How to Transform Public Utility Commissions

Renewable energy, like wind and solar, has grown fast and now accounts for nearly a quarter of U.S. energy generation. Technologies have advanced. Costs have come down. But regulation remains stubbornly stagnant. Electric utilities continue to slow down the clean energy transition, often opting to invest in fossil fuels at the expense of renewables.

An important but overlooked regulatory body exists that can address this problem: public utilities commissions, or PUCs. Each state has one—although some states’ go by other names, such as public service commissions. PUCs consist of anywhere from three to seven commissioners, whose terms typically last between four and six years. Most commissioners are appointed while some are elected.

 

PUCs play a critical role in utility regulation.

They have power to determine how much people pay for their energy bills, how much utilities invest in clean energy versus fossil fuels, where energy projects are sited, and how federal policies like the Inflation Reduction Act (IRA) are implemented. 

Take the coal fleet in operation today. A recent study from Energy Innovation shows that 99% of U.S. coal plants are more expensive to run than if they were replaced by new solar, wind, or storage projects. In addition, building new gas plants is not only incompatible with our climate goals, but will also prove a costly mistake as these projects will need to be retired before the end of their useful life. Whenever PUCs continue to approve these increasingly uneconomic, climate unfriendly investments, they are slowing down the clean energy transition and costing consumers money.

Utilities are key to climate action.

Together, clean electricity and electrification of buildings, transportation, and parts of heavy industry can cut current carbon pollution by about 75 percent. Hence utilities, and by extension their regulators, are critical to making progress on climate change.

Very few people know about PUCs.  

Terms like PUCs or utility regulatory reform might induce yawns or blank stares. PUCs can seem obscure and boring, hidden from the public’s view. But this lack of salience and transparency is exactly what has enabled utilities to escape public scrutiny.

This has led to regulatory capture, where utilities influence their regulators and promote decisions in their self-interest at the expense of the public. Utilities have denied climate science and opposed distributed energy resources like rooftop solar. Bad actors in the sector have used ratepayer funds to bribe regulators and lobby for funding to bail out uneconomic coal and gas power plants. If there is one industry in the U.S. that should be held accountable through robust regulation, it is the monopoly electric utility industry.

Utilities have significant financial, political, and technological capital to move the needle on climate action. But insufficient regulation, combined with misaligned incentives, have made utilities barriers to an equitable clean energy transition. In fact, as Sierra Club’s The Dirty Truth About Utility Climate Pledges illustrates, the vast majority of utilities receive a failing or near-failing grade based on their plans to retire coal plants this decade, stop building new gas plants, and build clean energy at the necessary pace.

If you want to learn more about these issues, you can read or listen to the book Short Circuiting Policy, which gives a background on PUCs and explains how utilities have slowed down the clean energy transition. 

PUCs and utilities can do better.

Activists have long been the driving force behind improving clean energy policy, passing laws like Clean Energy Standards (CES) at the state level. Working together, we can ensure that PUCs center climate and equity, allowing them to be enablers rather than barriers to clean energy and electrification.

• Use existing statutory authority. Through Integrated Resource Planning (IRP) processes, PUCs can require utilities to retire coal plants, build more clean energy, and prevent the building of new gas plants. PUCs can also adjust rates to make electrification more affordable, pursue innovative regulatory models including performance-based regulation, and bar utilities from using ratepayer money for political activities. To help this happen, advocates can testify in support of clean energy and environmental justice during PUC proceedings, and provide people power and communications resources to state and local groups engaged on PUC issues.
• Appoint and elect climate and equity leaders. Advocates can push for climate and environmental justice champions to be appointed and elected to PUCs.
• Pass model legislation. State legislatures can pass laws that explicitly require PUCs to consider climate and environmental justice impacts in their regulation, mandate utilities align their integrated resource plans (IRPs) with climate and clean energy goals, and establish programs that pay advocates to participate in PUC proceedings through intervenor compensation. Advocates can help make these laws a reality.

 

There are countless examples and case studies of success stories to build upon. Colorado recently passed legislation that bars utilities from using ratepayer money for political lobbying. Illinois established a consumer intervenor compensation fund to provide advocates with financial resources to participate in the state’s regulatory proceedings. Connecticut has proposed a bill that would require utilities to fund intervenor compensation and regulate utility executive compensation. And earlier this year, Louisiana elected Davante Lewis, a clean energy and equity champion, as a member of its Public Service Commission.

We have a tremendous opportunity in front of us to rapidly accelerate an equitable clean energy transition through utility regulatory reform. Let’s seize it. 

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Charles Hua (Twitter: @charleschurros, LinkedIn: charles-hua) is a Policy Analyst at Rewiring America and a recent Harvard College graduate who has been recognized by the White House as a U.S. Presidential Scholar and by the Aspen Institute as a Future Climate Leader.

Leah C. Stokes (Twitter: @leahstokes; Instagram: @leahcstokes) is the Anton Vonk Associate Professor at UC Santa Barbara, Senior Policy Counsel at Rewiring America, and Co-Host of the podcast “A Matter of Degrees.”