Electing Public Service Commissioners Is Opposed By KRC Because It Wouldn't Result Lower Rates, Or Benefit Average Ratepayers Posted: February 18, 2011
WRITTEN TESTIMONY BEFORE SENATE NATURAL RESOURCES
AND ENERGY COMMITTEE ON SENATE BILL 151
Tom FitzGerald, Director
Kentucky Resources Council, Inc.
February 17, 2011
Mr. Chairman, members of the Committee, I am here to respectfully oppose SB 151 and to ask that you do not support the measure.
If there were ever a public policy issue that called out for rigorous scrutiny and deliberation, this is that issue. For we are considering here a dramatic change in the composition of a body that we have charged with assuring that public utilities in our Commonwealth provide light in the darkness, heat in the cold, and energy to power our homes, industry and commerce.
I have, over the past 31 years, represented individuals and organizations that represent individuals who are among the most vulnerable of ratepayers.
If I had any reason, after reviewing the experiences of those states that elect public utility commissioners, to believe that scuttling the 71-year old framework of appointed Commissioners and replacing with direct election of Commissioners would result in lower rates, more reliable service, and more ratepayer protection from excessive utility earnings, I would be here in support of this bill.
Yet while KRC favors transparency in governance, KRC opposes this bill because there is no evidence to suggest that states with elected public utility commissions have lower rates than those with appointed commissions, nor that elected utility commissioners are more responsible to the needs of utility ratepayers. Kentucky?s rates are lower than those of every state with elected utility commissioners. A 1984 study published in the Yale Journal of Regulation titled Electing Regulators: The Case of Public Utility Commissioners found that the historical evidence does not support the [proposition that election of state public utility commissioners leads to lower electricity prices. Instead, the evidence seriously undermines the contentions of those who favor elected PUCs on the grounds that they improve consumer welfare. It suggests that elected commissioner may not support policies that are in the interest of small ratepayers. . . Without other reasons for changing the method of selecting regulators, this evidence argues for maintaining the status quo. Any change would entail substantial implementation costs -- including the cost of establishing election procedures, the cost of running the elections, and the cost of election campaigns -- without producing any apparent benefits.
Additionally, KRC is very concerned after reviewing the experiences of some of the states that elect Commissioners (Alabama, Arizona, Georgia, Louisiana, Mississippi, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Carolina, South Dakota, Virginia) that there has been demonstrated a real potential for the regulated utilities to focus campaign contributions in a manner that would affect the policies and decisions of an elected commission. A 2005 University of California Berkeley study, Does Private Money Buy Public Policy? Campaign Contributions and Regulatory Outcomes In Telecommunications, by R.J. de Figueiredo of the Institute for Governmental Studies, reviewed the setting of wholesale telephone rates and found a strong correlation between campaign contributions to utility regulators and regulatory outcomes favoring contributors. Experiences in Oklahoma, Georgia, Louisiana, Alabama and Montana, and the Supreme Court decision in Citizens United v. Federal Election Commission, which opened the floodgates for unlimited corporate spending on election campaigns, raise concerns with making the office of Public Service Commissioner an elective office.
Thank you for the opportunity to appear before you in opposition to this bill.