"Pro-Utility": What Does That Mean?

My law students write short papers on the weekly readings for the course Monopolies and the Nation's Infrastructure:  The Regulation of Public Utility Performance.  Last week covered the legal changes necessary to convert a monopoly market into a competitive market.  (Changes include modifying franchise exclusivity, defining the type of regulation that new entrants "consent" to, establishing quality of service standards, defining the obligation to serve, addressing eminent domain powers and granting nondiscriminatory access to bottleneck facilities). 

One student, prefacing his critique of a court decision, admitted that he was "pro-utility."

Here's what I wrote back to the student:

At this stage in your career—at any stage, actually—you want to be pro-facts and pro-logic, then let the chips fall where they fall.  Being "pro" anything implies being "anti" something else.  In this context of converting markets from monopoly to competitive, what is that something?  Might it depend on the context?  One can be "pro-utility" when the government fails to compensate the utility justly for the utility's services.  One can be "anti-utility" when the utility uses corporate structure to escape liability for environmental damage.  What does it mean, then, to be "pro-utility"?  One can always have hunches and leanings; those are the signs of an active, attentive, committed thinker.  But what must accompany hunches and leanings is a curiosity about facts and context.

How would you respond?


Eric Witte

Hard to improve upon, “you want to be pro-facts and pro-logic, then let the chips fall where they fall.” But should regulators be “pro-utility” in the sense of being biased to say yes? In discussing Regulatory Capture II, Hempling casts doubt upon a regulatory commission granting a merger request simply because the utility wants to “position itself competitively.” I think regulators should bear the burden to justify rejecting a utility’s request for pretty much anything. Admittedly, people will disagree about what facts/arguments fulfill that burden. I suspect that most regulators would find it easier/more familiar to deal with relatively small utilities; is that a sufficient ground to reject every merger proposal? Wisely or not, I sense most commissioners don’t think so. (That said, I don’t favor granting any utility a rate-of-return adjustment to compensate for the utility’s small size -- or large size, for that matter – unless, perhaps, the regulator had rejected the utility’s merger petition. Otherwise, utility management and shareholders should bear the cost of their decisions not to buy/sell/merge with other entities.) Note that utility’s do not merely argue that “bigger is better.” On the flip side, some electric utilities petitioned to divest generation from transmission from distribution. In essence, the utilities were making a “smaller is better” argument. Again, all else being equal, I think regulators should grant that request as well. (Of course, this is a specious argument because it’s easy to demonstrate that vertically-integrated utilities are NOT equal to the sum of their parts.)

Post new comment