Newcomers to regulation are not newcomers to government. They understand executive branch, legislative branch, judicial branch. But they wonder, what exactly are we? The tendency is to emulate the familiar. Judges sit on benches, await the parties' disputes, use adversarial processes, find facts, then apply law to those facts. That seems straightforward enough; let’s be judges.

To view the Commission as a court to "preside" rather than lead undermines regulatory effectiveness.

How do commissions differ from courts?

A commission's purpose derives from its origins. The Legislature receives lawmaking powers from the state constitution. The Legislature then creates a commission, delegating to it some substantive slice of those lawmaking powers. That delegation consists of commands coupled with standards; e.g., establish just and reasonable rates, ensure reliable service, allow mergers if consistent with the public interest. Common to these commands and standards is a single legislative purpose: Within a defined substantive space, make policy for the public.

Courts and commissions do have commonalities. Both make decisions that bind parties. Both base decisions on evidentiary records created through adversarial truth testing. Both exercise powers bounded by legislative line drawing. But courts do not seek problems to solve; they wait for parties' complaints. In contrast, a commission's public interest mandate means it literally looks for trouble. Courts are confined to violations of law, but commissions are compelled to advance the public welfare. Even the narrowest of commission decisions say, approving or disapproving a special contract between utility and industrial customer affects a public interest larger than the parties. Will the low contract price shift costs to other customers or weaken utility's finances? Will the lucky buyer's competitors seek “me too” treatment? To what effect?

Court decisions can have policymaking attributes. A class action suit under the civil rights or securities laws, an antitrust suit against a Microsoft or an AT&T, can set policy for a generation. But consider this difference: In courts, the judge's power to act is confined to the issues stated by parties. In commissions, the complaint is stimulation but not limitation. The Commission can add issues, combine it with other cases, invite or require the appearance of other parties, convert a two party complaint into a multi party rulemaking, as the public interest demands.

It is true that a Commission "looks like" all three branches: like a legislature when promulgating rules; like an executive agency when enforcing those rules; like a court when deciding complaints. But utility commissions are not "like" anything; they are what they are: governmental units created to exercise powers delegated to Legislature by Constitution, then re delegated by Legislature to Commission. Commissions, like the Legislatures whose powers they exercise, make policy for the public.

Note: In some states, the commission is created by the state's constitution, not its Legislature. But it still exercises powers defined by the Legislature.

How does "acting like a judge" undermine a regulator's effectiveness?

A regulator acting as judge assumes that the parties, their interests, their arguments and their legal citations comprise the full intellectual universe requiring regulatory attention. This assumption relies on one or more incorrect premises:

1. that the scatterplot of private interests appearing in a proceeding will display some pattern from which the Commission can determine the public interest;
2. that the public interest is synonymous with satisfaction of the private interests;
3. that the private interests' evidentiary submissions will produce information sufficient in relevance and objectivity to discern the public interest;
4. that the opportunity for access equals the reality of access; i.e., that all possible private interests have hearing room resources sufficient to get the Commission's ear; or
5. that through the sturm und drang of private interest opposition, the "truth" will emerge.

Accepting any of these premises undermines effectiveness, by:

1. inducing intellectual passivity, because the proceeding and the record become party centric rather than public centric ("What are the parties seeking?" instead of "How do I advance the public interest?");
2. imposing the wrong time horizon (the parties' short term desires rather than the public's long term needs);
3. depriving the regulator of objectivity (because the regulator “learns” the issues from parties' arguments rather than impartial sources);
4. distorting the regulator's personal time management (because as the parties load the record with conversation among themselves testimony, cross examination and briefs exchanged four ways (direct, reply, answering and cross answering) procedural law compels the regulator to peruse every page, leaving insufficient time and mental space to read and think on her own); or
5. substituting private settlements for public interest solutions (regulation, unlike marital dissolutions and fender benders, requires policymaking, not dispute resolution ).

Why do some regulators prefer the judicial?

Ease of explanation:   In regulatory procedure, adjudication holds center stage. It applies to the "big cases" rate increases, mergers, complaints. Its formality commands respect. Its familiarity defines the forum: because we use judicial techniques, we are "quasi judicial." That prefix is the tipoff. T here is nothing "quasi" about making policy for the public. Adjudication is but one procedural device for discerning and declaring the public interest. The procedural tail should not wag the purpose dog.

Inexperience:   Most new regulators are generalists. Faced with regulation's complexity, the generalist prefers to examine the arguments of the more experienced, rather than establish her approach.

Overwork:  If one is overrun by paper, it is easier to preside than to lead.

Aversion to risk:   Acting like a judge carries less risk, involves less responsibility. Politics punishes errors of omission less than errors of commission (pun unintended).

Recommendations for Regulators