Utility Regulation Gone Awry: A Crash Course

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D. Maurice Kreis, NH Consumer Advocate

Power to the People is a column by D. Maurice Kreis, New Hampshire’s Consumer Advocate. Kreis and his staff of four represent the interests of residential utility customers before the NH Public Utilities Commission and elsewhere.

D. MAURICE KREIS, Consumer Advocate

Welcome to the remote learning edition of this column.  Today’s topic:  administrative law.

If you think this is certain to be a cosmically boring subject, you’re in good company.  I taught administrative law in the classroom several times, at Vermont Law School.  Picture a lecture hall full of 75 aspiring attorneys, each looking up at me with a dazed expression, as if I were talking about renaissance polyphony or mitochondrial protein synthesis.

But stick with me a minute.  Because, for most folks, administrative law is all of the law.  You’re unlikely to be the party to a lawsuit, but you probably have a driver’s license, you might need a building permit someday, and you will certainly want to collect Social Security.  Bureaucracy and its processes – that’s administrative law.

So, too, if you care about your utility bills and what your electric or natural gas or water company is up to.  In that case, all the action is at the New Hampshire Public Utilities Commission (PUC).  Every state has a PUC or something similar.

PUCs are examples of what administrative law professors refer to as an “independent regulatory agencies.”  In this context, “independent” means that PUC commissioners (of which New Hampshire usually has three) don’t report to the Governor, once they’ve been appointed by her or him and have been confirmed by the Executive Council.

But independent regulatory agencies are still considered part of the executive branch, as opposed to the legislative or judicial branches of the government, at least according to recognized administrative law experts like Justice Stephen Breyer of the U.S. Supreme Court.  (Before becoming a judge, Breyer taught administrative law at Harvard.)

To be clear, such principles are well-established as a matter of federal law, under the U.S. Constitution.  But it’s reasonable to assume that state law, under the New Hampshire Constitution, would be to similar effect.  The New Hampshire Constitution and its federal counterpart are very similar.

Since this ain’t the Civics 101 podcast from New Hampshire Public Radio, why am I going on about independent regulatory agencies?  Because of a bizarre ruling issued by the New Hampshire PUC on October 8.

According to the PUC, when the agency conducts a rate proceeding – i.e., when it is trying to determine what charges a monopoly utility like Eversource, Liberty, Unitil, or Aquarion Water may impose on its captive customers – the case is what the PUC referred to on October 8 as a “legislative” docket.

Much turns on the PUC’s use of that one word, “legislative.”

If there really is such a thing as a “legislative” docket at the PUC, it means the state’s Administrative Procedure Act (APA) does not apply.  The APA is an important statute because it lays out how administrative agencies adopt rules (which apply to everyone) and conduct adjudications (which are decisions made on a case-by-case basis, usually about specific utilities or specific rates).  As to adjudications in particular, the limitations of the APA are the reason such administrative proceedings are not free-for-alls – the way, frankly, the process of passing actual legislation in New Hampshire is.

The Legislature has its own elaborate set of procedures and limitations, of course.  But anyone can say anything she wants at a legislative hearing – nobody has to swear to tell the truth when testifying – and legislators are free to consult with anyone they want (lobbyists, political operatives, even constituents!) in the hallways or anywhere else as the lawmakers decide what bills to adopt.  That’s what I mean by “free-for-all.”

If rate cases and other PUC proceedings are allowed to go forward in such fashion, out the window go concepts like due process and fundamental fairness.  The PUC is literally reserving the right to make up the rules of the game as it goes.

And how would the New Hampshire Supreme Court ever review a decision made via a “legislative” docket?  If rate-setting is really just legislating by another name, how could the court ever enforce the traditional appellate guardrails?  I refer to established notions like agencies should not make arbitrary and capricious decisions and must base their rulings on actual facts in evidence.

The PUC’s ruling about “legislative” dockets relies on prior court rulings to the effect that rate-setting is a legislative act.  But that’s anathema to administrative law professors, who point out that all authority of regulatory agencies (especially independent ones like PUCs) is power that has been delegated by the legislature, whether it’s Congress, the New Hampshire General Court, or some other state’s lawmaking body.

It was also anathema to the late Marion P. Opala, who served from 1978 until his death in 2010 as a justice of the Oklahoma Supreme Court.  In 1994, Justice Opala penned a vigorous dissent (joined by three colleagues) when his tribunal ruled that the Oklahoma Corporation Commission – the utility regulator in the Sooner State – is legislating rather than adjudicating when deciding rate cases and thus commission members need not be impartial.

Justice Opala compared his court to “an ostrich that hides its head in the sand to escape the unpleasant consequences of reality” (which, in that particular case, had to do with corrupt regulators of the sort we thankfully do not have in New Hampshire).  As baseball great Casey Stengal would say, you could look it up:  Southwestern Bell Telephone Co. v. Oklahoma Corporation Commission, 873 P.2d 1001 (1994).

Marion Opala, incidentally, surely knew a bit about the misguided exercise of governmental authority as well as ostrich-like behavior.  He fled his native Poland when the Nazis invaded, served in the British Army during World War II, was captured during the Battle of Warsaw in 1944, and was liberated from a German prisoner-of-war camp in 1945.

No on-line course is complete without a final exam.  Mine consists of one multiple-choice question:

What action should the Office of the Consumer Advocate, as the representative of the interests of residential utility customers, take in response to the PUC’s determination that a rate proceeding is a “legislative docket?”

File a motion for rehearing to give the PUC a chance to reconsider its ill-conceived ruling,

Continue the relentless pursuit of all cost-effective energy efficiency, especially because the PUC’s pending energy efficiency docket is the one the agency decided is “legislative,”

Ask the Legislature to pass a statute clarifying that the Administrative Procedure Act applies to PUC rate-setting, or

All of the above.

As final exams go, this one is pretty easy.

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