Regulatory Interface with the Judiciary: Experience from the West Craig Glazer Vice President—Governmental Policy PJM Interconnection, L.L.C.
Regulatory Interface with the Judiciary In U.S. electricity and telecommunications began as competitive industries No regulation By contrast, transportation industry deemed “affected with the public interest”
Regulatory Interface With the Judiciary Regulation of utilities deemed a legislative function Local municipal councils negotiated franchise terms Rates, terms and conditions set by legislatures Regulation existed by contract Franchises could be exclusive or non-exclusive
Establishment of Regulatory Commissions State public service commissions established: Illinois, New York Public utility functions added to oversight of railroads, wharves etc.
Establishment of Regulatory Functions Establishing tariffs governing rates, terms and conditions Regulation the “quid pro quo” for the exclusive franchise Service quality review Review of capital structure
Independence of the Regulator Regulator subject to appointment by executive with approval by legislature Rise of elected commissions Commissioners have fixed terms in office with limited grounds for removal Salaries and staff are fixed through legislative protections
Accountability of the Regulator Direct accountability to the courts Appeal of commission decisions Indirect accountability to legislative branch Control over commission budget Ratification of appointments Indirect accountability to executive branch Direct appointment of commissioners Service as member of executive cabinet
Judicial Review of the Regulator Age of substantive due process Court reviews wisdom of regulation Court reverses child labor laws, economic regulation etc. Violation of the freedom to contract Interpretation of “liberty” provision of U.S. Constitution
Post-1930’s Judicial Review in U.S. “The switch in time that saved nine” Adoption of federal laws that added regulation: Filling the “Attleboro” gap—Federal oversight to supplement state oversight Public Utility Holding Company Act—Federal regulation of corporate structure
Post 1930’s Judicial Review in U.S. Court de novo review of procedural fairness Was there notice and an opportunity for hearing? Right of utility to present evidence Mixed views on similar right of customers.
Post 1930’s Judicial Review in U.S. De novo review of questions of law Substantial evidence standard for review of questions of fact: Was there substantial evidence in the record to support commission’s decision?
Today’s Judicial Review in U.S. Chevron Deference---Deference to expertise of administrative agency Arbitrary and capricious standard
Today’s Judicial Review in U.S. Today’s challenges Commission role to establish markets Commission making policy rulings in generic rulemaking proceedings Lack of injunctive processes to stop market power abuses Lack of expedited proceedings for addressing market power abuses
Procedural Issues/Impediments for Commissions Ex Parte rules Sunshine rules Need for speed Need for evidence in the record Delay in regulatory/judicial processes out of step with the pace of the market
Other Judicial Models Canada: Provincial regulation of electricity with ISOs to serve regulatory role, no federal role Alternative Dispute Resolution Models Voluntary ADR processes—appointment of settlement judges Use of technical conferences and other alternative means of gaining evidence
The Future: Regulation and the Judiciary Inability of judiciary to keep pace with markets Commissions ham-strung by judicial model Market disruption caused by potential foundational challenges
For More Information: Craig Glazer Vice President—Governmental Policy PJM Interconnection, L.L.C. glazec@pjm.com