Effective Regulation of Public Utilities

. . . [T]he Commission has claimed to be the representative of the public interest.  This role does not permit it to act as an umpire blandly calling balls and strikes for adversaries appearing before it; the right of the public must receive active and affirmative protection at the hands of the Commission.

— Scenic Hudson Preservation Conference v. FPC, 354 F.2d 608, 620 (2d Cir. 1965) (referring to the Federal Power Commission), cert. denied sub nom., Consolidated Edison Co. v. Scenic Hudson Preservation Conference, 384 U.S. 941 (1966).

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Newcomers to regulation are not newcomers to government.  They understand “executive branch,” “legislative branch,” “judicial branch.”  But they wonder, “What exactly are we?”  Some respond by emulating the familiar:  Judges sit on benches, await the parties' disputes, use adversarial processes, find facts, then apply law to those facts; that seems straightforward enough; let’s make regulators like judges.

To view the commission as a court—to "preside" rather than lead—undermines regulatory effectiveness.  Here’s why.

How Do Commissions Differ From Courts?

A commission's purpose derives from its origins.  The legislature receives lawmaking powers from the state constitution.  The legislature then creates a commission, delegating to it some substantive slice of those lawmaking powers.  That delegation consists of commands coupled with standards; e.g., establish just and reasonable rates, ensure reliable service, allow mergers if consistent with the public interest.1  Common to these commands and standards is a single legislative purpose:  Within a defined substantive space (e.g., activities of electricity, gas, telecommunications and water utilities), make policy for the public.  That is not what courts do.

Courts and commissions do have commonalities.  Both make decisions that bind parties.  Both base decisions on evidentiary records created through adversarial truth testing.  Both exercise powers bounded by legislative line drawing.  But courts do not seek problems to solve; they wait for parties' complaints.  In contrast, a commission's public-interest mandate means it literally looks for trouble.  Courts are confined to violations of law, but commissions are compelled to advance the public welfare.  Even the narrowest of commission decisions—say, approving or disapproving a special contract between utility and industrial customer—affects a public interest larger than the parties:  Will the low contract price shift costs to other customers or weaken the utility's finances?  Will the lucky buyer's competitors seek “me too” treatment?  To what effect?

Like commissions, a court’s decisions can have policymaking attributes affecting non-parties.  A class action suit under the civil rights or securities laws, an antitrust suit against a Microsoft or an AT&T, can set policy for a generation.  But consider this difference:  In Court Land, the judge's power to act is confined to the issues stated by a plaintiff’s complaint.  In Commission Land, a party’s filing is stimulation but not limitation.  The commission can add issues, combine proceedings, invite the appearance of other parties, or convert a two-party complaint into multi party rulemaking, all as the public interest demands.

A commission does “look like” all three branches:  like a legislature when promulgating rules; like an executive agency when enforcing those rules; like a court when deciding complaints.  But utility commissions are not "like" anything; they are what they are: governmental units created to exercise powers delegated to the legislature by the Constitution, then re-delegated by the legislature to the commission.  Commissions, like the legislatures whose powers they exercise, make policy for the public.