Electoral Politics Are Keeping Arizona’s Energy Prices Low

Recently, President Trump and Congressional Republicans claimed that the Board of Governors of the Federal Reserve are unaccountable to the American voter. Elected officials, the argument goes, would better serve the interests of typical citizens. Yet many contemporary scholars bemoan the state of the American democracy. They allege that American voters suffer from irrationality and are at best minimally informed during the electoral process. As a result of American voters being uninformed, wealthy interests purportedly dominate the policy process. These factors have led some scholars to call for the abolition of the franchise for ill-informed or uneducated citizens. Pervading these critiques is the notion that the typical citizen is unable to use elections as a mechanism to extract policy that he or she wants.

If these arguments are correct, then we should expect the typical voter to be especially uninformed in elections that receive comparably less attention than legislative and gubernatorial races. One such environment is the selection of public utilities commissioners by popular vote in Arizona. Such elections inevitably command far less media coverage than races for president, governor, and the like. As such, given the inattention of the typical voter, utility companies could seemingly have ample opportunity to extract favorable concessions such as higher electricity prices from these elected commissioners. And while Arizona utilities commission elections have received considerable attention and money over the past decade, the technical nature of regulatory policy could still diminish voter interest and allow utility companies to receive special treatment from regulators.

We find the opposite. Over a six-year span, we looked at how Arizona’s elected public utilities commission set electricity prices, when utility companies applied for higher prices. The single biggest predictor of whether the Commission sided with utilities over consumer-voters, by raising prices to the level requested by the utilities, was the financial impact on said consumer-voters, as represented by the rate of inflation in Arizona at the time of the decision. That is, when inflation is high, the power of a consumer-voter’s dollar decreases, making any electricity price increase all the more painful. At the same time, when inflation is high, failing to increase prices in these threatens the continued profitability of the utilities themselves. As such, we tested whether these low-information elections nevertheless induced pro-consumer decisions from the Commission, even when economic conditions set up a direct conflict between the interests of consumer-voters and utility companies.

Typical measures of interest group involvement in the electricity price-setting process, including testimony to the Commission itself from firms themselves and affiliated organizations, fail to meaningfully influence the pricing behavior of the elected commissioners. This result mitigates against concerns that ill-informed voters will universally see their interests ignored by their representatives. Why? We speculate that while consumer-voters may not pay much attention to these elections, the commissioners themselves fear the activation of anti-incumbent bias if prices rise too painfully. The perpetual cycle of seeking re-election raises the specter of removal, and this risk motivates commissioners to consider the impact on consumer-voters whenever utilities request a price increase.

We therefore show that electoral accountability works, at least in issues where most typical voters want the same thing: affordable electricity bills. This finding may not necessarily apply to other areas of energy policy where consumer-voter preferences are more diverse, such as the presence of renewable energy mandates.

The flip side of this relationship, however, may be that elected officials pander to the short-term interests of consumer-voters at the long-term expense of pragmatic aspects of their regulatory responsibility. For example, reliability and sustainability of electricity delivery and production may be ignored since utilities must make costly investments to improve in these areas. These investments may not be made without sufficiently frequent price increases.

Elections, then, seem to deliver consumer-voters what they want, even when these voters possess minimal information. Yet what satisfies consumer-voters may not, in the long run, promote the general welfare of their communities.

Srinivas “Chinnu” Parinandi is an Assistant Professor in the Department of Political Science at the University of Colorado at Boulder. Matthew P. Hitt is an Assistant Professor in the Department of Political Science at Colorado State University.

Purchasing Power: The Conversation This post is part of the special series designed to provide well-informed commentary, fresh questions, and new answers about the facts of money in politics. Dive in to 'Purchasing Power: The Conversation’ here.  The views expressed by blog contributors are the authors’ own and not necessarily the views of the Brennan Center.