Matthew J. Neubert, Executive Director
Arizona Corporation Commission
1200 West Washington St.
Phoenix, AZ 85007
Email: [email protected]
; [email protected]
Bar No.: 009225
May 21, 2020
Arizona Supreme Court
1501 West Washington, Fourth Floor
Phoenix, Arizona 85007
Re: Petition No. R-20-0034
Chief Justice Brutinel, Vice Chief Justice Timmer, and Justices Bolick, Gould, Lopez, Beene, and Montgomery:
On March 30, 2020, the Arizona Corporation Commission ("Commission") submitted extensive comments suggesting modifications to Petition No. R-20-0034's proposed language to replace the current Arizona Supreme Court Rule 31 (“Rule 31”). The Commission's comments appear not to have been considered in creation of the Amended Petition. Thus, the Commission again submits, for the Court's consideration, the following comments suggesting modifications to the proposed language to replace Rule 31:
Many parties who appear before the Commission use lay representation as permitted under Rule 31(d)(28), which allows a public service corporation, an interim operator appointed by the Commission, or a non-profit organization (collectively “organization”) to be represented by a corporate officer, employee, or member who is not an active member of the state bar under the following circumstances: (a) the organization must have specifically authorized the representation, (b) the representation must not be the representative’s primary duty to the organization, and (c) the representative must not receive separate or additional compensation (beyond reimbursement of costs) for the representation. Rule 31(d)(28) further allows the Commission or presiding officer to require counsel in lieu of lay representation if it determines that the lay representation is interfering with the orderly progress of the proceeding, imposing undue burdens on other parties, or causing harm to the represented organization.
The Commission is also mentioned by name in Rule 31(d)(13), although it has relied upon that provision only to allow for lay representation in Commission securities cases, to which Rule 31(d)(28) generally does not apply. The Commission finds the current language of Rule 31(d)(13) to be unclear in that inclusion of the Commission in the first sentence of Rule 31(d)(13) is unnecessary, because the Commission has no involvement in tax-related proceedings, and the second sentence of Rule 31(d)(13) is a very broad exception that appears to have no relationship to the first sentence. Additionally, the Commission has received inconsistent opinions from Arizona State Bar UPL attorneys over the years when inquiring as to the meaning of Rule 31(d)(13).
The Commission conceptually supports broadening the exception currently afforded by Rule 31(d)(28), as the proposed Rule 31.3(c)(5) would do, but requests that the following revisions be made to the language of the proposed Rule 31.3(c)(1), (c)(5), and (c)(6):
• In Rule 31.3(c)(1), the definition of “legal entity” should be revised to include federal, state, county, municipal, and tribal governmental entities. It is not uncommon for a federal government entity or a tribal entity to desire representation by an individual licensed as an attorney in another jurisdiction. Additionally, small municipal entities may prefer to rely on lay employees for representation rather than outside counsel for budgetary reasons.
• In Rule 31.3(c)(5), a comma should be inserted between “administrative agency” and “commission,” to distinguish between them.
• In Rule 31.3(c)(5)(A), the “full-time” requirement should be deleted. A number of smaller utilities primarily use part-time employees in their operations. Additionally, an individual’s status as “full-time” with a legal entity does not necessarily correlate with an enhanced ability to represent the legal entity effectively in a hearing or other administrative proceeding.
• In Rule 31.3(c)(6), an additional situation under which counsel may be required should be added—when lay representation is causing harm to the legal entity so represented. The Commission believes that this is what the current Rule 31(d)(28) language “or causing harm to the parties represented” was intended to address. The Commission suggests replacing “or” in the last line of proposed Rule 31.3(c)(6) with a comma and inserting the following after “parties”: “, or causing harm to the entity.”
Additionally, the Commission requests that “the Arizona Corporation Commission” be removed from proposed Rule 31.3(d)(5), as the Commission is not involved in tax-related proceedings, and its inclusion there invites confusion.
Finally, for the reasons set forth below, the Commission requests that the following revisions be made in Rule 31.3(c) to allow for the preparation and filing of technical or financial documents by qualified non-attorneys:
1. Add the following language as a new subsection (c)(6) in proposed Rule 31.3:
"(6) Arizona Corporation Commission.
(A) A person may represent a legal entity in a proceeding before the Arizona Corporation Commission (“Commission”) if the representation complies with subsection (c)(5).
(B) A person with expertise in the field of public utility regulatory compliance, public utility accounting or finance, public utility engineering, railroad engineering or safety, or pipeline engineering or safety may, on behalf of a legal entity regulated by the Commission:
(i) Prepare for filing with the Arizona Corporation Commission or submission to a Commission Division a tariff, rate schedule, engineering report, or other technical or financial document within the person’s field of expertise; and
(ii) File in a Commission docket, or submit to a Commission Division, the tariff, rate schedule, engineering report, or other technical or financial document prepared as permitted under subsection (c)(6)(B)(i)."
2. Renumber the existing subsection (c)(6) in proposed Rule 31.3 to (c)(7).
Utilities and other legal entities regulated by the Commission are often required to file with the Commission technical or financial documents, such as tariffs, rate schedules, or engineering reports. Regulated entities also may be required to submit such technical or financial documents to a Commission Division directly. It is common for these technical or financial documents to be prepared by hired consultants rather than attorneys or the personnel of the regulated entities. In the case of utilities, this is true largely because public utility operation and regulation is a complex and niche field, and it can be difficult for utility personnel to develop the level of regulatory expertise that experienced consultants have acquired. For smaller utilities, of which there are hundreds in Arizona, the training necessary to develop such expertise generally is cost prohibitive, as is hiring an attorney. For out-of-state competitive telecommunications utilities, which commonly operate throughout the United States, it is often most efficient to have one consulting company oversee regulatory compliance for all operations. Also, and importantly, the education, training, and experience of most attorneys does not impart the knowledge and expertise necessary to prepare such technical or financial documents.
Nevertheless, because such a technical or financial document is prepared on behalf of a specific entity for filing with an administrative agency and could be a document intended to affect or secure the utility’s legal rights (e.g., a tariff may confer the right to impose certain requirements on customers or to receive recovery through rates for certain capital expenditures), the preparation of the document by a non-attorney consultant appears to constitute the unauthorized practice of law (“UPL”) under the current Rule 31(b)(3) and (5). Likewise, under the current Rule 31(b)(2), the act of filing such a document in a Commission docket or submitting such a document to a Commission division can be viewed as representing the utility in an administrative proceeding and thus UPL.
The Commission believes that it would be beneficial to the regulated entities and the public interest to facilitate regulated entities’ use of experienced non-attorneys, including consultants, for the preparation and filing of technical or financial documents. The Commission further believes that the cost savings to affected utilities (from not being required to hire attorneys) would flow-through to the customers of those affected utilities in rates.
Matthew J. Neubert
CC: Jane Rodda, Hearing Division Director
Robin Mitchell, Legal Division Director
Mark Dinell, Securities Division Director