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. Some responded well and we had frank discussions on general matters not case-related. Others were simply scared to walk into the commission building. By so doing, they never understood where the regulator was coming from, since the regulator's message often was filtered through a regulatory affairs rep trying to keep his job (often by blaming the "irrational" bureaucrats). Regulatory relationships work best when the CEO can talk honestly and openly with the regulator and vice versa. This is not to encourage "dog and pony shows" about how great the company is. Nor should it ever involve pending cases before the commission. Rather, it's an attempt at understanding each other better during a stressful time of great change to all. I encourage all the CEOs to talk with their regulators regularly.
Mistake No. 3: Forgetting the Other Commissioners. I've had the unique experience of serving both as chairman and as a commissioner. I found that my voting power and influence stayed the same when I switched positions. Yet it seemed to me that the utilities held different perceptions on how to deal with an individual commissioner vs. the chairman.
Wrong again. Commissions work best as collegial bodies. If a utility or intervenor is seen as "playing favorites," or believes that working with the other commissioners is not as important, she can be making a big mistake. Don't go there. Spread your time equally among all the commissioners.
Mistake No. 4: Doing the "End-Run" to the Governor or Legislators. You say you can't get what you want from the PUC. So your next step is the governor's office - or maybe the legislature. I understand. It's natural for utilities or intervenors to take this approach. The stakes are too high and a certain degree of accountability by the commission to these two elected bodies of government is quite appropriate. However, don't assume that the commissioners won't find out about it. They will, and generally they'll be annoyed.
While some PUCs cave to these outside pressures, in other cases, such tactics force the commission to bend over backward in the other direction to avoid the perception of being manipulated. To guard against that, always tell your regulator beforehand if you plan to do an end-run.
And here's another tip: If you leave materials with governors or legislators, always make sure they are accurate. It's easy for the regulator to destroy the simplistic presentation left with the legislator or the governor's office by pointing out inaccurate or less than complete facts. That generally leaves their staffs angry, since they were being asked to go out on a limb for you.
Mistake No. 5: Refusing to Concede Anything. You know the natural inclination. You think to yourself, "If I admit I made a mistake, the PUC will launch a prudence review. They'll go after me." So you put a "spin" on everything.
That might be best when dealing with a harsh commission. However, I've always found that those who are willing to concede a point while they are making another point generally do better than those who won't concede anything. Conceding a point where you might have screwed up can be a successful tactic for achieving credibility on a bigger point. Don't be afraid to be honest.
Mistake No. 6: Communicating Poorly with PUC Staff. The relationship between commissioners and their supporting staff members is always a delicate one. Recent analyses from the National Regulatory Research Institute show a new degree of tension developing between commissioners and staffs as both face the pressures of restructuring.
I would always urge you to make sure the staff is aware of what you are talking to the commissioners about. On the other hand, don't always assume that talking to staff is the same as talking to the commissioners and that your message will get through in the way you intended. There are lots of reasons why your message may end up being changed in translation by even the most well-intentioned staff members. Cover your bases by talking with both the staff and commissioners if the matter is one that is free for open discussion.
Mistake No. 7: Interpreting the Ex Parte Rule Creatively. Certainly you know that a commissioner sometimes can't discuss certain items with you because of ex parte rules. Please respect that situation. Don't put your regulator in a box. Take your lead from the commissioner in the "gray areas," such as talking before a case is filed formally or any other area where state law may not be so clear.
Mistake No. 8: Attacking the Staff or the Commission. I once sat through a diatribe by a CEO attacking a federal agency that was to decide a major case pending for the CEO's company. Can you imagine?
As I remember, Lesson No. 1 in law school was "don't attack the judge." Even if you disagree with a decision, always, always be respectful. Say that you may be disappointed, but remain committed to working with the commission. Attacks on the commission or its staff in newspapers or at the legislature never work.
Mistake No. 9: Failing to be a Good Listener. Regulators often send messages in subtle ways. Orders are carefully worded; what is not said can be as important as what is said. The staff is sometimes a messenger for the commissioners and sometimes not. The worst mistake you can make is not to be a good listener - to be so caught up in the importance of your message that you don't pay enough heed to what is said (or not said) in response.
If the message from your regulator isn't clear, then find a way to confirm or clarify it. Don't go off with an erroneous interpretation or psychoanalyze what could be an innocent remark. Good listening is a key part of working with a regulator.
Mistake No. 10: Adopting a "Win at All Costs" Attitude. Regulatory relationships are like good marriages - they're for the long term, even in this age of restructuring.
Understand that at the end of the day, the commission will get to make the call, but it won't be life or death. Tomorrow will bring more battles. Swallow hard on a bad decision and then begin immediately to mend the relationship. Don't fight a "take no prisoners" battle. I always consider the commission to be like a china shop. No one would put up with a bull thrashing around the china shop; you might get thrown out completely, which is the last thing you want.
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These simple suggestions sound like common sense. Yet you would be amazed at how many times they are not followed - not out of evil intent but often out of the pressure of the business of the day. If you master these rules (and the subtleties behind them), however, you can have a successful relationship with your state PUC that can advance your particular interest and, it is hoped, the public interest as well. I wish you luck.
Craig Glazer is a commissioner at the Public Utilities Commission of Ohio. He served as PUC chairman under three Ohio governors, from April 1991 through April 1999. Glazer chairs the National Council on Competition in the Electric Industry, and is also a member of the Generation Adequacy Committee of the North American Electricity Reliability Council, and the Advisory Council of the Electric Power Research Institute. His current term at the PUC runs through April 2001.
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