(BOSTON, MA) – The NARUC alumni? The ghosts of Christmas past?
National Association of Regulatory Utility Commissioners executive director Tony Clark didn’t know quite what to call the panel of 10 former regulators who took the stage Tuesday afternoon at the NARUC Summer Policy Summit in Boston, Massachusetts. Thankfully, unless they decide to take their show on the road, a clever moniker won’t matter much. The group’s nearly 90 years of collective commission experience, though? That’s something worth leaning into.
“We don’t have any shrinking violets up there,” chuckled Clark, former NARUC president, who moderated a wide-ranging discussion that ping-ponged from lessons learned and obstacles overcome to imparting advice to future regulators. Here are some of the most interesting responses to Clark’s open questions, lightly edited for clarity and conciseness.
What Was The Most Difficult Challenge You Faced as a Regulator?
“To not be staff. To move from that advisory role to that decision-making role. I still wanted to do the work.” – Talina Mathews, CFO, Big Rivers Electric Corporation, Kentucky Public Service Commission (2017-2021)
“2001 was really an odd time for state commissions. Telecom was deregulating, as Congress had acted to do that. There was a lot of movement in energy markets with Enron and the California energy crisis… I think it was a time of sort of chaos in what was going on in the industries we were responsible for. I remember there was debate about what the role of the state commission was, and the roles of the federal regulator versus the state regulator… There was a lot that needed to be worked out, not just in our own commissions, but at a regional level.” – Jim Kerr, Chairman, President, and CEO, Southern Company Gas, North Carolina Utilities Commission (2001-2008)
“When COVID hit and you had to quickly figure out how to navigate affordability. We had to create tools that didn’t exist. That was a real eye-opener of how utility bills impact everybody’s lives and how a lot of our customers are one paycheck away from not being able to pay their bills.” – Carrie Zalewski, VP of markets & transmission, American Clean Power, Illinois Commerce Commission (2019-2023)
“Winter Storm Uri was definitely the seminal point in my career. I wasn’t at the Public Utility Commission, but at the time, I was at the Office of Public Utility Council, and by way of that appointment and serving in that role, I served on the ERCOT Board of Directors. I was the only remaining member of the ERCOT board after Winter Storm Uri. I got reappointed to that role, but then the next month, the Governor appointed me to the PUC. I had been in the industry for over 20 years at that point, and I felt that it was sort of like being asked to serve in the war and go defend your country, so I gladly accepted the opportunity.” – Lori Cobos, President, Cobos Strategies, Public Utility Commission of Texas (2021-2025)
“It was the gravity of the decisions that you’re making as a regulator. You’re taking what you know today, and you have to try and apply it to a 30-40-50-60 year decision, really, and that’s hard to do when you can only go with what you have today. A perfect example is a situation I regret. We have a nuclear plant, and the utilities purchasing from that plant went out and found wind and solar PPAs that were going to save money for customers, which is a good thing. At the same time, it would put that plant at a point where it would no longer be able to operate. A nuclear plant is a great asset to have, and it had plenty of operational years left, so you’re stuck with this ‘Oh my gosh, do we shut this down even though it could provide tremendous help in the long run?’ What’s the value of a bill today versus a bill tomorrow?” – Nick Wagner, VP of regulatory, Black Hills Corporation, Iowa Utilities Commission (2013-2020)
“The genesis of the first new nuclear power plants in the country… A contentious time of overruns, costs, and the like. We stuck with it, and today we have an operational plant.” – Stan Wise, consultant, Pendleton Group, Georgia Public Service Commission (1995-2018)
“One of the first challenges was realizing there were no Rs or Ds tattooed to electrons, and [NARUC] helped me see that… And the fact that it is our job as regulators to sometimes tell a utility ‘no.’ The real question is, how do you tell them ‘no’ without impacting their credit rating, and how do you avoid weaponizing your orders? I wanted to send a message to the utility, I had to pull myself back and not do it through the order and recognize there are other ways to make that happen without creating an appearance of an atmoshpere that there was regulatory uncertainty or conflict between regualtors and the utility.” – Paul Kjellander, CEO, KJEL LLC, Idaho Public Utilities Commission (1999-2022)
“The implementation of the Telecommunications Act of 1976, which was a direct assault on the traditional way states were regulating telecoms, which was essentially the same as energy and water. NARUC actually embraced the challenge, took on the technical work of Section 271 implementation.” – Bob Rowe, Principal, RCR LLC, Montana Public Service Commission (1993-2004)
“It was sort of a mental switch I had to make coming from the agency I was at, where I was accustomed to applying a set of facts to the law, and it’s just not that simple. A lot of decisions have larger implications for utilities, the markets, or other stakeholders, so that was the most challenging part, trying to balance that. I found grounding in why I was a public servant to begin with.” – Maria Bocanegra, President, Peoples Gas and North Shore Gas, Illinois Commerce Commission (2019-2022)
“We were afflicted with so many hurricanes. We had this happen during my Chairmanship, and we were dealing with the largest electric rate case at the time. We had Ivan and all these storms come through, and we hadn’t evaluated whether storm hardening actually works. As the Chairman, it was an opportunity to come together and say ‘What are we going to do?’ Ultimately, we came up with an idea, and legislation was passed, and we have a mechanism now for cost recovery and for improvements.” – Julie Brown, Vice Chairman, Florida Gaming Control Commission, Florida Public Service Commission (2011-2020)
What Are Some of the Most Valuable Lessons You’ve Learned?
Brown: “Every regulator counts, and I think businesses across the board need to understand they need to take an interest in even the most innocuous regulator, because they can make a huge impact, especially on a live bench. They need to do their research, don’t discount anyone.”
Wise: “How incredibly bright and dedicated our staffs are, and the role they play in regulation. They’re the guts of the organization, and they get it done. Also, remember the impact on the end consumer of your decisions.”
Cobos: “It is really important for the regulator and utility community to have a relationship. The more proactive you can be in your communication and responsive, the better, because at the end of the day, it’s not just about that natural disaster or that one incident. How do you set the tone moving forward for your companies on a variety of matters across a regulator’s desk? Treat everybody with respect, because one day, you will not be a Commissioner and people are never going to forget how you made them feel.”
Kerr: “What you should try to do is establish your credibility and your relationship with the agency, the commission. If you do that and maintain that over time, we might not get everything we ask for or be pleased with every outcome, but over time it should even out in a way that allows you to do what you need to do over a longer view and not sort of rise and fall over every episodic transaction… Celebrate the quality of our effort and tell people that before we get the ultimate order and the outcome. Say, look, this is good. Whatever happens is gonna happen, but let’s celebrate, and I thank you for the quality of your work before we get the final decision.”
Mathews: “Dont let your regulator find out something on the front page of the newspaper.”
Wagner: “Commissioners don’t like surprises, even if it’s their birthday.”
Bocanegra: “I genuinely believe that regulators are not looking to say no. They’re really weighing decisions and want to make the right, informed decisions. But to do that, there’s a series of steps that you have to maintain. It doesn’t ebb and flow. It really is about relationships and communications and making sure that we understand the regulatory environment, but simultaneously, they understand what the business needs.”
Zalewski: “Commissioners are problem solvers. They want to get to solutions, and they’re always thinking about reliability and affordability. So if you start with alignment of the solution that you bring, that can bring a headwind to get to a solution. Come with a solution. They might be interested in your business model, but they really want the solution.”
Rowe: “There is a view sometimes on the regulatory side that the companies have a master plan. Sometimes they do, but typically not. There’s a view on the other side, quite often, that the regulators have a master plan. The truth is that most people are just trying to make the best decisions they can. Be transparent. Get your regulators out into the field. Companies need to be very transparent. Engage regulators outside of a rate case, and on the regulator side, do the same thing. Be active and engage. Remember that yes, you set policy, but policy is really just a vehicle to very important ends. The core across all of the different positions is a deep commitment to public service.”
Wagner: “I didn’t know a quarter of how important [the financial aspect] is to the utility, how important it is to Wall Street, how important it is to make sure a utility has the financial ability to serve customers. If you don’t like Wall Street, if you think Wall Street is a bunch of crooks, if you think they’re up to something, go learn how they’re up to something. Understand what they’re trying to do, and understand how it impacts the utility and why the utility pays attention. We are not cash heavy. When you look at most utilities, they have 14-16% of cash flow compared to debt. If any of us did that in private life, our credit rating would be like 200.”
Kjellander: “I wish I realized the real power of saying the words ‘thank you.’ You don’t always have the ability to give out raises and bonuses, but you always have the ability to say thank you and be sincere about it. That’s something I wish I had done more of. So if there’s any Idaho staff in here, thank you.”
Zalewski: “Certainty is very important, and time is money. We know there is a regulatory lag, and there should be, and there’s a really good reason for the process, but that absolutely has to be accounted for when these businesses are trying to figure out where to invest, what states to build in, and how to fill all of their major projects.”
Kerr: “I would encourage you to get to know more deeply about the businesses rather than just what’s in the context of a hearing. I suspect that when I was a Commissioner, I expected that when the utility showed up, they had all the answers, but they don’t. We’re not trying to get away with things all the time. We’re all kind of doing the best we can. I would not be so intimidated now.”
Mathews: “Language in an order affects [utilities] more ratings-wise than a turn of a phrase. I had no idea. I probably would’ve been nicer. But the other thing I wish I’d have done as a regulator is to get to know the people who aren’t coming into the commission. Spend a little time with the utilities. Maybe put on a hard hat and go to a power plant and look at these folks who work Christmas Eve and don’t get to be with their families on Christmas morning, or folks on a line in a storm in the most dangerous of conditions. Recognize that those of us who go in, sometimes with our hat in our hands, we’re not really the utility. The utility is those folks. Take a little time getting to know them. They really appreciate it.”
How Has Working in a Regulated Company Changed Your Perspective on Regulation?
Rowe: “I internalized the idea that there are always eyes on you, whether that be at the grocery store or when you’re filling out an expense form. That culture of compliance is critical… Always err on the side of staying well, well on the right side of the line. It’s really like credit ratings. It takes forever to rebuild trust. Compliance is a part of that, not all of it, but you can burn up that trust in just seconds with behavior that is thoughtless and inconsiderate and unintentionally crosses the line.”
Kerr: “We had a whistleblower incident. It was unfortunate and involved a regulated entity. Once you’re on the inside, what you realize is that any regulator, once they question your integrity or your credibility, it takes a lifetime to build it. It takes one mistake to put yourself behind the 8-ball. You have to embrace it. It’s a non-negotiable… You can’t avoid doing the right thing 100 times and hoping the inspector doesn’t come out.”
Wise: “It’s becoming more technical and complicated since I left the Commission seven years ago. There are entirely different players (hyperscalers) than we had [before]. It’s more important than it’s ever been before, and I don’t see it getting any less technical or less complicated.”
Wagner: “I have at least a monthly meeting with our risk management team to identify current risks and what we’re doing about them. It is definitely a piece of a functioning utility.”
What Trend do Business Leaders Need to Know About, and Vice Versa?
Brown: “Automation and predictive automation. Businesses have to be able to predict what customers want before customers even know they want it… Technology is emerging rapidly, and I believe businesses as well as customers need to be fluid and adaptive, but businesses really need to be proactive and invest in the research, time, and money.”
Bocanegra: “It absolutely is AI, 100%. It is something we are starting to talk about, everything from governance around appropriate and ethical use cases to applications to making sure confidential data is stored [properly]. It’s really scary and exciting at the same time to see what it can do to make rates affordable, reduce cost where appropriate, or solve some of the more complex problems.”
Rowe: “On the negative, it’s the severe erosion in public trust. All of us in this room depend on that aspect of social capital; it’s how we conduct ourselves. It’s how we treat one another and communicate what we’re doing. Tremendous excitement about the technology. Continue to engage in that and think about ways to preserve and build the trust we all depend on.”
Kjellander: “There is a trust deficit that needs to be overcome. That capacity building needs to happen. There was a time when regulators could’ve very well been perceived as ‘honesty brokers,’ and I don’t know that we hold that position anymore. It’s not that we’ve done anything that was so negative, but we haven’t been able to overcome some of the gaps that occurred during COVID. We weren’t having live hearings. How do we now address and get out there, through all the chatter and clutter, to communicate what’s happening? We all know that your costs are going up, that your bills are going to increase, and affordability is a legitimate issue. But we also know that just saying no isn’t going to change the fact that we need to build these resources and get them built into rates.”
Wise: “The extraordinary expansion of data centers, the impact on infrastructure, and what consumers ultimately pay has got all of our attention, and I think that’s going to continue for the next few years.”
Wagner: “The new pressures that are being put on Commissioners as economic regulators that are not economic pressures. I think both the utility side and the regulator side need to understand that and understand their role… The work that we do is absolutely critical for our success as a country, for the success of families. So, understanding that it is your role as a Commissioner to make sure that there is a balance between that utility and the customer. That is increasingly difficult with some of the pressures being put on commissions today.”
Cobos: “Obviously, data centers have been a constant topic of conversation. Regulators are now having to evaluate these large electricity demand increases that are on the horizon and plan from an infrastructure standpoint, and at the same time, ensure reliability, resiliency, and affordability. At this time, in our industry, it is more complex to balance all three, and ever so more important.”
Zalewski: “I think a trend is speed. Data centers can be built in 18 months, and obviously, generation cannot match that. And the regulatory process is not built for that, and it probably shouldn’t be that quickly, but you have to balance that against stranded assets. I think it might bring on some interesting approaches and new ways to connect both the load side and generation side quickly.”
Kerr: “Affordability is going to be, at least in the midterm, the challenge, and we’re going to have to build more capacity to meet this growing demand. I guess I’m hopeful that while it’s part of the problem, it can be a big part of the solution… Longer-term trend: avoid certitude. The only thing I know is that people told me gas prices were going to be $8; they’re now $2.50. As regulators, you probably need to try to make ‘no regrets’ decisions and understand that no one has the answer to what’s in front of us… Most of the big mistakes in this industry have been when someone has been totally certain that they’d seen or understood something that everyone else had missed.”
Mathews: “For regulators, I think what they’re getting ready to see is the expectation that decisions will be made so much faster than what I was used to. Things are going to happen very quickly. 30-year decisions on 4-year election cycles are not a great way to plan a utility, but that’s where we are. AI might need a gigawatt here and a gigawatt there. Those are words I never thought I’d hear. Load growth is great if it’s 1%. Now you’re kind of blessed with the opposite side of that and meeting those resource needs. It’s going to be fast and furious, and we’re all trying to do the best we can with the information we have available to us now. It is just, unfortunately, a 30-year decision.”