Regulation

As federal policy makers push for GHG regulation and transparent markets, the California experience shows what works and what doesn’t work.

In light of coming GHG legislation, price transparency is the key to achieving cleaner generation through the dispatch of lower-carbon sources.

After 10 years of incentive regulation, reliability has declined in Ontario. Regulators failed to enforce service-quality standards, and consumers are suffering as a result.

When Congress repealed the Holding Company Act, it gave states greater authority to regulate utilities. New Jersey picked up the baton and enacted rules to protect ratepayers.

Unlike the majority of performance-based regulation plans, alternative design paradigms require less data, by instead allowing firms to reveal performance potential. In an asymmetric environment, regulators don’t have needed information, but that can be overcome with better models and incentives.

Energy efficiency holds the key to meeting lofty greenhouse-gas (GHG) reduction goals. Rate design can help—specifically residential inclining block rates should be considered as part of the industry’s efforts to comply with forthcoming GHG targets.

So far, states have taken the lead in carbon-control strategies. These state actions, however, could lead to constitutional conflicts—as recent court battles demonstrate. Only the U.S. Congress can regulate interstate trade, so states must step carefully in controlling carbon leakage.

The SEC is taking steps toward substituting International Financial Reporting Standards for U.S. Generally Accepted Accounting Principles. Having certainty surrounding existing utility asset and depreciation accounting practices enhances the ability to use financial statements to accurately depict the results of operations and financial status of reporting entities.

Despite political challenges, the EPA and Congress have made strides toward a more coherent and integrated approach to regulating air emissions. The time is right to reach consensus on a multi-pollutant strategy.

Adoption of IFRS (International Financial Reporting Standards) in the United States undoubtedly will mark a significant change for many U.S. companies. But this change should not be feared. Moving to an entirely new accounting structure ultimately might enable companies to streamline reporting processes and reduce compliance costs.