A Regulatory Thanksgiving

Each November, families give thanks for what enriches their personal lives. For those of us in utility regulation, there also are many thanks to give. Here are ten examples.

Ownership diversity:  We have utilities owned by investors, by consumers, and by federal, state, county, city, and town governments. In their scatterplot of failures and successes, no data point is static. This gives the lie to worn-out rhetoric about “public vs. private,” and induces humility in those who are certain of solutions (like some of Montgomery County, Maryland’s outage sufferers, who wanted public ownership of the investor-owned Potomac Electric Power Company; and Newsday, the paper of record for Hurricane Sandy-tortured Long Island, which sought investor ownership of the government-owned Long Island Power Authority). Let the comparisons continue.

Professional consumer advocacy:  Egregiously absent from most nations’ regulatory systems, our brand of tax-funded and rate-funded consumer advocacy ensures alternative views presented by professional practitioners. Exemplified by such icons as former Pennsylvania Consumer Advocate Sonny Popowsky, former New Hampshire Commissioner Nancy Brockway, the low-income advocate Roger Colton, and the binomened West Virginian Billy Jack Gregg, our system persists; even while under-funded, tolerated but only minimally supported by tax-frightened politicians.

It is a system in which captive ratepayers pay for shareholder advocacy while legislative budget-cutters lower the level of consumer advocacy. The result is hearing rooms where $500/hour private lawyers battle $50/hour government lawyers, and utility witnesses outnumber consumer witnesses 4 to 1. To bridge that distance even halfway would better balance utility-heavy hearing records with expertise aimed at values broader than “return on equity” and “competitive positioning”; values like consumer education, consumer choice, and calibrating utility compensation to utility performance.

Engineers, craft workers and line workers:  Most of us sit at computers and stand at lecterns, filing pleadings, writing briefs, giving testimony, cross-examining witnesses, drafting statutes and promulgating rules, all arguing endlessly about market structure, rate structure, corporate relationships, interest rates and hurdle rates. Others, thankfully, are designing and building our infrastructure, and fixing it when storms bring it down. . . .

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Testimony, Papers, and Presentations

“Regulatory capture” is a ringing phrase, too casually used. But because it is a hyperbolic phrase, it is too readily dismissed. With a careful definition, regulatory capture can be anticipated, detected, and resisted. Regulatory capture does not include illicit acts—financial bribery, threats to deny reappointment, promises of a post-regulatory career. These things all have occurred, but they are forms of corruption, not capture. Nor is regulatory capture a state of being controlled, where regulators are robots executing commands issued by interest groups.
In this proceeding before the Mississippi Public Service Commission, Entergy proposes to sell its transmission facilities to ITC at a gain. The transaction is a “spin-merge” transaction in which Entergy shareholders will end up owning 51% of ITC, along with their shares of Entergy.
Utilities are seeking to earn returns on equity above the real cost of equity. Currently, there are five strategies: (1) move assets from state jurisdiction to FERC jurisdiction; (2) use holding company debt to fund utility subsidiary equity (aka "double leveraging); (3) seek supranormal returns as "incentives" to perform normal tasks; (4) seek authorized returns that reflect certain business risks while shifting those risks to ratepayers; and (5) use "riders" reduce business risks without reducing authorized return on equity. This presentation describes these strategies.

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Regulating Public Utility Performance

“[A] comprehensive regulatory treatise …. In all respects, it merits comparison with Kahn and Phillips."

Regulating Public Utility Performance:  The Law of Market Structure, Pricing and Jurisdiction

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Preside or Lead

Preside or Lead?
The Attributes and Actions of Effective Regulators

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Electricity Jurisdiction

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Letter to Governors and Legislators

Hempling Appearances

Nigeria Electricity Regulatory Commission
3rd Judges’ Seminar


Telecom Forum
Asamblea Plenaria REGULATEL


NARUC Annual Meeting
Panel on State–Federal Relations


New England Electricity Restructuring Roundtable
The Future of Demand Response in New England

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Testimonials

I highly recommend Scott Hempling. I have known him since 2003, since he was a consultant for the Hawaii Public Utilities Commission on various important and cutting-edge policy regulatory matters in Hawaii, through his time as the Executive Director at the National Regulatory Research Institute. His expertise, knowledge, and experience in all regulatory and energy matters is unmatched, and he would be a highly valuable resource and asset in any such endeavor.
— Carlito P. Caliboso, former Chairman, Hawaii Public Utilities Commission