1. Regulatory Interface with the Judiciary: Experience from the West
Craig Glazer
Vice President—Governmental Policy
PJM Interconnection, L.L.C.

2. 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”

3. 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

4. Establishment of Regulatory Commissions
State public service commissions established:
Illinois, New York
Public utility functions added to oversight of railroads, wharves etc.

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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.

11. 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?

12. Today’s Judicial Review in U.S.
Chevron Deference---Deference to expertise of administrative agency
Arbitrary and capricious standard

13. 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

14. 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

15. 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

16. 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

17. For More Information: Craig Glazer Vice President—Governmental Policy PJM Interconnection, L.L.C.