Economic Inequality:
Does Utility Regulation Contribute?

          In a democratic society built on a capitalist economy, some economic inequality is inevitable.  But current levels of inequality threaten both democracy and capitalism.  As the New York Times recently reported:  “Officially the economy is surging again. But the winnings have gone predominantly to the wealthy.  And the middle class is never coming back.”[1]  What is regulation’s responsibility?

          Regulation's purpose is performance—the economic performance of the industries we regulate. The regulator’s job has four main components:  (1) define the public interest in performance; (2) identify whose private behavior, if unregulated, will conflict with that public interest; (3) design standards that align that private behavior with the public interest; then (4) set and enforce rewards and penalties for those who satisfy or fail the standards.

          For utility regulators, the “public interest” is defined and confined by their statutes.  The typical utility statute requires “reliable” service, offered without “undue preference or discrimination” at “just and reasonable” rates.  Reliable service means service available to all customers at all times.  Just and reasonable rates give the utility a reasonable opportunity to earn a fair return on prudent investment, while not imposing wasteful costs on customers.  Nondiscrimination means treating similar customers similarly and dissimilar customers dissimilarly—by assigning costs to the cost-causers and awarding benefits to the benefit-creators. 

          Because utility statutes focus only on economic performance, the “public interest” addressed by those statutes does not include broad societal objectives.  So said the Supreme Court, holding that the Federal Power Commission had no authority to issue a rule prohibiting utilities from racially discriminating.  Racial equality, while certainly core to humanity’s public interest, was not part of the Federal Power Act’s public interest.[2] 

          What about economic inequality?  Do regulatory decisions contribute to it?  If so, what is regulation’s responsibility? Consider six examples. . . . 

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