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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.

 

Every regulatory undertaking should be anchored to a guiding vision for what the process seeks to achieve and what the ultimate outcomes it is in service of. The guiding vision should articulate what opportunity the state or utility is facing; how the opportunity benefits customers, the grid, and public policy; what the outputs of the effort should be; and how outputs will be utilized by regulators going forward.

Regulatory processes can be either investigatory or decisional in intent. Investigatory processes engage stakeholders to explore grid needs or potential reform options, whereas decisional processes set out to adopt new rules or programs. States should explore using either or both types of processes depending on their underlying objectives.