entity.” The Qualified Special Purpose Entity is a distinct entity established and wholly
owned by the utility which exists to (1) hold the “transition property” and (2) issue the “transition
bonds” that are secured by that transition property. A.R.S. § 40-601(13). The “transition property”
includes the right to “impose, charge, collect and receive financing charges.” A.R.S. § 40-
601(23)(b)(ii). “Financing Charges” are those “nonbypassable charges that are paid or payable by
all customers to a qualified special purpose entity to recover ongoing financing costs” incurred to
facilitate the issuance of the transition bonds. A.R.S. § 40-601(6). Once the Qualified Special
Purpose Entity has issued the bonds, the Financing Charges are permanent; they are not “subject
to rescission, alteration, amendment, reduction, impairment or adjustment by further action of the
commission” except through the “True-up Mechanism.” A.R.S. § 40-610(A); A.R.S. § 40-601(24)
(the True-up Mechanism is “a formula . . . that adjusts financing charges over time to correct for
any overcollection or undercollection of financing revenues”).
The Financing Charges are payable to the Qualified Special Purpose Entity, and, once
payment is received, the resulting “Financing Revenues” belong to the Qualified Special Purpose
Entity, not the utility. A.R.S. § 40-601(6); A.R.S. § 40-608(I) (“Financing revenues are the
property of qualified special purpose entity[.]”). However, a Qualified Special Purpose Entity can
authorize a “servicer” to “calculate, bill, [and] collect” the Financing Charges on its behalf. A.R.S.
§ 40-601(14). The applicant public service corporation can act as a “Servicer” for its subsidiary
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Qualified Special Purpose Entity. A.R.S. § 40-601(14)(b)(i). A “third-party” can also act as a
Servicer, but only “in the event an applicant is unable to act as a servicer.” A.R.S. § 40-
601(14)(b)(ii); A.R.S. § 40-601(16) (defining “Third-party servicer”). When the utility is a public
service corporation, the Servicer must collect the Financing Charges pursuant to the terms of a
“Transition Billing Services Tariff.” A.R.S. § 40-609(A). The Transition Billing Services Tariff
sets forth how the Servicer collects the Financing Charges, but does not itself determine the amount
of the Financing Charges. A.R.S. § 40-601(20).
B. Approval of the Transaction
Before a utility can initiate a securitization transaction, it must first obtain approval to do
so. A.R.S. § 40-603(A). Specifically, public service corporations must apply to the Commission
for a “Financing Order.” A.R.S. § 40-603(A). 4
A.R.S. § 40-603(A) sets forth the required components of an application for Financing
Order from the Commission. Among other requirements, the public service company must
(1) identify the “Transition Assets” or other costs that the company seeks to securitize; (2) describe
the expected characteristics of the “Transition Bonds;” (3) estimate the Financing Charges;
(4) explain how the “True-up Mechanism” will adjust the Financing Charges over time; and (5) if
the proposed Initial Servicer is a public service company, include a proposed “Transition Billing
Services Tariff.” A.R.S. § 40-603(A).
Upon review of an application, the Commission “shall” issue a Financing Order that either
“approves, rejects or approves with conditions” the proposed transaction. A.R.S. § 40-603(B).
4
A Public Power Entity must provide public notice to and obtain approval from its governing body
before adopting a “Financing Resolution.” A.R.S. § 30-1003(A). Because your Request focuses
on how H.B. 2679 impacts the Commission, we do not discuss the process for approving a Public
Power Entity’s Financing Resolution here.
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The Commission can only approve (or “approve with conditions”) the Financing Order if it finds
that the applicant has met certain criteria. Id.
One of the criteria that the Commission must find is that the “transition benefit test” is
satisfied, i.e., that the “securitization transaction will result in lower costs to the applicant’s
customers on a net present value basis as compared to other financing options that are available to
the applicant.” A.R.S. § 40-603(B)(2). The Commission must also find that “[t]he proposed
transition billing services tariff,” “any true-up mechanism,” and the securitization transaction itself
are all “just and reasonable” and “in the public interest.” A.R.S. § 40-603(B)(3), (4).
Once the Financing Order is approved, the Qualified Special Purpose Entity can (but is not
immediately required to) issue bonds and pledge the “Transition Property” as security. A.R.S.
§ 40-606(A); see also A.R.S. § 40-601(23) (“Transition Property” includes the “right to impose,
charge, collect, and receive financing charges”). After issuing the bonds, the Qualified Special
Purpose Entity can begin to collect the Financing Charges.
II. Subsequent Review of an Approved Securitization Transaction
Another hallmark of securitization is that the Financing Charges must be irrevocable and
unmodifiable. See A.R.S. § 40-602(A) (“It is the public policy of this state to gain the benefits of
securitization by establishing irrevocable financing charges[.]”). To accomplish this, H.B. 2679
limits the circumstances in which courts can review or modify a Financing Order itself and the
resulting Financing Charges. Relevant to this Request, H.B. 2679 also prohibits the Commission
from reconsidering or modifying the Financing Charges once it has approved a Financing Order.
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A. Judicial Review of a Financing Order
A.R.S. § 40-611 dictates the process for seeking judicial review of “a commission decision
as to an application for a financing order.” A.R.S. § 40-611(A). 5 That process is as follows:
1) “A party. . . who is dissatisfied with a commission decision as to an application for
a financing order” can seek rehearing pursuant to A.R.S. § 40-253, which governs
applications for rehearing for all other Commission decisions. A.R.S. § 40-611(A).
Applications which are not granted within 20 days are deemed denied. Id.
2) A party then has 10 days to file a superior court action seeking “to vacate, set aside,
affirm in part, reverse in part or remand the commission’s decision regarding the
financing application.” A.R.S. § 40-611(C).
3) There are only two grounds upon which a party can challenge the Financing Order:
(a) the Financing Order is “unlawful” or (b) the “factual findings made in the
financing order …[are] unsupported” by either the Order itself or the “evidence”
that was present to the Commission. A.R.S. § 40-611(D). The challenging party
must prove either of these claims by “clear and satisfactory evidence.” Id.
4) Except as otherwise provided (like in A.R.S. § 40-608), no court has jurisdiction to
“review, enjoin, restrain, suspend, stay or delay” (1) a Financing order, (2) the
creation of Transition Property, (3) the issuance of Transition Bonds, (4) “a
commission’s performance of its duties under this chapter.” A.R.S. § 40-611 (G).
5) The Superior Court has 60 days to decide the matter (and can extend once for good
cause). A.R.S. § 40-611(E).
6) Any appeal must be taken directly to the Arizona Supreme Court. A.R.S. § 40-
611(F).
This structure largely tracks the existing processes for rehearing and judicial review of
Commission decisions which are set forth in A.R.S. §§ 40-253, -254, and -254.01. However,
A.R.S. § 40-611 expressly supplants the procedures for judicial review set forth in A.R.S §§ 40-
254 and -254.01. A.R.S. § 40-611(B) (“Sections 40-254 and 40-254.01 do not apply to any claims
arising under this chapter.”).
5
A.R.S. § 30-1010 is Title 30’s counterpart to A.R.S. § 40-611. See A.R.S. § 30-1010(A) (“A
party to the proceeding who is dissatisfied with a governing body’s decision as to a financing
resolution adopted pursuant to this chapter . . . may apply to the governing body for rehearing.”).
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B. Judicial Review of Financing Charges
A.R.S. § 40-608 also provides a narrow pathway to challenge implementation of the
Financing Order. 6 In general, the Financing Charges and the True-up Mechanism “are not subject
to review or approval” except that:
1) “the superior court has exclusive jurisdiction” to hear a claim by a customer against
a Qualified Special Purpose Entity that “there has been a mathematical or
administrative error” in ‘the calculation or application of the true-up mechanism”
or resulting Financing Charges. A.R.S. § 40-608(E).
2) That jurisdiction is limited to determining what charges should result from the
correct application of the True-up Mechanism, and the superior court has no
authority to “enjoin, restrain, stay or delay” the imposition of Financing Charges or
collection of Financing Revenues. A.R.S.§ 40-608(F).
3) “A court may not enjoin, restrain, stay or delay the application of the true-up
mechanism or the collection and remittance of financing revenues.” A.R.S. § 40-
608(G).
Any party seeking to challenge the Financing Charges or True-up Mechanism must do so
within 10 days of when the Qualified Special Purpose Entity notifies the Commission of the
adjusted Financing Charges. A.R.S. § 40-608(F), (K). Like A.R.S. § 40-611(F), any notice of
appeal from the Superior Court’s decision on a challenge to a Financing Charge must be taken
directly to the Arizona Supreme Court within five days of the decision. A.R.S. § 40-608(F).
C. Commission Review of Financing Charges
Once the Commission has approved a Financing Order and the Qualified Special Purpose
Entity has issued the bonds, “the transition property, the true-up mechanism and the financing
charges are irrevocable, final, nondiscretionary and effective without the need for further action
by the Commission” and the Financing Charges are not “subject to rescission, alteration,
amendment, reduction, impairment or adjustment by further action of the commission” except
through the True-up Mechanism. A.R.S. § 40-610(A). Any subsequent “[a]djustments to the
6
A.R.S. § 30-1007 is Title 30’s counterpart to A.R.S. § 40-608.
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financing charges. . . resulting from the application of the true-up mechanism are not subject to
regulation by the commission.” A.R.S. § 40-608(D).
The Commission does, however, retain “continuing jurisdiction over the terms of a
transition billing services tariff that is filed and maintained by a public service corporation.”
A.R.S. § 40-609(A). And while the Commission cannot modify the Financing Charges or True-
up Mechanisms themselves, it can consider the “bill impact” of the Financing Charges “when
determining the design of the rates within its jurisdiction or the allocation of the costs to and
among” ratepayers. A.R.S. § 40-604(D).
Analysis
This Office presumes that a state statute is constitutional. Ariz. Att’y Gen. Op. I83-069;
see also State v. Arevalo, 249 Ariz. 370, 373 ¶ 9 (2020) (“An act of the Legislature is presumed
constitutional[.]”) (citation omitted). As further explained below, we conclude that the Judicial
Review Provisions are constitutional, but Sections 40-608(D) and 40-610(A) are unconstitutional
to the extent that they prohibit the Commission from modifying securitization Financing Charges
after a utility has issued its bonds.
I. The Judicial Review Provisions are a constitutionally permissible exercise of the
Legislature’s authority to adopt substantive law.
The Arizona Constitution requires a separation of powers between the three branches of
government. Ariz. Const. art. 3. When assessing whether a statute violates the separation of
powers between the legislative and judicial branches, a court must consider “the essential nature
of the powers being exercised, the degree of control by the legislative department in the exercise
of the power, the objective of the Legislature, and the practical consequences of the action, if
available.” State ex rel. Woods v. Block, 189 Ariz. 269, 276 (1997) (citations and quotations
omitted).
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The Arizona Constitution gives the legislature the power to originate substantive law.
“The legislature has plenary power to deal with any topic unless otherwise restrained by the
Constitution.” Seisinger v. Siebel, 220 Ariz. 85, 92 ¶ 26 (2009). One such restraint is the Arizona
Supreme Court’s “[p]ower to make rules relative to all procedural matters in any court.” Ariz.
Const. art. 6, § 5(5). However, the legislature may also enact procedural rules so long as they
merely supplement, but do not contradict, existing court-made rules. State ex rel. Collins v. Seidel,
142 Ariz. 587, 591 (1984).
Court rules cannot “abridge, enlarge or modify substantive rights of a litigant.” A.R.S.
§ 12-109(B)(1). Thus, procedural matters prescribe the method of enforcing a right or obtaining
redress for the invasion of a substantive right. State v. Fletcher, 149 Ariz. 187, 191 (1986).
“Substantive law, on the other hand, is that portion of the law which creates, defines and regulates
rights.” Id. at 191–92 (citing State v. Birmingham, 96 Ariz. 109, 110 (1964)).
Here, the “essential nature” of the powers being exercised by the legislature in enacting the
Judicial Review Provisions pertain to the legislature’s authority to enact substantive law. State ex
rel. Woods, 189 Ariz. at 276. The Judicial Review Provisions do constrain Arizona courts’
authority to review Financing Orders (or Resolutions) and Financing Charges, but they do so in
ways that are “substantive” and do not encroach on the judiciary’s constitutional authority to
govern the procedural aspects of the courts.
First, the Judicial Review Provisions dictate which aspects of the securitization transaction
can be challenged in court. A customer who has timely sought a rehearing can later challenge in
court a regulatory authority’s decision to adopt a Financing Order or Resolution. See A.R.S. § 30-
1010; § 40-611. In such a challenge, the superior court can consider whether the Financing Order
or Resolution was “unlawful” based on the evidence presented. A.R.S. § 30-1010(C); § 40-
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611(D). The superior court also has “exclusive jurisdiction” to adjudicate claims arising from the
Financing Charges, but the reviewing court can only determine whether there has been a
“mathematical or administrative error” with respect to (1) “the calculation or application of the
true-up mechanism” or (2) “the calculation of the resulting financing charges and unit financing
charges.” A.R.S. § 30-1007(D) and § 40-608(E).
As a general rule, the subject-matter jurisdiction of a trial court is a substantive matter to
be determined from sources other than procedural rules. Encinas v. Pompa, 189 Ariz. 157, 160
(App. 1997); see also Ariz. R. Civ. P. 82 (“These rules do not extend or limit the jurisdiction of
the superior courts or the venue of actions in those courts.”). A jurisdictional directive from the
legislature, however, may encroach upon the judiciary’s procedural authority if it deprives a trial
court of jurisdiction to decide “violation[s] of its procedural directives.” Encinas, 189 Ariz. at 161
(a statute dictating how attorney general’s office was to be served with a complaint alleging RICO
violations was unconstitutional because it prohibited a trial court from dismissing for failure to
timely serve). But here, the legislature’s decision to grant the superior court “exclusive
jurisdiction” to hear certain disputes by customers against Qualified Special Purpose Entities does
not conflict with any existing procedural rules.
Second, the Judicial Review Provisions limit the types of relief that courts can grant. A
customer may not seek—and the superior court may not enter—an injunction or stay preventing
the application of the True-up Mechanism or the collection of Financing Revenues, nor can the
superior court modify the True-Up Mechanism. A.R.S. § 30-1007(E), (F); § 40-608(F), (G).
A.R.S. § 30-1007(F) and § 40-608(G) further clarify that, because the court “may not enjoin,
restrain, stay, or delay the application of the true-up mechanism,” any “modifications” necessitated
by the court’s miscalculation findings must be made “at the time of and as part of the next periodic
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adjustment of the financing charges.” The legislature routinely enacts statutes restricting or
prohibiting courts from enjoining certain governmental decisions. See, e.g., A.R.S. § 40-254(F)
(“[N]o court of this state shall have jurisdiction to enjoin, restrain, suspend, delay or review any
order or decision of the [corporation] commission”). Thus, like jurisdictional limitations, the
Judicial Review Provisions’ prohibitions on injunctive relief are substantive matters not in conflict
with any procedural rule.
Third, the Judicial Review Provisions impose 10-day statutes of limitations for actions
challenging approved Financing Charges and provide that the Superior Court’s decision can be
appealed “only to the supreme court” within five days. See A.R.S. § 30-1007(E), § 40-608(F);
see also A.R.S. § 30-1010(E) and § 40-611(F) (imposing similar limitations for actions
challenging a Financing Resolution or Financing Order). The legislature plainly has the
constitutional authority to adopt a statute of limitations. Indeed, there is an entire chapter of Title
12, Ariz. Rev. Stat., devoted to statutes of limitations and other similar limitations on liability. See
A.R.S. §§ 12-501 et seq. And while the Arizona Supreme Court has adopted a rule that dictates
when a notice of appeal must be filed, that rule expressly allows for the legislature to set a different
deadline. Ariz. R. Civ. App. P. 9(a) (notices of appeal must be filed “no later than 30 days after
entry of the judgment from which the appeal is taken, except as otherwise provided in this Rule or
unless the law provides a different time.”) (emphasis added). Here, the Judicial Review Provisions
do “provide[] a different time,” requiring notices of appeal to be filed within five days, not 30
days. Because ARCAP 9 expressly contemplates that the legislature may decide to set a different
appeal deadline, the five-day notice of appeal requirements in A.R.S. § 30-1007(E), § 40-608(F),
§ 30-1010(E) and § 40-611(F) do not “contradict” the procedural rule. State ex rel. Collins, 142
Ariz. at 591.
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Finally, the Judicial Review Provisions require parties challenging a decision to adopt a
Financing Order or Resolution to prove their claims by “clear and satisfactory evidence.” A.R.S.
§ 30-1010(C), § 40-611(D). A legislative enactment that changes the burden of proof does not
violate the separation of powers because the burden of proof is substantive, not procedural.
Seisinger, 220 Ariz. at 93 ¶ 30 (collecting cases which holding that “legislature is empowered to
set burdens of proof as a matter of substantive law”).
In sum, the Judicial Review Provisions are substantive because they “create” and “define”
individuals’ rights to seek review of a regulatory authority’s decision to adopt a securitization
Financing Order or Resolution. Fletcher, 149 Ariz. at 191. These are essentially jurisdictional
statutes that tell people considering a challenge to a Financing Order or Resolution or the resulting
Financing Charges (1) when to sue, (2) where to sue, and (3) what relief will be available. Because
the Judicial Review Provisions are substantive, they are within the legislature’s constitutional
authority and do not impermissibly invade the judiciary’s authority to govern “procedural matters.”
II. The Judicial Review Provisions do not violate the anti-abrogation clause.
Arizona’s anti-abrogation clause provides that “[t]he right of action to recover damages for
injuries shall never be abrogated.” Ariz. Const. art. 18, § 6. The anti-abrogation clause prevents
the government from eliminating “the ability to invoke judicial remedies for those wrongs
traditionally recognized at common law.” Boswell v. Phoenix Newspapers, Inc., 152 Ariz. 9, 17
(1986), disapproved of on other grounds by Torres v. JAI Dining Servs. (Phoenix), Inc., 256 Ariz.
212 (2023).
The anti-abrogation clause, however, “does not extend to new actions created by the
legislature.” Torres, 256 Ariz. at 216 ¶ 9 (citing Boswell, 152 Ariz. at 14) (quotations omitted).
“It extends only to rights of action that existed at statehood or that are based in pre-statehood
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rights.” Id. at 217–18 ¶ 15. In order to be protected by the anti-abrogation clause, the action must
involve a claim for damages. Id. at 16.
Four subsections within the Judicial Review Provisions pertain to the types of relief that a
customer can pursue in court. A.R.S. § 30-1007(E) and § 40-608(F) prohibit a party from bringing
“any action to enjoin, restrain, stay or delay” the Financing Charges or True-up Mechanism.
A.R.S. § 30-1010(F) and § 40-611(G) similarly provide that “a court in this state does not have
jurisdiction to review, enjoin, restrain, suspend, stay or delay” the implementation of any
Financing Resolution or Order.
There are two reasons why these provisions do not run afoul of the anti-abrogation clause.
First, the anti-abrogation clause only protects “action[s] to recover damages for injuries.” Ariz.
Const. art. 18, § 6. The Judicial Review Provisions, however, circumscribe certain forms of
equitable relief. See. e.g., A.R.S. § 30-1007(E) (“A party may not bring any action to enjoin,
restrain, stay or delay” the Financing Charges or True-up Mechanism); A.R.S. § 30-1010(F) (“[A]
court in this state does not have jurisdiction to review, enjoin, restrain, suspend, stay or delay” the
Financing Resolution or related actions). Second, the Judicial Review Provisions do not appear to
implicate any cause of action for damages that was “cognizable at statehood.” Torres, 256 Ariz.
at 216 ¶ 9. To the extent that there may exist some tort claim which could arise from decision to
approve a Financing Resolution or Order, or from the Qualified Special Purpose Entity’s
implementation thereof, the Judicial Review Provisions would not preclude that.
For these reasons, the Judicial Review Provisions do not violate Ariz. Const. art. 18, § 6.
III. H.B. 2679 unconstitutionally invades the Commission’s plenary ratemaking
authority.
The Commission has the “full power to, and shall, prescribe just and reasonable
classifications to be used and just and reasonable rates and charges to be made and collected, by
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public service corporations within the state for service rendered therein[.]” Ariz. Const. art. 15,
§ 3. The legislature may enlarge, but not reduce, the Commission’s authority. Ariz. Const. art.
15, § 6. The Commission’s ratemaking authority is, in other words, “plenary.” Sun City Home
Owners Ass’n v. Arizona Corp. Comm’n, 252 Ariz. 1, 5 (2021) (citing Johnson Utils., LLC v. Ariz.
Corp. Comm’n, 249 Ariz. 215, 222 ¶ 25 (2020)).
The Commission has complete authority over whether to approve of a proposed
securitization transaction. A.R.S. § 40-603(B) (Commission may “approve[], reject[], or approve[]
with conditions” a proposed transaction). However, once approved, H.B. 2679 purports to prohibit
the Commission from making any modifications to the resulting Financing Charges. These
restrictions are found in two separate provisions. First, A.R.S. § 40-610(A) provides that the
Financing Charges are not “subject to rescission, alteration, amendment, reduction, impairment or
adjustment by further action of the commission,” including under A.R.S. 40-252, which permits
the Commission to amend any of its prior orders “at any time.” Second, A.R.S. § 40-608(D)
clarifies any subsequent “[a]djustments to the financing charges. . . resulting from the application
of the true-up mechanism” are likewise “not subject to regulation by the commission.” Because
we conclude that the Financing Charges constitute a “charge” for “service rendered” by the public
service corporations seeking to avail themselves of securitization, the statutory restrictions in
A.R.S. §§ 40-610(A) and -608(D) infringe upon the Commission’s plenary authority to “prescribe
. . . just and reasonable rates and charges” and are, therefore, unconstitutional.
A. The Financing Charge is a “charge” for “service rendered” by a public
service corporation.
When enacting H.B. 2679, the Arizona Legislature seemed to recognize the constitutional
dilemma that emerges from allowing a public service company to include a nonbypassable charge
on customers’ bills while also prohibiting the Commission from ever modifying that charge. See
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A.R.S. § 40-610(A). To that end, A.R.S. § 40-608(I) states “[r]egardless of whether financing
charges are administered, billed, or collected by a servicer that is a public service corporation, the
financing charges are not rates or charges imposed or made by a public service corporation for
electric service, and the right to receive financing charges and to collect resulting financing
revenues is independent of any rate that is established, made or charged by a public service
corporation for electric service.”
However intentional the drafting, the Legislature’s power to enact statutes is subject to any
limitations imposed by a constitutional provision, including any limitation that may be implied by
the text of the constitution or its structure taken as a whole. Citizens Clean Elections Comm’n v.
Myers, 196 Ariz. 516, 520–21 ¶ 14 (2000). Thus, in order to assess whether H.B. 2679 imposes
unconstitutional restrictions on the Commission’s authority to prescribe “just and reasonable . . .
charges,” we begin by considering whether the Financing Charges are “charges” within the
meaning of art. 15, § 3.
In this context, a “charge” is one that is “made and collected[] by public service
corporations” and “for service rendered” within the State. Ariz. Const. art 15, § 3. The Financing
Charges meet both criteria, and are therefore “charges” subject to the Commission’s constitutional
ratemaking authority.
1. The Financing Charge is a charge for electric “service rendered.”
Electric generation, transmission, and distribution is a complex undertaking, and, as a
result, the Commission regulates more than the price per kWh that public service corporations can
charge for the electricity they provide. The Arizona Constitution gives the Commission “full
power” to regulate both “rates and charges.” Ariz. Const. art 15, § 3. “Rates” and “charges” are
different terms which we presume capture different concepts, each of which must be given
meaning. Nicaise v. Sundaram, 245 Ariz. 566, 568 ¶ 11 (2019) (“A cardinal principle of statutory
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interpretation is to give meaning, if possible, to every word and provision so that no word or
provision is rendered superfluous.”). In order to respond to the present Request, however, we need
not decide exactly where the line between “rates” and “charges” falls. Rather, we conclude the
Commission’s constitutional authority to regulate “rates and charges” necessarily includes both
the cost of the electricity itself, as well as all the other costs incidental to providing electricity that
a public service corporation might seek to pass on to its customers.
Related statutes and regulations support this reading. For example, in the statute which
describes the Commission’s power “to determine and prescribe rates,” the legislature defined
“rates” and “charges” to include those paid for “any service, product or commodity, or in
connection therewith[.]” A.R.S. § 40-203 (emphasis added). Likewise, the Commission itself
defined “customer charge” as “[t]he amount the customers must pay the utility for the availability
of electric service, excluding any electricity used, as specified in the utility’s tariffs.” Ariz. Admin.
Code R14-2-201(10) (emphasis added).
Having established that there is a distinction between “rates” and “charges,” we further
conclude that the Financing Charge is a charge “for service” because: (1) the cost underlying the
securitization transaction was incurred by the public service corporation for the purpose of
providing electric service; (2) the customer is responsible for the charge solely by virtue of their
receipt of electric service from public service corporation; and (3) the customer must continue to
pay the Financing Charge in order to continue to receive electric service from the public service
corporation.
First, the Financing Charges only exist because a public service corporation incurred a cost
as a result of its provision of electric service within the State and now wants to offload some of
that cost through a securitization transaction. See A.R.S. § 40-601(17) (defining “transition asset”
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to include “any electric power generation, transmission, or distribution facilities, including other
property or equipment that is used by the applicant and that is identified in an application for a
financing order”). Indeed, one purpose of enacting H.B. 2679 was to “enable public service
corporations to achieve the benefits of securitization for customers by reinvesting capital now
committed to paying the costs related to the production and delivery of energy for new facilities,
resources or other assets.” A.R.S. § 40-602(B). In other words, the securitization transaction and
the charges through which the public service corporation funds its bond service are a means to
certain ends (cheaper financing, increased access to capital), all of which are the product of the
public service corporation’s provision of electric service within the State.
Second, the sole criteria for determining whether a person is responsible for paying the
Financing Charges is whether they receive electric service from a public service corporation. The
Financing Charges “are nonbypassable, are mandatory, and apply to all customers.” A.R.S. § 40-
608(A) (emphasis added). Customers are those that “receive retail electric service” from the
“applicant,” A.R.S. § 40-601(5), and, by definition, an applicant is a “public service corporation
that provides electric service.” A.R.S. § 40-601(2). In other words, all “customers” are responsible
for payment of the Financing Charges, and “customers” are defined exclusively by their
relationship to—and receipt of electric service from—a public service corporation. This makes
the Financing Charges a product of the “service rendered” to those customers.
Third, and most importantly, the Financing Charges are paid first, before any other rates,
charges, taxes or fees billed by the public service corporation. “If a customer pays only a portion
of the charges stated on a bill provided by a Servicer that includes Financing Charges, the partial
payment shall be first applied to the payment of Financing Charges.” A.R.S. § 40-609(B). This
means that payment of the Financing Charges is a necessary prerequisite to receiving service from
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the public service corporation. The Financing Charges must be paid in order for a customer to
receive service at all.
For example, assume that a customer receives a $30 bill from her electric utility, and this
$30 bill includes a $15 Financing Charge. If the customer pays only $15 to the utility, the full $15
dollars of that customer’s payment will be applied to the Financing Charge and deemed Financing
Revenues belonging to the Qualified Special Purpose Entity. The remaining $15 of the bill, which
is attributable to Commission-approved rates and charges, will be unpaid. If this happens for
several months in a row, eventually the customer may be in a position where the utility disconnects
her electric service, despite having paid the utility monthly an amount equal to the other
Commission-approved rates and charges shown on her utility bill. A charge that appears on a bill
from a public service corporation and is a prerequisite to receiving “service” from that public
service corporation cannot reasonably be construed as falling outside the Commission’s
ratemaking authority. To conclude otherwise would unreasonably elevate form over function.
2. The Financing Charges are “collected by” a public service corporation.
In order to fall within the Commission’s exclusive authority, the “charge” must also be
“made and collected by a public service corporation[].” Ariz. Const. art 15, § 3 (comma omitted).
H.B. 2679 uses the construct of the “Qualified Special Purpose Entity” to create distance between
the customer who pays the Financing Charge and the public service corporation who benefits from
the securitization transaction.
By statute, Financing Charges are payable to the Qualified Special Purpose Entity. A.R.S
§ 40-601(6); see also A.R.S. § 40-608(I) (“Financing revenues are the property of the qualified
special purpose entity and are not the property of the servicer or any other public service
corporation.”). The Qualified Special Purpose Entity is not itself a public service corporation
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because it is not engaged in “furnishing . . .electricity for light, fuel, or power.” Ariz. Const. art.
15, § 2. Instead, the Qualified Special Purpose Entity is a “wholly owned” subsidiary of the
applicant public service corporation, created for the sole purpose of owning the Transition Property
and repaying the Transition Bonds. A.R.S. § 40-601(13).
Practically speaking, it will be the customer’s own public service company—not the
Qualified Special Purpose Entity—that physically collects the Financing Charges. The Qualified
Special Purpose Entity can use a “servicer” to “calculate, bill or collect financing charges on behalf
of a qualified special purpose entity” and performed related administrative services. A.R.S. § 40-
601(14). A.R.S. § 40-601(14)(b)(ii) does permit a “third-party” to act as a servicer, but only “in
the event an applicant is unable to act as a servicer.” A.R.S. § 40-601(16). 7 Thus, in almost all
circumstances, the Financing Charge will appear on the customer’s bill from his public service
corporation along with every other Commission-regulated rate and charge, and the customer will
reasonably (and correctly) understand the Financing Charge to be a charge that must be paid in
order to continue to receive electric service from that public service corporation. See A.R.S. § 40-
609(B).
But even if a Qualified Special Purpose Entity does not use the applicant public service
company as its servicer, payment of the Financing Charge is a “nonbypassable” condition of
continued service. A.R.S. § 40-601(6). In other words, if the customer wants to continue receiving
electric service from his public service corporation, he must pay the full Financing Charge because
7
Most likely, this would only occur in a situation where the applicant no longer exists (and
therefore is not billing customers for service anymore). See, e.g., A.R.S. § 40-610(E)(1)
(Financing Charges survive “the bankruptcy, reorganization, sale, dissolution or insolvency of the
Applicant” and its successors).
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any dollar paid toward “a bill provided by a servicer that includes financing charges” must be “first
applied to the payment of financing charges.” A.R.S. § 40-609(B).
Again, it would be an absurd elevation of form over function to allow the Financing
Charges to avoid any prospective Commission scrutiny simply because the public service
corporation creates a wholly owned subsidiary entity that is legally entitled to the revenues
generated by the Financing Charges. State v. LeMatty, 121 Ariz. 333, 337 (1979) (pragmatic
construction is required if technical construction would lead to absurdity). For purposes of
deciding whether A.R.S. §§ 40-610(A) and -608(D) unconstitutionally restrict the Commission’s
ratemaking authority, we conclude that the Financing Charges are “collected by” the public service
corporation.
B. A.R.S. §§ 40-608(D) and 40-610(A) unconstitutionally restrict the
Commission’s authority and duty to set just and reasonable charges.
The Financing Charges are charges for service rendered by a public service corporation.
The Commission, therefore, must have “full power” to regulate them. Ariz. Const. art. 15, § 3.
Indeed, the Commission has an obligation to determine that all rates and charges are “just and
reasonable.” Id. Courts have consistently held that “just and reasonable rates” are those that are
fair to both consumers and public service corporations. See Arizona Cmty. Action Ass’n v. Arizona
Corp. Comm’n, 123 Ariz. 228, 231 (1979). In the securitization context, this means that the
Arizona Constitution requires that the Commission retain authority to assess whether the Financing
Charges remain fair to consumers over time.
Rate-setting methods that completely remove the Commission from the equation are
unconstitutional. See Phelps Dodge Corp. v. Arizona Elec. Power Co-op., Inc., 207 Ariz. 95, 107
¶ 31 (App. 2004), as amended on denial of reconsideration (Mar. 15, 2004). In Phelps Dodge, the
Arizona Court of Appeals considered a Commission-adopted rule governing how rates are set for
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“electric service providers.” The rule provided: “Market determined rates for Competitive
Services . . . shall be deemed to be just and reasonable.” Id. at 106 ¶ 27 (quoting Ariz. Admin.
Code R14-2-1611(A)). Opponents of that rule argued that “the Commission improperly
abandoned its constitutional duty to prescribe just and reasonable rates by promulgating [the rule].”
Id. The Court agreed, holding: “although the Commission may be influenced by market forces in
determining what rates are ‘just and reasonable,’ the Commission may not abdicate its
constitutional responsibility to set just and reasonable rates by allowing competitive market forces
alone to do so.” Id. at 107 ¶ 32. If “market determined rates alone are deemed just and reasonable”
the Commission cannot fulfill its constitutional “mandate” to set just and reasonable rates. Id. ¶ 31
(cleaned up).
Decades prior, the Arizona Supreme Court similarly rejected a rate that was “based solely
on the percentage of return on [a public service corporation’s] common stock equity.” Arizona
Cmty. Action Ass’n, 123 Ariz. at 230. The Court explained: “[a]lthough we see no reason why
return on common stock equity may not be taken into account in fixing a rate increase, the
troublesome aspect here is that the Commission made that factor the sole criterion for triggering
an increase.” Id. at 231. Because the Commission’s rate-setting mechanism had the effect of
“tying rates to one factor over which APS exercises total control,” this caused a “complete
divorcement from the interest of the public,” which the Arizona Constitution does not permit. Id.
Both the Financing Charges and the True-up Mechanism that adjusts them over time are
“irrevocable” and not “subject to rescission, alteration, amendment, reduction, impairment or
adjustment by further action of the commission.” A.R.S. § 40-610(A). Section 40-608(D) says
the same thing even more directly: neither the Financing Charges nor the True-up Mechanism are
“subject to regulation by the commission.” Together, Sections 40-610(A) and -608(D) deprive the
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Commission of “full power” to set just and reasonable charges because it puts a variable charge
for service permanently outside the Commission’s control. Here, the Financing Charges are
determined not by market conditions like in Phelps Dodge, or stock price like in Arizona Cmty.
Action Ass’n, but on a pre-set formula—the True-up Mechanism—that is completely beyond the
Commission’s control.
If the Commission cannot delegate its constitutional obligations to an outside force (see
Johnson Utils., 249 Ariz. at 221 ¶ 22), the legislature cannot either. Ariz. Const. art. 15, § 6 (the
legislature may enlarge, but not reduce, the Commission’s authority).
C. The aspects of the securitization transaction over which the Commission
retains control are insufficient to solve the constitutional problem caused by
the irrevocable Financing Charges.
The Commission does have some authority over the structure of the Financing Order and
the ultimate impact of the Financing Charges on customers. But none of these carve-outs for
Commission input and discretion restore the Commission’s control to the “full power” that the
Constitution requires.
First, the Commission is not required to approve any Financing Orders, and has the
authority to deny or approve with conditions a proposed Financing Order. A.R.S. § 40-603(B).
So, in theory, the Commission could refuse to approve any proposed Financing Order, thereby
avoiding the constitutional problem that arises from the irrevocable Financing Charges that a
Financing Order would authorize. But once a Financing Order is approved, the Financing Charge
will appear on customers’ bills until the bonds are repaid and the Commission will have no
discretion or authority to modify the charge, even if changed circumstances render the charge
unjust or unreasonable. A.R.S. § 40-610(A).
This permanent and absolute limitation on the Commission’s authority is constitutionally
problematic. In its application for a Financing Order, the public service corporation must, among
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other requirements, “estimate the transition costs and financing costs,” “describe the expected
characteristics of the transition bonds,” and “project the financing charges.” A.R.S. § 40-
603(A)(2)-(4). The public service corporation must also “[c]ommit to making a filing with the
commission that will describe the final structure and pricing of the transition bonds, a statement
of actual up-front financing costs and an updated calculation of the estimate financing charges.”
A.R.S. § 40-603(A)(12). But that filing would necessarily come after the Commission has issued
a Financing Order approving the proposed transaction and the bonds have issued, causing the
Financing Charges to become irrevocable. A.R.S. § 40-610(A) (Financing Charges are irrevocable
“[o]n or after the issuance of transition bonds”). Thus, the Commission would be powerless to
revoke or modify its Financing Order, even if the final terms of the transaction did not match the
expected terms reflected in the application that the Commission found to be “just and reasonable.”
A.R.S. § 40-603(B)(4). This is not “full power.” Ariz. Const. art 15, § 3.
Second, the Commission can consider the “bill impact” of the Financing Charges when
“determining the design of the rates within its jurisdiction or allocation of the costs to and among”
ratepayers. A.R.S. § 40-604(D). But the fact that the Commission retains plenary authority over
its traditional ratemaking function cannot serve as a stand-in for the lack of authority to modify
the Financing Charges themselves. To the contrary, that A.R.S. § 40-604(D) suggests that the
Commission should be considering the Financing Charges in its rate design only further
demonstrates why the charges are properly understood to be “for service.”
Finally, while the Commission retains “continuing jurisdiction over the terms of a
transition bill services tariff,” A.R.S. § 40-609(A), the law expressly prohibits the Commission
from altering the Financing Charges or True-up Mechanism that are reflected in that tariff. A.R.S.
§ 40-610(A) (the Financing Charges “shall not be subject to rescission, alteration, amendment,
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reduction, impairment or adjustment by further action of the commission”); see also A.R.S. § 40-
608(D) (Financing Charges and True-up Mechanism are “not subject to regulation by the
commission”). This means that the Commission can control who collects the Financing Charges
and how they are reflected on customers’ bill, but not how much is collected, no matter how
external circumstances change over time. The Arizona Constitution, however, requires that the
Commission retain “full power” to decide whether those Financing Charges are just and
reasonable.
Conclusion
A.R.S. §§ 40-608(D) and 40-610(A) violate the Arizona Constitution art. 15, § 3 because
they deprive the Commission of the power to—and impermissibly interferes with the
Commission’s obligation to—“prescribe . . . just and reasonable rates and charges to be made and
collected, by public service corporations within the state for service rendered therein.”
* * *
Kris Mayes
Attorney General
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