Decisional Defaults: Does Regulation Have Them Backwards?

In our field, what happens when a regulatory choice is necessary but no choice occurs? Do our defaults make sense? Five examples follow.

Energy Efficiency

Consumers under-invest in energy efficiency. They overvalue upfront costs and undervalue long-term benefits; they require too short a payback period; they will passively pay 18% interest on a credit card balance but not act to save 10% on their electric bill. Inertia is powerful—and it makes consumers and our environment worse off.

Yet for most energy-efficiency policies, the default—the “choice” if the consumer makes no choice—is to do nothing, i.e., to continue inefficiency, to make us worse off. True, programs are available. But to trigger their benefits, the consumer must act: find, hire, and pay an energy auditor; choose among multiple thermostats, hot water heater covers, insulation types, window replacements; do the advanced math necessary to learn that paying now produces benefits later; find a bank and fill out loan papers; write a big check. Who on earth does any of these things, when there is soccer to play and SpongeBob to watch? Opt-in is our default; as an energy efficiency policy, it fails. 

Why is the default not “opt-out”?  Opt-out means that unless you say otherwise, a commission-selected, independent auditor will visit your home, determine the cost-effective investments, procure the contractors and the financing, and arrange matters so that the stream of savings exceeds the stream of costs, leaving the resident’s wallet untouched but the residence’s efficiency increased.  Why is our default backwards? . . .

Services

Testimony, Papers, and Presentations

The testimony relates to AltaGas’s proposed acquisition of WGL Holdings, Inc. and Washington Gas Light Company.
The testimony addresses the following: the effect of the transaction on consumers, including: (1) reasonableness of the purchase price, including whether the purchase price was reasonable in light of the savings that can be demonstrated from the merger and whether the purchase price is within a reasonable range; (2) whether ratepayer benefits . . .
Testimony addresses the issues of whether the proposed transaction affects the interests of ratepayers; the ability of JCP&L and MAIT to provide safe, adequate, and proper utility service at just and reasonable rates; and whether the proposed transaction is in the public interest.
This expert report was submitted to a federal trial court in May 2016 on behalf of City of Jacksonville, Florida. The litigation, and report, involve a 1943 disaffiliation of a gas corporation from its holding company, as mandated by the Public Utility Holding Company Act of 1935. The report explains why the disaffiliation did not prevent liability for the costs of environmental cleanup, if such liability exists under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, from passing to the new corporation.

Books by Hempling

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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Hempling Appearances

Energy Bar Association
Panel on Practice Principles for New Regulatory Lawyers


UDC Law School Panel
Is the Exelon Takeover of Pepco in the Public Interest?


Nigeria Electricity Regulatory Commission
3rd Judges’ Seminar


Telecom Forum
Asamblea Plenaria REGULATEL


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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