Process for Purpose
Reimagining Regulatory Approaches for Power Sector Transformation
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Significant changes in grid technology, customer demands, and public policy priorities have prompted efforts across the country to update utility business models and their associated regulations. Ensuring the processes used to advance these reforms are properly designed is a crucial element of achieving reform outcomes and success. Yet process approach and design decisions frequently receive less attention than the technical and economic details of the regulatory reforms themselves. As a result, those technical and economic decisions tend to get mired in adversarial debates and processes, risking a loss of focus on intended objectives and delivering suboptimal outcomes.
In response, regulators, utilities, and related stakeholders are increasingly employing broader, more participatory processes to address this increasingly complex nature of electricity reforms and consider investment decisions and rule changes that go to the core of the utility business.
This paper reviews regulatory reform efforts undertaken by 10 states, describes the processes by which reform can proceed, and identifies the most significant factors that impact reform efforts’ effectiveness. The report examines four distinct stages of successful reform processes: initiating the reform process, communicating the vision for reform, conducting the reform process, and delivering reform outcomes.
Who launches the process can shape utilities’ and other stakeholders’ initial acceptance of reform efforts and can impact the extent of regulatory overhaul achieved in the state. While commissions, state policymakers, utilities, and other stakeholders can all initiate reform processes, utility regulators have particular importance as, in most cases, regulators are ultimately responsible for carrying reform efforts toward policy outcomes.