PUCs turn their attention to what they can still control.
The battleground has shifted. Utilities that last year worried about winning customers in pilot programs for retail choice now face public audits on the reliability of transmission and distribution.
With rate cases in remission, no nukes on order and generation planning left to the market, public utility commissions are turning their attention to what they can still regulate. That means service quality. Nor are PUCs the only ones involved. In some states, public officials up for re-election are making political hay of each major outage and playing on fears of post-deregulation reliability meltdowns. Consumer advocates and watchdogs also are protecting their interests.
Beyond the posturing, however, lies a genuine policy issue. How should utilities balance cost-cutting with improved reliability? Any serious discussion of performance-based ratemaking, or PBR, cannot avoid this issue.
The pace of regulation for T&D reliability and service quality is accelerating (see figure, Increase in States with New Rules). A closer look (see Table 1, New Reliability Regulations by State) reveals two major causes:
public reaction to unusually severe outages; and
public concern about competition-induced cost cutting.
Mergers only exacerbate this acceleration in rules and regulations. Merger reviews may include a special focus on post-merger reliability. Even an internal but very public restructuring could lead to the same result.