The current rapid transformation of the U.S. energy system is shining a spotlight on an important but little-known group of agencies across the country, which go by such names as state public utility commissions or public service commissions. Despite the different labels and varying institutional structures, these bodies have all been charged by their respective state legislatures with the same basic role: overseeing the mostly private, for-profit utility companies that produce and distribute electricity to our homes and businesses to ensure that these utilities charge reasonable rates, provide reliable electricity service, and serve the public interest more broadly.
Recognizing the critical role that public utility commissions (PUCs) play, this report builds on previous efforts to democratize these agencies and better align how they carry out responsibilities with principles of “energy justice”—or the general notion that communities affected by energy policy decisions should have a meaningful say in how we obtain and use energy and that the resulting harms and benefits of those policies be equitably distributed, particularly with regard to structurally marginalized communities.
At first blush, state PUCs appear to be an unlikely champion for promoting greater energy justice. The investor-owned utilities that PUCs oversee have long dominated those agencies’ policymaking agendas. Further, many PUCs have consistently failed to provide ordinary members of the public with meaningful opportunities to shape their decision-making. The resulting power disparities have led to policies that frequently depart from the public interest, including excessively high electricity costs, expensive polluting energy infrastructure, and poor service reliability. The harms of this arrangement have fallen disproportionately on low-income households and communities of color, such that the existing electric power system has become a major contributor to systemic racism and other forms of injustice in US society.
Yet, because PUCs play such a pivotal role in our energy system, it would be difficult to imagine charting a course to a more just energy future without their involvement. With the recent election of Donald Trump as president and Republican majorities in both chambers of Congress, federal progress on climate change and energy justice is likely to be stalled for the next several years, making states even more essential for achieving these policy goals.
This report builds on an existing approach to governing the operations of electric utilities known as performance-based regulation. Specifically, the creation of a novel Energy Justice scoring program that state PUCs would implement in conjunction with existing regulatory tools to provide powerful incentives for utilities to meet the energy needs of their customers in ways that advance the goals of energy justice alongside decarbonization.
The Energy Justice performance-based regulatory program outlined in this report consists of three components. PUCs would
- Develop rigorous tests for evaluating electric utilities’ energy justice performance;
- Assign them clear Energy Justice scores based on those evaluations; and
- Impose meaningful rewards and punishments based on those scores.
The evaluations would take place on a regular basis—perhaps every two years—and should be structured so that they judge both the procedural and the substantive dimensions of utilities’ performance on energy justice. Procedural criteria for evaluating Energy Justice scores might include a utility’s quality of public and stakeholder engagement efforts, while substantive criteria would assess the utility’s existing portfolio of energy sources and quality of service across geographic areas. Once derived, the scores must be applied to PUC proceedings, particularly by earning a utility real consequences—both positive and negative. Depending on the state, further legislative changes would likely be required to accomplish this aspect of the reform proposal.
Since few, if any, PUCs currently have legal authority to institute such a program, it will be necessary for state legislators to amend the authorizing statutes for PUCs. But even without new legislative authorities, some PUCs may be able to draw on their existing powers to set just and reasonable rates to adopt some aspects of this model into their regulatory activities.
If implemented well, an Energy Justice performance-based regulatory program could also expedite the build-out of badly needed clean energy infrastructure at the speed and scale needed to avert the worst consequences of climate change. Regrettably, the common “wisdom” is that procedures like these—particularly those aimed at advancing procedural justice goals—cause undue delays in infrastructure development. To the contrary, though, investments in early public engagement can actually expedite development by reducing opposition later in the process—such as litigation—where the real delays occur. Moreover, this proposal suggests Energy Justice scores incentivize utilities through the possibility of streamlined procedural requirements. In this way, Energy Justice performance-based regulatory programs can be embraced as a new pathway forward in ongoing policy debates over issues such as permitting reform.
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