Balance and Adaptability are Critical
Ken Costello serves as principal researcher for energy and environment at the National Regulatory Research Institute. He previously worked for the Illinois Commerce Commission, the Argonne National Laboratory, Commonwealth Edison Company, and as an independent consultant. Contact him at kcostello@nrri.org.
The three mortal sins of utility regulation are ideology, ignorance and inertia (the three I's). Acting on political beliefs, inadequate information, and past conditions that no longer exist is a recipe for poor regulation. It ensures that regulators will not be able to advance the public interest.
Poor regulatory performance comes from inappropriate action or unreasonable inaction.
Taking a laissez-faire position on an issue that requires regulatory intervention illustrates the latter problem. Inappropriate action can arise from poor information or willful neglect by the regulatory agency that is commissioned to serve the public. Regulators must serve the public, not narrow interests.
Regulatory failure, a term that is often used, would then be the sum of actions and failures to act, which leads to an undesirable outcome. More precisely, it's a performance that falls short of what the general public expects.
Two Hallmarks of Good Regulation
Balancing legitimate interests: Good regulation makes for well-informed decisions directed at the public interest. It strives for balance and justice. Specifically, good regulation weighs legitimate interests and makes decisions based on facts.
Good regulators do not unduly favor any one interest group over the public interest. The law and the evidentiary record should support those decisions.