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Will the Sun Set on PUCs?

Fortnightly Magazine - July 15 1998

we're supposed to be informing and educating consumers shouldn't we be starting on the front end?"

Bob Rowe of the Montana Public Service Commission agrees commissioners need to better define their market role.

"One of the things the NRRI report emphasizes, and I think is correct, is the importance of marketing," Rowe says. "Very few of us really understand marketing or market segmentation...getting consumer information out to customers at the time that they need it, at the time they're making their decision."

Regarding markets, Malachowski, says commissions' approach has to be different. The old question of where is the risk and who should carry it -- ratepayers or shareholders -- must be looked at differently, he says.

"That was always the taffy pull," he says. "I'll still continue to do that. But the new function I have now ... one of the criteria is, 'How will that affect the markets?'"

And yet, he asks, what does he know about markets?

He believes commissioners need to be more open minded on market issues. As an example, he cites withholding power from the New England grid. Regulators don't want generators to withhold power in attempts to affect the spot price. But generators that have long-term contracts for gas play the gas resale market. If they see the gas market as an attractive way to make money, they're resell the gas, rather than putting it in generators to make electricity, the commissioner says. And allowing this practice, called tolling, is an entirely appropriate decision for free market entrepreneurs.

"What it has to do with [commissioner] skills, is I think it epitomizes the knee-jerk reaction from regulators ... 'People are dumping gas, that's a problem, let's write a rule, let's put language on paper that's very tight ... so we can control, regulate the market.' It runs to skills ... because people can't take that knee-jerk command and control reaction. They have to be thinking about this differently. They have to be thinking about the markets."

Judith A. Jones of the Ohio Public Utilities Commission, a former city council member for 10 years, brings a unique perspective to commission restructuring. She minces no words.

"We need to get government out of the way," she says. "We should be looking at an exit plan for much of this. Not all. I think there's some natural monopolies within the utilities industries that will need to be regulated."

Her 370-employee commission recently wrapped up focus groups within all the departments and held a three-day conference at the end of May for staff, commissioners and industry representatives to examine "where we are, where we want to go, where we should go."

Like some other commissions, Ohio doesn't have rate cases. "Right now, what staff's doing ... in telecom is working on alternative regulation plans," Judith Jones says. "Most of the rates are frozen as we go to competition."

Staff, she says, is apprehensive of what deregulating industries will bring inside the commission.

"I think everyone realizes there's change and there is, unfortunately, a fear about their jobs," says the commissioner.