July 1, 2001
L.A. Loves a Loophole
There's no getting around it...
I know what you are thinking. We're in an age of deregulation, so the role of the state public utility commission is diminishing. You feel you can cut back on your regulatory affairs staff and concentrate on your business - on your marketing plan. Well, think again.
"Deregulation" doesn't quite describe what's happening today in energy and telecommunications. In reality, we are restructuring, not deregulating. And restructuring will raise a number of difficult issues that, like it or not, must survive review by your friendly state regulator. For these reasons, it's more important than ever to build and maintain good relationships with regulators.
During the decade just past, I was one of the country's longest-serving chairmen at a state PUC. Now, as my term on the commission begins to wind down, I think back on those utility-regulator interfaces that worked and those that didn't. Here I've outlined some key mistakes I've seen that can undo your best efforts in cultivating a relationship with your state regulators in this new restructured environment. By design, I'm sticking to generalities - obviously, each commission is a bit different. However, after spending almost a full decade working with regulators, I feel I've got some good ideas of what turns them on - and off, as the case may be.
Mistake No. 1: Failing to Communicate Your Business Plan. As a chief executive officer, you must be thinking, why would I ever share my business plan with my local regulator? That's proprietary and it's none of his or her business. Well, you may be surprised.
The regulator's actions can have a lot to do with the success or failure of that plan. And regulators are only as good as the information they get. In my tenure, I was able to understand and, in many cases, forward the agendas of those companies whose business plans I understood. That's not to say that was my mission; it wasn't. But by knowing where the company wanted to land (as a wiresco, a genco, an energy retailer?) I was better able to understand the implications of a particular decision.
I encourage you to share your vision with your regulator. Explain your view of the market and your strategic position. Be as frank and open as possible. That doesn't mean you need to bear open your most proprietary secrets. But it does mean that the regulator should understand your company's role in the developing energy or telecommunications market in your state. In short, better information can mean better regulation.
Mistake No. 2: Keeping the CEO Out of the Regulatory Arena. There are many reasons, both personal and professional, why CEOs tend to stay out of the regulatory arena. All the same, that's a bad idea. In Ohio, it was real transparent to us when the local regulatory affairs person was sent on a "mission" from the CEO yet was given no flexibility to deal with the regulator. Generally, that's a recipe for frustration for all concerned.
I used to try to make a point of meeting with each CEO every six months.