(November 2009)Regulators are in the unenviable position of determining an allowance for ROE that’s fair to consumers and investors in a volatile economy. The cases that stand out this year...
Consensus, Compromise, and Chopping Wood
NARUC President James Kerr seeks harmony among an unruly bunch of state regulators.
there is fairly high turnover. The average tenure for commissioners is about 3-1/2 years, and the institutional knowledge at the staff level is turning over. That is challenging us to look at our approach to education and research. We have formed a new subcommittee to focus on that, and to deter- mine what help we need to provide.
The second big piece is critical infrastructure. We have elevated what was an ad-hoc committee to full-standing committee status, recognizing the prevalence of critical-infrastructure protection issues that cut across the various industry sectors, and federal and state agencies.
Third, we need to think about integrating the work of the various committees. We want to be careful we don’t have a silo approach where we are dealing with substantive issues in separate committees and not fitting these issues together.
Finally, it has been more than a decade since the Democrats have been in control of Congress, and we have to make some adjustments to that reality. We have been treated well by members of both parties, but they have different jobs now and we have to adapt to that.
Fortnightly: What about issues such as natural-gas infrastructure, wholesale markets, and resource adequacy?
Kerr: Obviously, we have expanded interest in energy supply and efficiency. [Former NARUC President] Diane Munns was the co-sponsor of the National Action Plan on Energy Efficiency. Working with our research affiliate, NRRI at Ohio State University, we have responded to governor’s offices around the country that were interested in what role government and industry could play. We will continue to stay involved in that.
We also spent a lot of time implementing EPACT. We’ve been working well with the agencies on federal mandatory reliability rules and siting issues. And we will be working more on the perceived need for new base-load generation across the country. That will include issues like carbon policy and increasing concerns about emissions. We’re looking at new technologies, such as IGCC and smart metering, which might help us address these concerns.
This whole area raises interesting issues of regulatory policy, with different ideas about cost recovery and allocation of risk. We will be forced to look at some ideas to help the industry address the need for new resources.
Fortnightly: Utilities will play a major role in any strategy to address climate change. How might NARUC help them fulfill that role?
Kerr: We commissioners are the economic regulators at the state level, and not the environmental regulators. But it is imperative for us to be aware of what is going on in that arena because of the obvious impacts it will have on industries using fossil fuels.
As resource decisions are made and we economically regulate these businesses, we need to be understanding and open-minded about various approaches to cost recovery.
There has been a lot of discussion about decoupling earnings from throughput. Traditional ratemaking has valued throughput more than our society is comfortable with as we head into a carbon-constrained world. NRRI and our members will be looking at that through research and various discussions.